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Post-18 Education and Funding Review

Volume 798: debated on Tuesday 2 July 2019

Motion to Take Note

Moved by

I thank all noble Lords who are to participate in this debate. I am very conscious of the knowledge and experience of the Peers down to speak and await all contributions with great interest. It gives me great pleasure to debate this report and the review of post-18 education and funding that it informs, not least because I no longer have to keep noble Lords in suspense about the publication date—“shortly” or “soon” becomes “now”.

I reiterate my thanks to the panel led by Philip Augar for its exceptional work. The panel consulted a wide spectrum of experts and received almost 400 responses to its call for evidence. I also thank all the stakeholders, including colleagues from across the House, who contributed to the review. Alongside Dr Augar were Professor Sir Ivor Crewe, Jacqueline de Rojas, Professor Edward Peck, Beverley Robinson and, last but certainly by no means least, the noble Baroness, Lady Wolf, who I am pleased to see is in her place today. On behalf of the House I thank her for her hard work and effort.

Noble Lords will be eager to know what decisions the Government are going to make. Your Lordships will not be surprised to hear that I cannot commit to any decisions here today. But I come in listening mode and am prepared to answer as many questions as I can.

Whatever route a student chooses, post-18 education should set them on a successful path for their future. We recognise that good careers information, advice and guidance are vital to help people of all ages make informed decisions about their options, including routes into further and higher education. That is why we launched a comprehensive careers strategy, as well as investing more than £70 million each year until 2020, to help ensure that young people and adults received high-quality careers provision. Meanwhile, the Careers & Enterprise Company has also invested in more than 150 employer-engagement programmes, benefiting 540,000 young people.

However, it is important to remember that most students in post-18 education are not at university. As Augar emphasised, further education and technical colleges play an essential part in delivering the modern industrial strategy, with its long-term plan to boost productivity. We are all more likely to have multiple careers during our working lives and must be conscious of the need for reskilling and upskilling.

Around 1.5 million jobs in England are at risk of some automation in the future. That is why we are bringing together businesses, workers and government through the National Retraining Scheme, which will help prepare adults for future changes to the economy, including automation. We will also look carefully at the panel’s recommendations on how we can encourage more flexibility across our post-18 system to support people in accessing the right education for them throughout their lives. I share the Secretary of State’s strong belief that both the HE and FE sectors can, and should, continue to thrive together. To ensure a genuine choice for young people, and to give employers access to a highly skilled workforce, we want to see a system where technical education has the same weighting for a young person as an academic route.

I will take a step back and look at how we reached this major review—the first review since the Robbins report in 1963—to look at the totality of post-18 education. As many noble Lords will note, our current system of post-18 education already has many strengths. First, we have a world-class higher education system, with four UK universities in the world top 10 and 18 in the top 100. That is truly to be celebrated. Secondly, we have record numbers of 18 year-olds entering university, including from disadvantaged backgrounds. Thirdly, students from the lowest-income households have access to the largest-ever amount of cash support for their living costs. Fourthly and finally, our student finance system removes up-front financial barriers and provides protections for borrowers so that they have to contribute only when they can afford to do so.

We should not overlook all that we have achieved on the back of the Higher Education and Research Act. The Office for Students became fully operational in April last year and will, inter alia, play a key role in delivering the Department for Education’s objectives to improve and support informed choice through the provision of effective information, advice and guidance to all students. The teaching excellence and student outcomes framework now holds universities to account for teaching and graduate outcomes; I will say more about that later. Finally, diversity and flexibility in the system continue to increase; for example, with possibilities for new providers and accelerated degrees.

We are already reforming technical and vocational education by establishing a technical education system that rivals the best in the world and introducing new T-levels in phases from September 2020, backed by the investment of an additional £500 million per year once they are fully rolled out; developing proposals to introduce employer-focused higher technical qualifications at levels 4 to 5 to rival traditional academic options; reviewing classroom-based higher technical education at levels 4 to 5 as part of creating a world-class system; and, finally, overhauling apprenticeships to put quality at the heart of the programme and to increase employer investment and engagement in training their workforces for the future.

I will now focus on the challenges we face, because challenges remain and parts of the system are not working as well as they could. We have seen further growth in three-year degrees for 18 year-olds but the post-18 system does not always offer a comprehensive range of high-quality alternative routes for the many young people who pursue a technical or vocational path at that stage. When young people apply to university, it is based on the assumption that a degree will set them up for a bright future, but today’s analysis shows that this is not always the case. In universities, we have not seen the extent of increase in choice that we would have wanted. The great majority of courses are priced at the same level and three-year courses remain the norm, when some courses clearly cost more than others and some have higher returns to the student than others. It is right that we ask questions about choice and value for money. Although 18 year-olds from disadvantaged backgrounds are now 52% more likely to go to university than they were 10 years ago, they are still less likely than their more advantaged peers to attend the most selective universities or to have the support that they need to complete their degree successfully and achieve a 2.1 or a First.

We have been concerned by the recent large increases in the number of unconditional—or conditional unconditional—offers received by students and the potential impact that these offers can have. We also have concerns about the serious issue of grade inflation. We must not allow the credibility of our world-class universities to be damaged by pockets of low quality. That is why the Secretary of State has tasked the OfS with driving out bad practices which are not in the student interest.

Meanwhile, although the funding system is a progressive one with built-in protections, those elements are not always well understood. Going to university should be a positive, life-changing experience but students need appropriate support, particularly as they matriculate, to deal with the challenges that starting university can include to ensure their well-being.

We have a vision for the future. The UK is truly a world-leading destination for study and research, but we recognise the concerns and that is why we committed to conducting this major review. Studying for a degree is expected to benefit those undertaking it, with improved employment opportunities and a wage premium alongside wider individual well-being and other social benefits. Low-value outcomes are not just about economic returns. High-quality provision in a range of subjects is critical for our public services and for culturally enriching our society. University is not just for investment bankers but for those who will go on to contribute to many other sectors, including our creative industries. We want to ensure that higher education improves the life of students and of wider society and we want to equip students with the information to make the right choice for them about where and what to study. Now our graduate data—commonly known as LEO—represents a step change in our ability to understand students’ labour market outcomes on leaving higher education.

Before I conclude, I want to draw attention to a recent announcement by the OfS. It has awarded £6 million for 10 large-scale projects to encourage higher education providers to find new ways of combating student mental health issues. These projects involve more than 60 different universities, colleges and other organisations, including NHS services, the police and charities, together contributing an additional £8.5 million in matched funding, taking the investment up to £14.5 million.

I greatly look forward to this debate and to hearing the views of all who are speaking today. The independent panel’s report forms an important step on the road to achieving our vision of the post-18 education system. I hope that noble Lords will forgive the cliché, but it rings true in this case: it is not the end of the process but rather the beginning. We will continue to engage with stakeholders now that the independent panel phase is complete, as we work towards the completion of this review. I beg to move.

My Lords, I too welcome this timely debate and thank the huge number of organisations that sent us briefings. It shows the importance of the work we are talking about. We all welcomed the Government setting up the Augar review and there was excited anticipation and expectation. Here at last was an opportunity to put right the inequalities in our post-18 education system. I am afraid, however, that the editorial in the Guardian summed up my feelings about the published review. It said that the proposed rebalancing of the post-18 system meant,

“that FE colleges are no longer quite such poor relations”.

Further education, for so long the Cinderella of the education system, may look just a little bit better dressed, but is still very far from being invited to the ball. The media headlines were not about the rebalancing of vocational education but all about the impact on our universities. I do not think it was a helpful message from the spokespersons of the wealthiest universities that, should their income suffer, one of the likely cuts they would have make was to their outreach activities. Their budgets for increasing diversity and encouraging disadvantaged students would be the first to be cut. This was not a particularly helpful or thoughtful comment on the review.

Of course, the real beneficiaries of the proposed cut in fees will not be those who take out huge loans: they will be paying even more back over the longer repayment period. The beneficiaries will be those better-off students who do not need to take out a loan: they will benefit from a cut of £7,500 over a first degree course.

Both broadcast and print media paid scant attention to what was said about England’s 200 further education colleges, which are the backbone of our vocational training provision. Our further education colleges represent the essential engine to meet our growing skills gap.

Just 37% of men and 34% of women undertake post-secondary, non-tertiary education in the UK, which compares badly with the 49% of men and 44% of women across the industrialised nations of the OECD. I understand that £8 billion of government funding was received last year by universities to support 1.2 million students. That was more than three times the £2.3 billion allocated to 2.2 million full-time and part-time students aged over 18 in further education. While the proportion of students attending university has risen over the past decade, the number in all forms of further education has declined. In this country, we have a very elitist view of education in that schools and parents judge their pupils’ success by how many go to university. Last year, I visited an academy in a very poor part of London. As I went in through the door, the banner across the front portal read, “We Want All Our Children to Experience a University Education”. But actually, a vocational education or apprenticeship might be better for many young people. Further education is often seen as for other people’s children.

For many young people, particularly those whose parents did not go to university, their choices at 16 depend on the advice they receive at school. With schools incentivised to direct their students into the school sixth form and then to university, many students are not even told about the vocational options or apprenticeship routes open to them. Only this week, I was talking to a colleague who became the education officer in a local authority 40 years ago. He told me that he always made a point of looking behind the door of the head teacher’s office when he visited a secondary school to see whether there was an unopened box of FE college prospectuses. Is that still the case? I hope not.

At an event hosted by the APPG on Apprenticeships, every one of the seven apprentices invited to meet the group explained that they had been forced to do their own research into starting an apprenticeship. Not one of their schools had offered them any information or guidance. Following the addition of the “Baker clause” to the Technical and Further Education Bill, the Government reminded every school that, since 2 January 2018:

“Every school must ensure that there is an opportunity for a range of education and training providers to access all pupils in year 8 to year 13 for the purpose of informing them about approved technical education qualifications or apprenticeships. Every school must publish a policy statement setting out their arrangements for provider access and ensure that it is followed”.

I struggled to find the necessary policy statement on the school websites that I looked at, even though a model statement is set out in the guidance. Buried on one school’s site was a link from the heading “Not going to uni”, but the link was broken. Does the Minister know how many schools are meeting this statutory requirement?

Much of the report is good, and I will accentuate the positives in the 216-page review. It is encouraging to read that,

“there is a ‘powerful case’ for change in the FE sector … which in recent years has had its ability to innovate and plan for the long term ‘severely restricted’ by the funding regime”.

The report makes some very sound proposals. We support the proposal for a national network of colleges but have to consider the impact on students in rural areas. We very much welcome the £1 billion capital investment fund. We support the proposal that all adults should be able to study for their first level 2 and level 3 qualifications free of charge. We agree that there is no case to set a lower base rate for 18 year-olds in college compared to that for 16 and 17 year-olds. We agree that level 6 apprenticeships should be available only to those who have not undertaken a public-supported degree.

For me, as vice-president of the All-Party Parliamentary Group for the Teaching Profession, the most important recommendation is on the further education workforce. With average salaries being £7,000 less than in secondary schools, it is little wonder that FE colleges struggle to recruit staff. Can the Minister assure us that the 23% contribution to teachers’ pensions, which is hurtling towards colleges, will be funded by the Government?

In many of the technical areas that further education students need to study, salaries in the private sector are twice that of an FE lecturer. In terms of lifelong learning, we must ensure that our workforce is able to access the education that the changing patterns of employment will require. More than 2,000 years ago, Aristotle was able to say with confidence:

“Give me a child until he is seven and I will show you the man”.

Rousseau said much the same thing, with equal confidence, 300 years ago. How times have changed—and at a much faster rate than ever. For those who missed out earlier in their education, or those who need to retrain for a new career, lifelong learning is an absolute must. We must pay tribute to the Augar review for emphasising this.

All of us in our political careers regret things that we have been forced to do or see happen. For me—I hold up my hands—it was the coalition deciding to end maintenance grants. That was a real loss to young people from disadvantaged backgrounds. Now I am pleased that reinstating them has been suggested in the review. I very much hope that it will happen.

Finally, it is interesting to note that Mr Johnson and Mr Hunt have both announced spending plans as part of their leadership campaigns that even their own Chancellor thinks are in cloud-cuckoo-land. I have, to date, heard neither pledge to meet the cost of the Augar review. There is, of course, still plenty of time for each of them to agree to implement this review—at least one of the positive legacies that Mrs May craves.

My Lords, like the noble Lord, Lord Storey, I intend to focus my remarks on the Augar review’s recommendations on further education, always a neglected area of public debate, not least in this House. Before doing so, I want to pick up on one aspect of the review concerning universities.

Unlike some commentators in the HE sector, I greatly welcome the recommendation to reduce tuition fees for undergraduates to a maximum of £7,500. The coalition Government’s decision to treble fees at one go was a mistake and unlikely to be sustainable, as we are now seeing. I can think of no other example where the price of a public service to the user, in this case graduates, has been increased by so much at once. There are several unfortunate outcomes, including the need for huge write-offs of unpaid loans, leaving a large problem for the public finances in the longer term, and the disastrous decline in part-time and mature undergraduates.

I welcome the recommendation to return to government grants to make up for the loss of fee income but regret that it is focused on STEM subjects. We must stop perpetuating the myth that science and engineering courses hugely outweigh others in their usefulness and value to the economy and society. For example, courses that prepare people for jobs in the creative industries, financial services, business or public sector management, as well as in education or social work, are as important. Can the Minister say categorically whether all undergraduate courses will have their funding made up by grant if fees are reduced to £7,500?

I now turn to further education. The Augar committee must be congratulated on taking up the cudgels on behalf of the colleges and the intermediate-level vocational and technical courses that they provide. It has been a feature of Conservative Governments to neglect FEs. When Labour took over in 1997, there were many failures in education that needed addressing after 18 years of Tory rule, but there were few greater than in further education. Close to a third of FE colleges were running deficits—in some cases, very large ones—and capital grants were far below what was required. The way they were managed needed attention, as did the training of their teaching staff. The Government addressed these issues, along with providing a 12% per annum increase in their funding.

When the Conservatives came back into power in 2010, once again FE went to the bottom of the pile. Whereas universities have been relatively unaffected by the austerity programme, FE has sustained huge cuts, which continued until very recently. I have often puzzled over Conservative Ministers’ long-standing reluctance to support the FE sector. Why do they not get it? Is it that they just do not know people involved in FE, either as staff or as students? Neither they nor their children normally go to these colleges. Nor is FE given much coverage in the media; it is always about universities or schools.

This debate has been initiated by the Government and I am grateful to them for that. I know that they are trying to fill in time here, as we have little to do with virtually no legislation of any significance while the ghastly saga of Brexit continues. However, I assume that they would not have initiated this debate unless they were prepared to give some indication of their intentions on Augar’s recommendations. Therefore, in commenting on some of them, I will ask whether they agree with them and, if so, what they will do. I would be grateful for a reply that does not just hide behind bland references to considering them in the spending review.

First, do the Government agree with the fundamental contention that it is now time to rebalance spending priorities towards the 50% of the population who do not go to university? Secondly, do they also agree that it is necessary, as Augar rightly states, to address the disparity between those who go to university and those who do not, in the interests of fairness and social justice but also to bring about considerable economic benefits? I am not sure that really came out in the Minister’s opening remarks. Thirdly, I know that the Government are aware of the need to improve skill levels if their industrial policy is to be implemented, but do they accept, as the Augar report argued, that far more needs to be done to expand the numbers with technical and vocational qualifications, in particular through much greater enrolment in courses at levels 4 and 5? The numbers have been falling, so what funding structures and incentives will the Government introduce to reverse this? Fourthly, will they ensure, as the Economic Affairs Select Committee recommended in its recent report, that any changes, especially at this level but at others too, will be flexible, allowing students choice over how long they take to build their skills through acquiring a qualification?

Many universities have invested in substantial capital programmes; in contrast, hardly any FE colleges have been able to do this. Augar estimates that around £1 billion is needed and sensibly advocates doing it on a strategic national basis in line with industrial strategy priorities. Without this funding, the FE sector will be unable to meet the standards required to deliver technical qualifications, nor will the quality of its provision match that of our nearest neighbours in Europe. Instead, its estate will remain in poor condition and high-cost courses will not be provided.

Funding also needs to be restored, as Augar advocated, for level 2 and 3 qualifications. Although more young people now attain qualifications at this level, many still fail to do so. This means that they must catch up later. If this is to happen, we have to restore adults’ entitlement to free tuition for level 2 and 3 qualifications, with flexible routes to attaining them. Do the Government accept this?

Do they also agree that FE colleges are the best way to deliver locally based, permanent and reliable institutions, which, while having some overlap with schools and universities, recognisably provide different education and training from either? Their branding, status and public profile need improvement. This requires initiative on their own part but, above all, requires the Government to stand up for them, resource them and help drive up their standards.

As Augar states:

“Funding rules are complex and inflexible. They impose short time horizons and do not allow FE colleges to respond to local labour market needs”.

The Government must rectify this, as well as increasing the core funding rate for adult education courses and for 18 year-olds, which has unaccountably been reduced.

I conclude by admitting that the FE sector has not been uniformly successful in providing high-quality courses with high completion rates. Greater investment in every teaching staff member’s training is needed. As the noble Lord, Lord Storey, rightly said, their value also needs to be recognised through higher pay, since their pay has fallen considerably below that of secondary schoolteachers. This cannot be right. Employers need to be engaged constructively in the work of the colleges, helping to enrich their courses. This is incredibly important.

I end with a plea to the Government: please mend your ways and put the FE sector at the centre of the education system. Do not let it languish on the sidelines any longer. Do this as a matter of urgency.

My Lords, I will begin by declaring a few interests. I was chancellor of Newcastle University, a very good Russell Group university, for a number of years; I have been the elected chancellor of Oxford—the last election that I won—for 16 years; and, after I left the European Commission, I was a member of the working group that established how the European Research Council would work. Over the years, British universities have done exceptionally well out of peer-driven research under the ERC.

I should confess at the outset—it is good for the soul—that I have not always read every word of reports that I have commented or given speeches on. However, I did read every word of this report. It is extremely well written—I hope that does not sound patronising. There are one or two blemishes: I think the phrase “low-tariff universities” does not do much justice to the English language. However, by and large, it is well presented and extremely well written. The comprehensive referencing is probably a tribute to the number of academics on the panel. If you follow through with the referencing to the end of the report, you discover the IFS report indicating that graduate earnings have a great deal to do with the lifestyle of the graduate before university. This sort of drives a hole into one of the arguments the panel uses elsewhere for determining the value of courses. However, it is an extremely good report overall. It will provide very good resources for future discussions on higher and further education—I hope that is not too back-handed a compliment.

The rumour was that this would be the Government’s answer to the Corbyn effect at Glastonbury and that, because people thought that young voters had gone to Labour because of the promise to get rid of tuition fees, the right answer was to find a Tory version. Frankly, I think that that is a lot of baloney. Most students are too smart to think that you can get rid of all tuition fees without having some effect on public spending elsewhere. After all, they are not running for the leadership of the Conservative Party. They are perhaps a little smarter on the existence or non-existence of money-bearing trees. Also, reducing the tuition fee by £1,750—in what is, after all, a pretty regressive package of measures—will not have very much effect on young people’s voting habits. However, the decision to reinstate maintenance grants is very welcome. I hope the Office for Students will also think that, because it has been rather critical of our bursaries at Oxford, which are more generous than maintenance grants. I hope it will think again on that.

As the noble Baroness has just said, the most welcome part of the report is what is said about FE. The report quotes my noble friend Lord Baker as referring to FE as a Cinderella at the end of the 1980s. In 1985-86, I was the Minister responsible for FE and schools. It was a Cinderella then. As the noble Baroness has just remarked, FE—Cinderella—has been very badly treated since then by successive Conservative Governments. In 1990, FE spending per pupil was 50% higher than in secondary schools. By 2015, that had fallen so that FE spending per pupil was 10% below that in schools. We know that FE spending has fallen in real terms since 2010 and the cost has been closed courses, closed and badly maintained colleges, and teaching salaries in FE being much below those for similar jobs in schools. It is intolerable. It is shameful for Governments who have consistently and properly talked about the importance of doing something about low productivity in the British economy. I hope that this part of the report will be implemented by a Conservative Government —if there is one—or any Government in the future. It is exceptionally important.

I want to make three general points about what the report has to say about HE. First, there is a heroic assumption that the money lost to universities in tuition fees will be provided by the Government in some other way. I imagine that universities, their governing councils and vice-chancellors would take that assurance with a warehouse of salt, given past experience about university funding. We are told that any loss of income will be made up by changing the teaching grants so that we will get more in for STEM subjects and less for humanities and social sciences. Unless that happens—and unless there was some adjustment—we would lose about 17% of our tuition fee income at Oxford, for example.

The formula used for the shift from the humanities and social sciences to STEM is pretty absurd. It gets us back to the low-tariff and low-return universities. At some universities, humanities and social sciences may not be taught as well as they might be, but what happens when that is all the university does, such as at SOAS? It has been a very great university, though it is in some financial difficulty at the moment. At Oxford, our social sciences come first in the world in the QS rankings and many of our humanities subjects come extremely high. I do not think it makes very much sense to penalise those as proposed in the Augar report, not least given that we get huge and well-paid employment opportunities for graduates in those areas.

I also have an intellectual horror of talking about the humanities and social sciences in entirely utilitarian terms. I remember being criticised once when I was talking about the importance of people studying translating Voltaire. I was asked what that did for the country’s gross domestic product. It is perfectly true that the answer is, “I haven’t got the faintest idea”, but that is not actually the point. We know that a lot of things are done and taught at universities which would make us poorer as a society if they were not, even if you cannot demonstrate that they make us richer because we do them. I am very reluctant to accept the argument about shifting all the grant from the humanities and social sciences into STEM subjects, although they are extremely important.

I will make two other brief points. First, we tiptoe gently around the question of the different roles of different universities. We have been doing it ever since we doubled the number of universities by calling all the polytechnics universities. This was at a time when, frankly, some of the polytechnics were better than the universities, so it was not a question of suddenly giving the polytechnics a great lift up in the world. In Oxford, there are two fine universities. They do different jobs. We should not be too nervous about saying that universities have different functions and objectives. The report says—and I totally agree—that almost all other countries have very clear categories of university. Why are we in this country not prepared to accept that and face up to it? This is a debate that should be led by the higher education sector itself; it should not be imposed on higher education and higher education institutions by Ministers or quasi-ministerial bodies. It is a debate in which universities themselves should get engaged. Certainly, I do not believe that slightly wimpish phrases about getting the OfS to “bear down” on the cost of some courses is the right way to address a serious issue. If only we had a system like the Californian one we would not have to get involved in all this.

My last point is, I guess, the most important; it might sound disobliging to the authors of this admirable report. Universities are facing tremendous problems with the approach of Brexit whether with or without a deal. There are implications for students, for our research, for the professors and lecturers at our universities, and for our income streams. These are turbulent times; I hope that we will not add to that turbulence the gale force of a complete overhaul of university financing. We should help universities over the next period; the Government have so far been unprepared to say how they see the way forward.

My Lords, I first declare an interest as a member of the panel that produced this review. I thank the Minister and other noble Lords for their kind words. Obviously, I hope that the Government will implement our recommendations but I start by commending them for recognising that post-secondary education is, increasingly, for and about everyone, not just a small part of the population.

This is the first English Government-commissioned report, since Robbins in 1963, to look at post-18 education overall. Media coverage, predictably, has focused on universities; I have to say that the Minister’s opening remarks rather did so too. What matters for this country now and in the future, in my opinion and that of my fellow panel members, is the overall system. We have tried to produce a system of interlocking recommendations, which should—please—be treated as such, as far as possible.

In my limited time, I shall highlight three overarching conclusions which drove our very long list of specific recommendations. Before doing so, I emphasise that our terms of reference excluded any significant increase in total spending. We had to consider post-18 education as a single system, without some vast funding increase to make things smoother for everybody. We took that very seriously because we felt it was a realistic position: it was sensible to assume that there would not be much extra spending and to look at priorities and choices in that context.

Turning to our first and most important conclusion, I have to agree that the further education sector badly needs attention. Further and adult provision has been grievously neglected. Some of our headline numbers have, fortunately, been widely quoted: more than £8 billion was committed in 2017-18 to 1.2 million English undergraduates; in the same period, 2.2 million adult further education students received a little over a quarter of that amount—£2.3 billion—from public funding. Our undergraduate numbers have soared; we have one of the highest university participation rates in the OECD. Yet the total number of people in post-18 education has actually declined.

We think this is shameful and short-sighted, and the remedy is not some emergency bailout but to create —to recreate—a high-quality network of non-university provision. We inherited in this country a nationwide set of institutions closely linked to their communities. Every town of any size has a further education college, once commonly known as “the tech”. If we truly want to serve the whole community in the future, those colleges must again take centre stage.

While 18 year-olds can move away from home for three years, adults cannot; while 19 year-olds can study full-time, no adult with a family and a mortgage can do so. Small businesses create the majority of new private sector jobs in this country. They are at the heart of any successful apprenticeship system and an enormous part of our economy. They can work with and relate to a college, but there is very little opportunity for them to engage with a large university. While our universities are indeed world-class—I forgot to declare my other interest as a full-time employee of a fine university—we have created a walled dead end for anyone not university-bound. That is not merely half of our young people; in parts of the country it is well over half. In England today, the overwhelming majority of those not academically successful at 18 never progress to higher qualifications. That should be a source of deep national shame.

Further and adult provision has been underfunded and subject to short-term government contracts and endless micromanagement. But high-quality provision needs to be run in a stable, well financed way. A good comparison is with medical education, which is equally vocational. Most of what colleges do post-18 is workplace-oriented, vocational and technical. We would never run medical schools the way we have run further education. All this provision needs to be stable, expert, well resourced and based in institutions. That is why we made this issue such a major part of our review.

My second point concerns our very first recommendation. It has received rather little attention but we put it first because we thought it so important. I have to disagree with the noble Lord, Lord Storey, and with the Guardian: our review promises quite significant change, and this first recommendation is fundamental. The recommendation is to introduce a single lifelong learning allowance for adults, set at the same level as the loan entitlement that people currently have for a degree but giving individuals far more control over when and how they use it.

Our system at the moment tells young people, “Yes, you have an entitlement. You can have one full-time degree —once. Take it or leave it”. They very rationally think they should take it, and higher education, very rationally, sets out to make an offer that is, overwhelmingly and increasingly, for a full-time full degree. The level 4 and 5 technical qualifications have simply been disappearing, in spite of well-documented skill shortages and employer demand.

Students have a lot of choice of subject but very little choice over mode of study. A lifetime learning allowance of the sort we are advocating would enable and motivate people to split their education. They could take a technical qualification aged 18 or 28, then 10 years later take another, or perhaps at that point go on to a degree. This would give them a strong incentive to hold some money back and a strong incentive to part-fund when they can, because they could keep the money for when they need it. It would give a strong incentive to do some of their higher education in a college and then move to a university later. We believe it would also give a very strong incentive to institutions to develop a more varied set of offers. We put this recommendation first because we think it really matters.

My third and final point comes back to university funding, which will of course be a source of considerable debate. I should like to make two points on this. I do not want to get too involved in progressive versus regressive, except to say that we looked at this as a system—as a set of interconnected proposals. It is the proposals as a whole that we should consider when we talk about whether this is progressive. We believe that something that shifts resources to the 50% of the population who have been grievously served of late, is intrinsically a progressive set of recommendations.

My second point is that we were taken aback by how far funding and costs seem to have become divorced, and how universities have a complex set of cross-subsidies. You always cross-subsidise a bit, but it has become extraordinarily opaque—Heath Robinson would be proud of it. For example, and centrally, since this current system was introduced, the value of teaching grants, with which the Government top up student fees for high-cost subjects, has been comprehensively and progressively eroded. Unlike those in other countries, including Scotland, our universities now receive very little more for a science degree than they do for one in business studies. The funding for physics since 2011 has grown by a mere 6%, but for leisure studies it has grown by 40%. We find it hard to believe that the cost of teaching English has increased so much faster than the cost of teaching chemistry.

More importantly, a system so transparent and divorced from cost is not one that is stable or rational, or that can endure. Therefore, we made some serious suggestions for changing the nature of the funding regime, to make it clearer and recognise costs, because any regime for funding higher or further education must take proper account of both differential costs and the financial incentives that these create for institutions. At present, ours does not, and I hope noble Lords will consider the review and its recommendations with this, and our other general conclusions, in mind. I thank noble Lords.

My Lords, the noble Baroness did a good job of explaining clearly the recommendations of the report of which she was a party. I agree with her that Heath Robinson would be proud of the current university finance system. Indeed, it is now so complicated that it reminds me of Lord Palmerston’s famous remark, on the Schleswig-Holstein question, that there were only three people who understood it: one was dead, one had gone mad, and he was the third and had forgotten it. It is that complicated now, and part of the reason is that one reform has been layered on another reform. In the last 20 years, there have been three major reforms of the university finance system. Each Government have engaged in a substantial reform—indeed, as I look around the Chamber, I see the authors of many of them here, with the wounds to show for their works.

I had the misfortune to be closely associated with two of those reforms: the 1997 reform and the 2003 reform. The 2003 reform was the first of the seriously controversial ones, because it required an appreciable fee level of £3,000 being paid by students. I shall never forget that, when we had the general election shortly after in 2005, a friend of mine was standing in a university seat, and the fees were the big, controversial issue. I thought that I would defuse the issue at the beginning of my speech by saying that I knew that on my tombstone will be engraved the words “Tuition Fees”, and somebody shouted out from the back, “Not soon enough”. It got much worse than that, because that was £3,000 and we at least managed to create a consensus. Indeed, I was rather proud of the consensus we established between the two major political parties on tuition fees at the level of £3,000, because in my view big reforms of this kind only stick if you can create a consensus. It was not a complete consensus, because the Liberal Democrats were strongly in favour of abolishing all fees and fought the 2010 election on that.

The big mistake in policy, in my view, was the decision in 2010 to treble fees. That was a mistake in terms of making the policy acceptable, because it broke the consensus. It was the straw that broke the camel’s back in terms of public acceptability to go from £3,000 to £9,000. It was also a mistake in policy, because the universities did not actually require, in terms of any objective assessment of need, that degree of cash infusion. Indeed, they were not capable of absorbing it. All of the Government’s own modelling on the 2010 reform—the noble Lord, Lord Willetts, is not in his place, but he and I have debated this a lot over the years—was done on a fee level of £7,500, because £9,000 was supposed to be the upper limit, and it was expected that most courses would be at £6,000 and that the fees would be varied. What happened, of course, was that every university went straight up to £9,000. Universities could barely absorb the cash, which is the reason why the vice-chancellors are being paid £300,000 to £400,000, and in the case of the University of Bath—which I am afraid I got rather involved in because it was such a scandal—a salary of £500,000. It is not just the people at the top; there was a huge increase in the size of senior management teams and a big sense of resentment inside the universities themselves.

Although the noble Baroness is absolutely right to say that we need to tackle the issue of FE, it is important to understand that the inequity in the system has got substantially worse over the last 10 years. It is not as if we are moving towards an end point where there is going to be a fairer and better system. As the noble Lord, Lord Patten, said, the words of the report are excellent, but I am afraid that the graphs and figures—I always go to those first, as they tell you what is really going on—are startling. I invite noble Lords to compare Figure 3.1 with Figure 4.3. Figure 3.1, which gives university resources per student per publicly funded degree, shows that in real or constant terms the resources per publicly funded degree in the last 15 years have gone up from £18,000 to £28,000. There is no area of public spending which has been remotely as well protected as universities. However, Figure 4.3, which gives FE college sector total income in constant prices, shows a decrease in real terms, from spending of nearly £8 billion a year 10 years ago to under £6 billion a year now. So what we have done in the last 10 years—we as a Parliament and the coalition Government and the Conservative Government since 2010—while we have all been paying lip service to equality of opportunity and investing in the majority who do not go to university and are dependent on the FE system, is to massively increase resources per head in universities, irrespective of the type of university. There has been no differentiation of the kind that the noble Lord, Lord Patten, was talking about.

It is striking that, for a lot of courses in universities now, the fee level is higher than the actual cost of delivering the course. With fees at £9,500 per student per year, most social science and arts courses do not remotely cost that much to deliver. That is the reason why secondary schools, which teach about three times as much as universities in terms of per hour teaching in the arts, have a fee level—a grant per year—which is half the level of universities now, and that is being cut year by year, although they are the supply chain for the universities. At the same time as that has happened, we have had a huge cut in resources for FE.

On apprenticeships—we do not have my noble friend Lord Layard speaking, who has rightly championed apprenticeships over the years—

Oh, we do. Well, I may slightly be pre-empting my noble friend’s speech. He has been lobbying—he lobbied me when I was in government—for substantial reform to bring us much more in line with the German system, where young people who do not go on to university have a standard apprenticeship offer, which is what we desperately need as a society.

We have managed the remarkable feat of introducing an apprenticeship levy, which is requiring employers to pay towards apprenticeships, while apprenticeship numbers have gone down. So we have managed the triple whammy of massively increasing resources per head for the most privileged part of the post-18 system, slashing resources for the part of the system that deals with those who have the lowest skill levels at 18, and creating a funding system for apprenticeships which has got more money going in but does not appear to be producing any decent output. If we were not dealing with the crisis of Brexit—and I have to raise that in every speech I make, because it is the opportunity cost and the reason that the Government cannot do anything about any of this—these would be urgent matters requiring attention.

What should we do? I do not think that the current system is sustainable. I know that I am surrounded by people who are deeply engaged in the work of universities, who would love to think that we can maintain fee levels of £9,500 a year, with a 6% real interest rate and the current system. For what it is worth, speaking as a politician, I simply do not think that it is going to be sustainable. There is no other country in the world that has an average public fee level as high as ours that is required to be paid by students. Most European countries that started to go down this road, because of massive public pressure—of the kind we had at the last election, with it becoming a contentious issue between the parties—have abolished them. Most significantly, looking at leading-edge public policy, the Federal Republic of Germany, which introduced modest fees, has abolished them. In the United States, in US public universities—not private universities, which of course is what we spend most of our time looking at—where most students go, fee levels have been coming down and are being abolished in some states, notably now in New York.

I do not think the current system is sustainable, and there will be pressure over time to reduce the fee level. Either universities will have to take the burden of that entirely, which in my view they could afford to do if it was done in a managed way, or there will have to be some shift towards taxation. It is very clear to me that that should be done in the form of adjustments to the higher rate of tax, because only about 15% of taxpayers pay the higher rate. The idea that it would be inequitable to move towards a tax-based system is completely wrong. It depends on which taxes you increase and what system you put in place. If there was a modest increase in the higher rate traded off against a reduction in tuition fees and the money was segmented in some form, it could be done. I say all that not because it will be popular in the House but because it is probably inevitable that that will happen in due course.

The really important recommendation in the report, which is hugely significant for where it might lead in long-term policy, was mentioned at the end of the noble Baroness’s remarks, and that is the proposal for a lifelong loan allowance. The principle of the lifelong loan allowance is, to my mind, incontrovertible, and that is that the state should make an investment in all young people at the age of 18 that is in principle the same: whether you go on to an apprenticeship, further education or higher education, the commitment the state makes to you should be the same. Of course, they will be going to different institutions and many will go into apprenticeships and so on, but it is totally unjustifiable that, at the moment, the state makes a contribution about three times as great investing in students going on to universities, who already, by and large, have most spent on them before the age of 18, with many of them going to expensive private schools. It is totally unjustifiable that they should also then be the beneficiary of so much additional state investment beyond the age of 18.

If the principle of the lifelong loan allowance—that all students get the same investment—is accepted, over time that must lead to new investment going into further education and apprenticeships. Then the big challenge—and I look forward to my noble friend Lord Layard’s speech—is how we create a system that ensures we have an apprenticeship regime in this country that resembles that of the Federal Republic of Germany. I have always taken the view in public policy that R&D stands for “rob and duplicate”: where somebody else does something really well, you should copy it like mad. It is high time that we accepted that many of our continental friends have done a brilliant job of creating high-quality apprenticeship systems, and the sooner we copy them, the better.

My Lords, let me say at the outset that I support much of what has been said already about further education colleges: they need significantly more support. I do so because many of my remarks are addressed at the university sector, particularly our research-intensive universities, and the effect that might possibly be had by the reduction of fees. The Science and Technology Committee, which I chair, is currently taking evidence on research funding of universities. The comments I will make arose during an evidence session in that context.

The Independent Panel Report to the Review of Post-18 Education and Funding in England has recommended reducing tuition fees. It is interesting that we call them “tuition fees”, which suggests the money is used for nothing but tuition. That, of course, is not the case, as those who run universities know well. Maybe, as the noble Lord, Lord Willetts, has suggested, we should call them “university fees”. The panel recommended reducing fees to £7,500 per year, with a broad recommendation for the Government to make up this money through direct teaching grants. However, there is no obligation for the Government to adopt all its recommendations. I hope that they will take that recommendation on board, but there is also no indication as to how these teaching grants will be distributed. I asked the noble Viscount the Minister a question the other day as to who would decide how this grant is distributed. There has been some suggestion in the evidence that we heard that there might be some kind of mechanism on a quality basis, which might be variable in the distribution of this grant.

As Professor Julia Buckingham, president-elect of Universities UK, said to the House of Lords Select Committee, it is vital that the Government ensure that any lost fee income is made up through grants, with a long-term Treasury commitment to fund universities at a sustainable level. Given the current political uncertainty, it is unclear how the next Prime Minister will view the report and whether the recommendations will be cherry picked. Any future Prime Minister and Government must commit to funding universities sustainably. Analysis by Universities UK finds that a reduction to £7,500 tuition fees would result in a £1.6 billion funding gap, which would need to be filled through direct grants. If this funding was not replaced, for many institutions this would reduce research income by between 10% and 60%, particularly for the research-intensive universities. For some it would result in the loss of their entire research budget.

The most up-to-date TRAC data published in May 2019 found that there is a £3.7 billion deficit for research in England and Northern Ireland, with recovery of full economic cost for research standing at 69%, because universities do not get full recovery of cost for certain grants as is the case for charities. This is subsidised substantially by non-publicly funded teaching, at 139.3% of full economic cost, and by other income-generating activities such as commercial activities, investments, donations and endowments, with publicly funded teaching broadly breaking even at 98.3% of full economic cost. So research universities do not use tuition fees as they are called, or student fees, for subsidising research; they have to find that money from other sources.

Given the sensitive balance of cross-subsidisation within higher education institutions between domestic teaching, non-domestic teaching and research, it is vital that the post-18 review does not lead to a cut in university funding, with any potential reduction in student fees being replaced through direct grants. Not only is this important to maintaining the quality of the UK’s world-class university sector and supporting work to widen participation for disadvantaged students, but failing to do so may lead to significant funding being diverted within institutions away from research activities. I do not say, as has been suggested, that universities would have to cut their outreach programmes for disadvantaged pupils. I do not think that we should harm universities that have saved money. For example, a fall in funding for domestic teaching might lead to additional international student income and income from other activities being used to plug the hole, and therefore being diverted away from supporting research activities. Anything that damages the reputation of the UK’s higher education sector would also pose a threat to international student recruitment, such as reports of institutional difficulties or even threats of closure, thereby compounding the task for UK Research and Innovation.

Universities use their reserves to fund construction and maintenance of buildings and the purchasing of new equipment. If these resources are increasingly stretched as a result of a cut to funding, universities will be less able to invest in the infrastructure that enables them to gain a competitive edge. For instance, these days to recruit a high-calibre senior academic to start a new research channel costs between £2 million and £3 million to universities. “Non-essential” but highly valuable functions of universities that do not draw in funding are the most likely to be cut. These include smaller research projects, such as those with a local or community focus, and work with smaller industry partners for whom high amounts of matched funding are not possible.

Finally, although the Department for Education may want a reduction in the resources going into universities, at the same time BEIS wants to increase R&D from 2.4% to 3% of GDP, which would require 120,000 to 260,000 more graduates. They need not all be graduates, and the higher education colleges will have a significant role to play, but people will need to be taught STEM subjects to carry out the research and innovation—so a reduction in fees for the universities does have other implications. My plea to the Minister is that, in implementing the Augar review, the Government fund the universities as it recommended, so that they can continue as world-class research establishments.

My Lords, I thank the Minister for bringing this debate. Similarly, I thank Philip Augar and the independent panel members for the thorough review that they have undertaken. I welcome the publication of this report and the issues it raises. I declare my interests as the lead bishop for further and higher education, and as a governor of the University of Winchester.

I shall comment on three areas. My first point is about ensuring a genuinely rich ecology of higher education providers, and especially the contribution made by smaller and specialist institutions. A local example is the University of Winchester, a member of the Cathedrals Group association of universities, some of which are among the country’s smaller higher education institutions in terms of student numbers. One of the headline recommendations of the review is to lower tuition fees, which will reduce the funding institutions receive unless it is provided from other sources, such as grants for teaching. To enhance a diverse range of universities and secure the quality of provision, it is imperative to have a funding system that enables these institutions to flourish, and not simply larger universities which are generally more able to withstand funding turbulence.

It is true that the effect of the proposed changes will vary between institutions. However, I draw the Minister’s attention to some initial estimates on this matter. A headline tuition fee of £7,500 would reduce the income of some Cathedrals Group members by some 10% to 20%. One of the likely consequences of such a reduction would be fewer opportunities for students from the most disadvantaged backgrounds to access good local higher education provision—a particular strength in members of the Cathedrals Group, amounting to almost one in four students at one such institution.

It is vital to recall that universities are crucial centres for cultural provision, community and civic engagement, and support for local economies. I therefore support the report’s recommendation that teaching grants should replace any funding deficit, so that local communities do not lose out from a decline in university civic engagement, and, equally importantly, students do not suffer the loss of essential services, including provision for mental health and well-being—although I do share the concerns of the noble Lord, Lord Patten, about the security of such a funding stream in the future.

My second point is how pleased I was to see the emphasis placed on the value of further education—not just in an abstract way but by addressing funding for the 50% of young people who never attend university. It is crucial to recognise the central value of further education as an essential public good in itself. Indeed, it is part of the basic educational infrastructure that opens opportunities for those from all backgrounds to access learning and training, enabling them to contribute to the cultural and industrial health of our society. Many noble Peers have already pressed the case here.

Furthermore, I am pleased that Augar is forward-looking to the changing landscape of the labour market. Our further and higher education sector must not only support the increasing number of 18 year-olds wishing to study at university, but be adaptable enough to meet the needs of a society demanding reskilled adult workers. It is crucial that further education colleges, particularly in towns that lack a university, receive a long-term increase in funding. Further education provides the training required to meet the future skills that will be demanded of a society in a fast-changing technological context, offering opportunities for adult learners to return to study and to reskill, especially for the emerging fourth industrial revolution driven by artificial intelligence. I would welcome in particular a commitment from the Minister that Her Majesty’s Government will reverse the underfunding of further education by implementing the recommendations of the report, although I recognise that he may feel unable to commit to this at present.

Thirdly, I support the review’s judgment that the value of a degree should include its social value, and in doing so we must move beyond a narrowly one-dimensional measure based entirely on graduate earning potential. Let me take a concrete example from one of the professions with a public service focus: nursing. Clearly, the restoration of a block grant for teaching would help offset any reduction in fee income and avoid adversely affecting the financial viability of this type of provision. Similarly, the reintroduction of maintenance awards may well go some way towards encouraging increased recruitment, and perhaps compensate for the sharp fall in nursing degree undergraduate applications that has resulted from the abolition of bursaries in April 2017.

However, such steps are insufficiently radical. They do not, for example, address anxieties about student debt that are particularly acute in professions such as nursing, where some 50% of nursing and midwifery trainees are mature students with other family, caring and financial commitments. Nor will they address the equally crucial crisis in staff retention, already visible in nursing, and in social work and teaching.

As a matter of public policy, we need to create more effective ways to incentivise people to join public-service focused professions and to avoid unintentional disincentives for the higher education institutions that educate and train them—for example, by placing too much weight on graduate earnings as a measure of institutional effectiveness. May I suggest to the Minister that a more radical approach would be through a public service covenant? Using the example of nursing—teaching and social work are other possible professions—undergraduates would commit to several years post-registration service to the NHS in return for their loan balance being written off.

I would welcome a response from the Minister as to whether the Government plan to review their higher education policy to address the recruitment and retention crisis in a number of critical public service professions, and whether he would be willing to meet with me to discuss how such a public service covenant might be introduced.

My Lords, many years ago I worked on the Robbins report, and I believe that the Augar review could well turn out to be at least as important. Robbins unleashed the expansion of HE and I hope that the Augar report will unleash the expansion of FE. That is what I want to talk about.

The question is how to unleash such an expansion. I will focus my remarks on levels 2 and 3, which is where we are signally failing. We are producing lots of graduates, and the entitlement we have talked about might produce some more, but we are not producing enough well-trained non-graduates. This is where we differ from our competitors, and it is the source of our low productivity and our great income inequality.

How are we to unleash an energy of expansion at levels 2 and 3? Augar proposes an entitlement to free level 2 and level 3 education. When I heard Mr Augar present his report, that was his number one proposal. I was really excited by it, but I asked him how he would deliver it on the ground. I then read the Augar review and I could not find any explanation of how the places would be generated that would enable young people to feel that they had an entitlement, just as young people going up the academic route feel that there is an entitlement there: if they pass at one level, they know that they can automatically go to the next level. It is completely clear to them what the system is like and what the entitlement means. However, if you are going through FE, you do not know what will be available; it is not quite clear, and what you want might not be available. So how will we get a system like that?

We have to learn to apply the same principles to the non-academic route as we apply to the academic route. The fundamental solution to the problem in FE is to organise it as we organise sixth-form colleges and universities: to make it the same system with the same clarity of progression. How does that progression work in the case of sixth-forms and universities? It works because there is per capita funding. If a provider wants to put on a course, either at sixth-form level or in a university, they simply put it on and the money arrives with the student—it is per capita funding. We will never unleash the energy and dynamism that we see in HE in FE unless we have the same mechanism. It has to be per capita funding: automatically, the money has to follow the student. At the moment it follows the student only up to the age of 19. If you go down the non-university route, it then stops, so that age limit has to be extended to provide uncapped funding right through for all ages. That is my main point: you will not have any of this happening unless you uncap the funding of FE and apprenticeships—it really is quite simple.

There are problems, of course, with demand-led funding. We have seen some disasters in the past with individual learning accounts. There has to be a well-established system through which this uncapped funding is going. The funders have to know the institutions, have a proper list of approved institutions that they know and understand and have criteria for what courses can attract what amount of funding. That takes time to establish.

The main task over the next five years in FE and in apprenticeships is to develop this concept of a clear register of institutions and courses for which funding then becomes automatic: if a student goes there, they bring the money with them. That is a total contrast to the present system—perpetuated in Augar—in which we have ex ante contracting. The Education and Skills Funding Agency says to a provider, in response to a request, “Yes, you can have so many places, with so much money”. It is severely rationed and probably will go on being rationed. There is some extra money in Augar, but nothing like enough to produce an explosion or revitalisation of that sector.

I will say a bit about when that could happen. A five-year programme could lead to an uncapped system—within 3 years for people up to the age of 24, and for all ages at the end of a five-year period. Then you would have the elements of a system outside universities that worked in the same way as the system inside universities. Anything else would just not live up to the language of establishing equality between one sector and another.

I will say a bit about apprenticeships. We have a debate on apprenticeships the day after tomorrow, so I will not deal with the subject quite as fully as I will then, but obviously we want most of the people who are not going to university to go into an apprenticeship—it should be the main alternative to university. It has to have demand-led funding. In particular, that applies to the non-levy paying employers, because the system is somewhat different when you are paying the levy. What we have at the moment is an extraordinary system of funding for non-levy paying employers where the total amount is an unpredictable residual—it has been cut severely over the last year two years—and that really is an outrage.

Even if we have uncapped funding for apprenticeships, we cannot be sure that the number of places will match the demand. There is huge excess demand at the moment, but you have to persuade not only the training providers to come in on the apprenticeship system but also the employers. This is a further task and somebody has to be put in charge of it. We have a National Apprenticeship Service, but its mission is not to make sure that every young person who wants an apprenticeship can find one. That has to become its mission. We have to have a body whose duty is to persuade employers to provide enough apprenticeships—in particular for people who are under 25 who are looking to get off to a good start in life. We have to make apprenticeships the natural route that a person can expect to be able to progress along in the early part of their life if they are not going to university.

We had in the 2009 Act a guarantee of an apprenticeship, which was repealed when the coalition Government came in. Let us not have a legal guarantee, but we should have a policy guarantee that every young person outside university who is qualified at one level can find a place at the next level up. That has to be the objective, and it requires the uncapping of expenditure. Quite honestly, we have been playing the Robbins principle for nearly 50 years for the privileged group, where places are available for everybody who is qualified for one. We have just not begun to think about how to do that for the other 50%. Uncapping is the main channel.

I have one other point: this sector will not flourish without a champion. The Economic Affairs Committee of this House recommended that there should be a funding agency, as there once was at the time of the last Labour Government, to champion this sector. It cannot be left to a lone Minister and civil servants; there has to be a structure championing it. There are two acid tests of whether one is really serious about this. First, are we willing to work towards an uncapped system for outside the universities, as there is for inside them? Secondly, are we willing to establish a champion who will push for that sector? I consider those questions to be the acid test and I hope the Minister can comment on both of them.

My Lords, I was disappointed that so much of the reaction to this excellent Augar report focused on the issues relating to universities and their funding, but the debate so far has gone a long way to restoring the balance. I too will focus on issues including skills in general, further education and apprenticeships. It is a pleasure to follow the noble Lord, Lord Layard, in that context.

The report clearly shows how shockingly further education has been neglected in recent years. It has undergone average budget cuts of 30%, yet it has responsibility for educating about half of all young people—those who do not go to university—and is crucial to the Government’s laudable goals of achieving parity of esteem for technical and professional education with higher education, and to delivering T-levels. The total number of people involved in post-18 education has actually declined, and that decline is mostly in FE. The Augar review is right to recommend increased funding for the sector, including £1 billion of capital investment, together with a restructuring and grouping of colleges to increase the quality of provision and access. Its recommendations for a three-year adult education budget, for increased capacity for technical provision in specific FE colleges, and, above all, for greater investment in the FE workforce are also welcome. Why can there not be a programme such as Teach First or Now Teach to encourage new teachers into FE?

I am also delighted that the report asks for the careers strategy launched in 2017 to be rolled out nationally. This strategy is fundamental to addressing our skills needs and is already making an impact, particularly in areas which have received funding for careers hubs. I find it very encouraging that the latest evidence from the Careers & Enterprise Company indicates that careers support is now strongest in areas of disadvantage. I hope the Government will take to heart the recommendations that hubs should be rolled out nationally and that more young people should have access to careers activities, including encounters with employers—and, of course, that schools should be held to account for their statutory responsibility under the Baker clause to give employers access to their students.

The report includes a chapter on apprenticeships, starting with a very helpful contextual overview outlining the recent history and current status of apprenticeship policy. I echo the congratulations of the noble Lord, Lord Patten, on the quality of the report itself. This chapter includes the suggestion that apprenticeships should reflect the priorities of the industrial strategy, which I will come back to. I am not convinced that Ofsted is the right body to have the lead responsibility for inspecting the quality of apprenticeships at all levels. Given the range of sectors covered by apprenticeship standards, I am not sure whether Ofsted, as an education regulator, would have the right experience or skills to reflect the needs of the employers for whom and by whom the standards are designed.

However, I agree that the standard-setting process should be more transparent, and I strongly support the suggestion of undertaking work to address the barriers faced by SMEs in offering apprenticeships. Over half of current apprenticeships are in SMEs and that proportion will need to be maintained in future, but relatively few SMEs have the knowledge, capacity or willingness to offer them. My own experience, mainly with SMEs employing apprentices in the construction sector, has shown that specific mechanisms are needed to support them in providing apprenticeships, such as the apprenticeship training agencies—ATAs—of which the Minister has occasionally made mention. Can he tell us what actual support the Government might consider for ATAs or for other mechanisms to enable more SMEs to offer apprenticeships?

There are some gaps in the report’s recommendations. The utilities sector is a vital part of UK infrastructure and a particularly effective employer of apprentices. Its 1,000th apprentice completed the endpoint assessment process under the new standards just last month; it was only about six months ago that I hosted an event here to celebrate the 500th apprentice who achieved that goal. The report notes the sector also faces severe skills shortages, with 33% of skills shortage vacancies, but is not clear how this strong unmet demand for craft-level skills might be addressed.

There is little mention of the potential impact of new technology in delivering post-18 education. What happened to all those MOOCs—the massive open online courses—that we used to hear so much about? I would have expected more coverage of new, digitally based ways of delivering post-18 education, whether in or outside colleges. The report mentions but does not actually recommend the sensible idea of creating a single central portal or clearing-house for information about, and applications to, technical education courses along the lines of what UCAS does for higher education.

How will the review’s recommendations promote overall workforce development and labour market resilience? Its terms of reference extend only to England but, although education and skills are devolved, most other aspects of the labour market are UK-wide: the movement of people, industrial strategy, productivity, work and pensions arrangements, and so on. How can we have a meaningful UK-wide skills and workforce strategy without ensuring some degree of consistency, optimisation and shared goals between the four UK nations, not to mention the wider regional situation? There is already an anomaly with apprenticeships: employers in the devolved nations pay the apprenticeship levy to the UK Government but do not have the opportunity available to employers in England of drawing on their levy payments to fund their own apprenticeships.

A strength of the review is that it seeks to tackle post-18 education in the round, within the limits of its terms of reference. Skills strategy as a whole might benefit from a similar approach to create a comprehensive blueprint for tackling UK skills needs and provide a framework for deciding how the Government’s various initiatives fit together, what each should deliver and how their success should be measured. The review says that 70% of apprentices are aged 19 or over: is that good or bad? Should the allocation of apprenticeships by sector or geography be mainly market-driven, as now, or more responsive to the industrial strategy’s priorities? How can a UK-wide labour market be reconciled with devolved education and skills policies? Without an overarching strategy, such questions cannot be easily answered. The result is a plethora of separate initiatives, often worthy in themselves but not necessarily consistent or mutually reinforcing.

I do not expect the Minister to be able to commit to the development of such an approach in today’s debate. But I urge him and his colleagues, as they look at the spending review and beyond, to explore the possibility of some sort of grand plan for skills to which all interested parties could sign up: politicians, national and regional; educators at all levels; employers; and, above all, young people, especially the 50% for whom university does not fit the bill and who we will look to for the technical skills that we need. Such a plan would of course incorporate many of the welcome recommendations in the Augar review, and in a way that inspired confidence that they would make a measurable difference in raising productivity and delivering the industrial strategy. I believe there is a real opportunity here, and look forward to hearing from the Minister how the Government might seek to grasp it, using the Augar report as a template.

My Lords, I draw attention to my declaration of interest in the register and reiterate what the noble Lord, Lord Patten, said about the nature, accessibility and depth of the report. After listening to him this afternoon and with our joint venture on Radio 4’s “Any Questions” last week, I can genuinely call him my noble friend.

It seems to me that the report was extremely thorough and that the understanding of Philip Augar, and those working with him, of the system’s complexities is displayed very well. My only criticism of the members of the review, if the noble Baroness, Lady Wolf, will forgive me, is their naiveté. It is naiveté that the Treasury was, in any foreseeable future, likely to provide the funding necessary; they were also naive about the ingenious creative accounting, which led to the belief that it would be possible, on an annualised basis, to present the changes at £700 million. I am familiar with creative accounting from my days as leader of Sheffield City Council, when Margaret Thatcher’s Government were massively reducing spending in local government. The trouble with creative accounting is that it does not pay anybody’s wages. It may look good but does not actually deliver the goods.

This afternoon, however, I would like to be positive, first in ensuring that there is no doubt about my commitment to the review’s welcome recommendations on further education. When I asked an Oral Question in the Chamber last Thursday, I received a few emails saying, “Why didn’t you mention further education?” The Question was not about that—it was about the reduction in fee level and the likely impact on teaching and contact time, which I will come to in a minute.

I want to make it clear that I am not unique in this House, but I am unusual in the sense that I got my qualifications before going to university, in evening classes and day release through further education. I then taught in further education. My older sons went through further education themselves to get to university. I helped to substantially reverse the cuts in further education between 1997 and 2001, when I was Secretary of State for Education and Employment, in one year actually increasing funding by 10% in real terms.

I am deeply committed to further education and to the concept of lifelong learning, including lifelong accounts and entitlement. The late and, in my case, very much mourned Malcolm Wicks, when he was a Member of Parliament, produced a very substantial policy paper on lifelong learning. I am only sorry that the efforts that the noble Baroness, Lady Blackstone, and I made in the early 2000s to put this in place were completely undermined by the Treasury, which simply would not go along with individual learning accounts. Had the child trust fund not been abolished in 2010 in an act of spite by the then Chief Secretary David Laws, we might have been able to build on that initial fund which would have had the advantage of balancing the asset divide in our country and providing a platform on which lifelong learning could have been based and lifelong accounts could have been provided.

In this report, however, the most welcome recommendations were of course funding for part-time learners, the reversal of the increase in interest rates, the maintenance grants that have already been spoken about, as well as funding for further education and lifelong learning. All those suggestions would of course be reversing what has taken place with the austerity measures of the past nine years. While it is important to reverse them, as has been said by my noble friend Lord Layard, it is important that we have a sustainable system for the future.

I want in the brief time available to me to pick up on what the right reverend Prelate said about the way small institutions can have a major impact on individuals and the locality. I speak as someone who still lives in the north of England. What worries me most about the debate on higher education is not the comparator between spending on HE compared with FE, which is well known, but the belief that there is something inherently wrong in encouraging young people from the kind of background that I came from to go into HE. Of course, people should receive the right kind of career advice.

In my teenage years in Sheffield, apprenticeships were not only a given but they had high status as well as high quality. They were often funded by the employer. In fact, the engineering employers and the construction industry of course had their own levy and their own sustainable system long before the welcome introduction although not necessarily the implementation of the current levy. We need to get back to high-quality apprenticeships, as has been said, but they are not an alternative to encouraging young people to go in for HE.

I say to my noble friend Lord Adonis that there may be comparators across the world in terms of the number now going into higher education, but it will be necessary, with the move to artificial intelligence, to robotics, to the way in which we need to understand and handle the use of algorithms to have people who are not only skilled in a practical sense but able to adapt, as the introductory speech of the noble Viscount indicated, in an ever-changing world where people will change jobs many times in their ever-increasing longevity.

I want to draw attention to the absurdity of the longitudinal educational outcome measures which are potentially distorting this debate about the value of higher education and the emphasis that is placed on what people earn in the first few years after leaving university. The interesting thing about the longitudinal studies is that they do not take account of self-employment, which is an important aspect of encouraging young people to show enterprise and innovation, particularly in the most deprived parts of our country, where we have high levels of employment but very low levels of productivity. Of course, the comparator between London and the south-east and GBA and GDP with the rest of England and of course in Scotland, Wales and Northern Ireland is, frankly, extremely worrying. Such studies do not take account of part-time earnings, which are pretty important in relation to women, who often are taking time out in those first few years for childbirth or for caring responsibilities. Crucially, they do not take account of regional labour markets. They take no account of the fact that you might be paid £19,000 on leaving Trinity St. David in Wales or the University of Teesside in the north-east of England, but you might be paid up to £70,000 if you work for PwC, KPMG or financial and asset institutions in the City of London. That does not mean that the education received by people in the north of England is worth less. These are people who stay in their area, who contribute to the enterprise in that area, who often work in small or medium-size enterprises. They make up 90% of the employment in our country but often earn far less than those who come down to London to earn in the first five years after graduating. In other words, the debate about the value of education is wrong in principle in terms of the lack of understanding that education is more than what you earn and the job you have. It also has class implications and regional and socioeconomic implications.

I hope that we might address how universities as the core centre, the anchor institution in areas of our country that previously did not benefit from them, make a contribution to those communities and to regeneration. For some of the young people who stay in those areas, social mobility goes only one way. If we damage the university sector in our country by cutting funding to teachers and reducing numbers or discriminating against particular courses because the national press do not like them, we will regret it down the line. This is why the remarks made recently by the higher education Minister about participation and about foundation courses, if Augar is implemented, are so welcome.

We have got to get this right, not just for the moment but for the world of tomorrow. Thinking ahead involves apprenticeships and well-funded further education. It also involves a higher education system that offers to those who did not have it the opportunity of those who so often take it for granted.

My Lords, it is always a pleasure to follow the noble Lord, Lord Blunkett—which is just as well because I have spent quite a lot of time doing just that. There is a danger that we in the wider world and the educational establishment in particular will spend so much time debating the detailed recommendations in this review, not least the fees issue, that we miss the opportunity to promulgate and win ownership of the main message. That, of course, is that lifelong learning is a massively important subject which holds the key to tackling the big issues that will define our post-Brexit future.

It is the key to addressing our productivity deficit. It should be a cause of national shame that it now takes a British worker five days to produce what a German worker can produce in four. It is the key to addressing the lack of social mobility that blights our society and denies us access to so much talent that we have never needed more. It is the key to delivering the skills we must have if we are going to solve the health, social care and housing crises we face; and it is the key to ensuring that people are able to adapt to a rapidly changing world and to work effectively well beyond the traditional retirement age.

Given that all that is true, we might well ask ourselves —as, to be fair, the review does—why lifelong learning has been so neglected as to allow a fall in the number of level 2 adult learners from 550,000 to 160,000 in just five years; a 67% drop in those enrolling in the so-called other undergraduate courses, such as foundation degrees, certificates and diplomas; and a catastrophic 53% fall in the number of part-time HE students. It is no wonder that we have a productivity and skills crisis.

The question, of course, is whether Augar provides the answer. Inevitably, the answer to that is yes—with significant caveats—and no. It makes a powerful case for making lifelong learning a priority again. It recommends reintroducing maintenance grants, following the lead, let us not forget, provided by the Diamond review in Wales, which I hope the Government will also reflect on; and, as many noble Lords have said, it provides a rhetorical boost for further education. But the funds for that need to be found. The noble Lord, Lord Storey, is absolutely right—this is not an aside—that it is deeply distressing that neither of the leadership candidates has committed funds or even mentioned the subject of lifelong learning, as far as I am aware.

There are positive things in the review, but also some things that are more troubling. I will mention just four. The first is that it places a disproportionate emphasis on graduate salaries as a proxy for the value of studying a course. That could distort future policy decisions on teaching grants in a very dangerous way. It could also be to the serious disadvantage of creative arts institutions—I declare an interest, having been a vice-chancellor of one for seven years. These institutions are central to the success of the creative industries, which in turn make an important but sometimes unrecognised contribution to the UK’s economic prosperity—something that Augar seems not to recognise or fully understand. That oversight is exacerbated by the review’s failure to acknowledge the structural deficit in funding that already exists for creative arts subjects. At the University of London, a recent independent review by KPMG showed that the cost of delivering undergraduate provision stood at £11,200, significantly above any tuition fee cap.

The second thing that worries me is the proposal to adjust the HE fees regime. This seems to me to be fundamentally flawed. The reduction in the headline figure, from £9,250 to £7,500, is in my judgment insufficient to change the mindset of prospective students, not least when the term for repayment is extended from 30 years to 40 years, the income threshold at which loans are repaid is reduced from £25,000 to £23,000 and the interest charges, post graduation, remain at 6%. Not recommending the CPI measure of inflation for revaluing student loans is indefensible: any of us who were present at the debate yesterday of the Economic Affairs Select Committee report will have heard very strong arguments as to why that is so. Taken together, these fee proposals are regressive, with the well-off paying less—something like £25,000 less during their life—while those on middle and lower earnings will pay some £12,000 more, according to the DfE. Given that the review recommends that the Government make good the loss of income to institutions as a result of these fee changes, and given that the fee changes are not going to benefit students in any great respect, this seems to be a flawed set of proposals.

My third concern is that the review does not do enough to tackle the issue of affordability for mature and part-time students, which has been a major factor in the massive decline in part-time study. The lifelong learning allowance seeks to address this, but if I read page 42 of the review correctly—the Minister will correct me if I have not—it applies only to new cohorts of school leavers and excludes anyone who already has a degree. That will limit the support available to retrain the current workforce at level 4 and above.

Some of our competitors have been more radical. In launching the Singapore SkillsFuture programme, referred to in the Augar review, Singapore’s Deputy Prime Minister spoke of the global economy demanding nimble workers and the constant acquisition of new knowledge and skills. He said:

“We must become a meritocracy of skills, not a hierarchy of grades earned early in life”.

To help achieve that, every Singapore citizen now receives an initial credit of $500 towards the cost of skills training, while for Singaporeans over 40, up to 90% of the training costs of a Government-approved scheme is subsidised. Well, the majority of our workforce will shortly be over 45, and 40% of workers in the UK over 50 have received no formal training since leaving school. From those statistics, we may conclude that this is the moment for the UK to take a similarly bold approach. I assume that Augar felt that the cost of that would be prohibitive. I would rather that we saw it as an investment rather than a current cost.

My final concern is the failure to offer maintenance loans to students who study part time and via distance learning. I find this incomprehensible. As the Open University has pointed out, many of these students have no option but to study via distance learning, because of work or caring responsibilities, and they should not be penalised in this way. Indeed, they should be encouraged and incentivised. In Wales, that policy has been reversed, which has had a very significant and almost immediate impact—a 35% increase in part-time undergraduate students.

So the review is right to assert again the importance of lifelong learning, but any future strategy needs funds and political commitment. It needs to be progressive, not regressive, and it needs to tackle the issue of affordability and to encourage flexible distance learning. I hope that the Government will look carefully at all the Augar recommendations and consider them in that context.

My Lords, I very much welcome this debate and congratulate the Government on scheduling it. I also very much welcome what my noble friend Lord Younger said in opening about the funding of mental health services. I declare my interest as professor of government at the University of Hull and as chair of the Higher Education Commission, which draws together people from business, academia and Parliament. In commenting on what I see as the limitations of the Augar report, I do not wish to detract from its considerable strengths. Those derive from its breadth of coverage in addressing post-18 education.

As Disraeli put it:

“Upon the education of the people of this country the fate of this country depends”.—[Official Report, Commons, 15/6/1874; col. 1618.]

That quotation is especially relevant to today’s debate because the report is not confined to a specific—some would say privileged—group of people, the 18 to 21 cohort in or going into higher education, but looks more broadly at post-18 education. I welcome, as others have, its recognition of the importance of not only further education but lifelong learning and the need for flexibility. Further education has been neglected, to the detriment of society, as has the value of enabling people to learn at different points during their lives. I have taught mature students who realised their potential in middle age or even after retirement—the oldest student I have taught was a Member of this House, the late Baroness Miller of Hendon—and they tend to appreciate the value of education more than those who at 18 may take it for granted.

I therefore welcome the recommendations covering those subjects. I also welcome the acknowledgement of the crucial importance of career guidance, dealt with on pages 55 to 56. This might usefully have been expanded, given the difference guidance can make to one’s choice of education and career. It has a crucial bearing on many of the issues addressed in the report.

Like others, I welcome the recognition given to apprenticeships. The most recent report of the Higher Education Commission was on degree apprenticeships. The focus on apprenticeships in the Augar review is very welcome, but I stress the need to go further. As has been mentioned, SMEs represent the backbone of our economy—over 99% of businesses—but big businesses, levy payers, have made four times as many degree apprenticeship starts.

I was pleased to see the report echo the Higher Education Commission’s call for a body of work which examines the challenges preventing SMEs taking up the opportunities for degree apprenticeships. While a review will provide clarity, it has been abundantly clear for some time that the current funding system, which sees HEIs procure for non-levy funding, has resulted in a patchwork quilt of provision and frozen out many SMEs. The Higher Education Commission’s report notes that 63% of degree apprenticeship standards have no, or just one, provider that can deliver to non-levy payers. This needs to be corrected quickly to enable access for SMEs across the country. It is disappointing that the report does not call for the inclusion of all HE providers to deliver to non-levy payers, moving to bring non-levy payers into the digital service, as a means of mitigating some of the challenges facing small businesses.

The report makes it clear that degree apprenticeships are some way from achieving their potential. The Government’s ambition to improve productivity and social mobility is laudable, but they must ensure that degree apprenticeships sit within a co-ordinated strategic framework of education and skills that the country so vitally requires.

Although acknowledging the value of degree apprenticeships, there is no mention of the value to other degree courses of work-experience learning. I have spent the past 30 years organising placements in Parliament. When I started, such placements were a rarity. Today, their value is more widely recognised. Work-experience learning can produce graduates with enhanced confidence and skills appreciated by employers. The report, in the context of good information, advice and guidance, at page 55 mentions the positive impact of having contact with employers. Placements can be especially valuable for students drawn from disadvantaged backgrounds, broadening not only their skills but their awareness of what they can achieve. Given some of the pressures to reduce the length of degree courses, it is important to stress the value—to the student, to employers and to society—of gaining real experience in the workplace while also studying.

This brings me to the problems. Like others, my focus here is on higher education. I welcome several of the proposals, not least restoring maintenance grants and capping the rate of interest paid while students are still studying. However, as various responses to the review today have noted, the recommendations to reduce the fee and extend the repayment period are regressive. The proposals favour those able to repay quickly. Higher earners will pay back less than middle earners. As the noble Lord, Lord Blunkett, emphasised, penalising those in lower-paid jobs will work against women and those in less prosperous towns and cities who decide to stay at home.

Universities will suffer from a reduction in fees if the Government do not fill the funding gap by increasing the teaching grant. Even if the Government meet the cost, in full or in part, there are dangers that the money may not be free of strings. Universities will still suffer in real terms, even if the gap is met.

The report recognises that the value of higher education extends beyond measurable economic benefits. As several noble Lords have stressed, there are benefits it is difficult, if not impossible, to measure in monetary terms. Even trying to measure it in terms of value for money, which the report does, has its limitations, given that many students today will go on to take up jobs that we cannot presently identify. I am also wary of government getting involved in subject choice. That is not the path we should be pursuing.

There is also the danger, as touched on by my noble friend Lord Patten of Barnes, of seeing HE in a domestic vacuum. Universities could face a triple whammy from cuts deriving from the recommendations of this report, from losses and uncertainty deriving from Brexit and from the threat to recruitment of overseas students because of aggressive marketing by our leading competitors. The position looks healthy in terms of current numbers but we are already losing market share. We are vulnerable in the light of what is happening elsewhere. My noble friend Lord Younger has said that we need to see the recommendations of the Augar review in the round. Would he acknowledge that we need to see the report itself in the round, taking into account these wider considerations?

The report is a serious contribution to addressing post-18 education and has a welcome breadth, with recommendations that, in the main, I very much support. However, there are qualifications. Would my noble friend agree that we need to be very wary of actions that may reduce student choice, increase state direction and disadvantage those on middle incomes? Would he care to comment on where the United Kingdom will rank in figure 3.2 of the report if the Government do not make up the funding gap if fees are reduced? Given that the report is, as my noble friend said in opening, part of a process and not an end point, could he give us some idea of the timescale for what happens next?

My Lords, I declare my interests as set out in the register. I start by urging the Government to accept the recommendation of the report and restore maintenance grants in place of loans. I do so not solely for the sake of students’ finances but in the pursuit of genuine diversity and choice, which have been diminished in recent years. The Institute for Public Policy Research has reported on this and, taking that together with the Sutton Trust paper from last year, Home and Away, we see that the increased debt load if a student borrows to live away from home results in debt-averse students living and studying at home, with segregation as a result. They choose the nearest university. They will not meet diverse others with the same ambitions, but be reinforced in the social make-up of their home background.

Students from the least diverse areas go to the least diverse universities because they can afford to pick and choose. Ethnic minority students from London worry about studying outside the capital on grounds of racism. Moving long distances to university study has become largely the preserve of the better-off. According to the Sutton Trust, only one in 10 students goes to university more than 150 miles from home, while the rest are daily commuters. Does this matter? Yes, because social mobility is associated with moving to a large city and leaving the region of birth.

The older and higher-ranked universities have the most students who have come a long way from home; the others have the more local students. Therefore, the maintenance element has more social effect than tuition fees, which are the same for most universities. It is maintenance that affects choice. The report does not specify the level of grant that the Government will make available. Will they specify the level of grant that they will support, and recognise its importance?

I turn to an omission from the report—no doubt because of the unpredictability surrounding Brexit—of the financial effect of the recruitment of international students. As we know, the student loan system is in trouble. I will not go into that now. But we must recognise the gap between the fee income received by universities and the actual amount needed to teach and fund their other activities. The top universities—and remember how proud we are of our domination of the world league tables and hence our ability to attract the best international students—will be losing about £17.5 million a year, according to the Oxford University calculation. This is where I come to international students. Will this shortfall be entirely met by increased government teaching grants for subjects that are valuable to society and expensive to deliver, or will it be made up by international students?

I suspect that the Government will, in the end, let down the universities, because they regard some subjects as being more valuable than others. It is likely that the humanities and social sciences will see cuts in the order of 10% to 15%. The report argues that some courses are poor value, with low financial returns for graduates. There is great concern that the Government will accept the cut in fee but will not guarantee to make up the difference by increasing the central grant for teaching. The Augar report is clear that the two recommendations are connected.

Will the Government guarantee that the allocation of teaching grants in the future will reflect the cost of delivery, and abandon the practice of measuring economic value to the student and the taxpayer? Some of the students with the lowest postgraduate incomes, such as nurses and teachers, are of the highest value to society. Creative arts graduates may become stars, attracting audiences and influencing young people, without being rich. Every citizen who has benefited from the work of a doctor, an engineer, a scientist, a civil servant or a clergyman has benefited from their university education. It is not a matter of private benefit but of benefit to the entire society, and it is disparaging to treat university education as a matter of one individual seeking to increase his or her own lifelong earnings. The creative economy is important to the UK’s prosperity and to our reputation the world over. Humanities courses at good universities should not be penalised as a result of targeting low-quality courses at less well-performing universities.

Will the Government guarantee not to use their financial leverage to interfere with what subjects universities teach? Philosophers can become bankers, or someone as valuable to society as the late Baroness Warnock; economics at Oxford has brought us the right honourable Jeremy Hunt; classicists become bankers —or the right honourable Boris Johnson; lawyers become clergymen; and ballet dancers, dance being an academic subject, include the noble and multi-talented Baroness, Lady Bull.

If there is a shortfall in funding from fees, universities will turn even more urgently to recruiting international students in order to make it up. Current EU students are charged the same as home students, but in future they will be treated like non-EU students and charged much higher fees. Some predictions say that the number of EU students will fall, but not by very much. This is because British universities are, after all, at the top of the league tables and those in the rest of the EU much further down, so the bright European student will still want to come here and will go to the US alternative only if he or she can cope with the visas and even higher fees.

It is possible, therefore, that international students will contribute to the increased financing that our universities will need. They will be subsidising home students. Interestingly, the UK International Student Survey reports that prospective students from outside the EU are more likely to be interested in studying in the UK because of Brexit, perhaps because they believe it will be easier to be admitted, or because they feel that they will be treated the same as EU students. There may well be pressure—and there should be—for better treatment of international students in terms of visa restrictions and the ability to stay on after completion of a degree, which would be attractive to them.

There are some real risks here, however. The first is that we forget our commitment to access when it comes to international students, who have to be from wealthy families or supported by government scholarships to be able to study here. Their fees are two or three times higher than those charged to home students. Underprivileged international students will become a rarity, whereas at one time many future opposition leaders and heads of foreign Governments started as impoverished radical student leaders at our own universities.

Secondly, we are not making them as welcome as we should, a topic on which I have spoken before. International students need to be integrated, mentored, befriended in vacations, accommodated and supported to a larger extent than appears to be the case. Some of them feel that they are here only because they provide funding. If our reputation as a welcoming environment is damaged, that important source is at risk. Funding is also at risk if the Chinese or Indian Government, for example, change their policy or find visa rules simply too off-putting. A stoppage in that flow would ruin some universities.

Universities need to consider how they would cope if there were fewer international students. Some Australian universities, oddly, are moving to limit international recruitment because the financial reliance is unsustainable. Yet a cut in fees for home students without a promise that the Government will bridge the gap will mean a renewed chase after international students. The Government expect the total number to rise from today’s 460,000, who contribute £11.9 billion to our economy, to 600,000 by 2030.

Finally, the Augar recommendations come as a package. It would not be workable for the Government to pick, say, a reduction in fees and ignore the other recommendations that are inextricably linked to it. In this time of political uncertainty, can we be sure that a new Education Minister will take the report as seriously as current Ministers appear to do? What guarantee do we have of continuity in policy?

My Lords, I am very glad that the noble Baroness, Lady Deech, emphasised the international student dimension in all this. I am convinced that we repeatedly and constantly undervalue the importance of the international community in higher education. We live in a totally interdependent world. We have a great deal to learn from other cultures, outlooks and experiences, and the quality of our higher education is intimately related to the presence of a strong international community, especially among undergraduates, postgraduates and, indeed, academic staff. If this review has done nothing else, it has made an invaluable contribution by encouraging this House to concentrate on lifelong learning and to begin to look at the wood in higher education, rather than continuing an unhealthy preoccupation with the trees.

I will make some wider observations about higher education. We are constantly told that we are one of the wealthiest nations in the world. Millions of our fellow citizens go to their graves never having begun to appreciate what they might have been and what a full life they could have had. That is totally unacceptable. I have never quite understood why we have so easily drifted into this conviction that, whatever we are doing about funding in higher education, the concept of free higher education is no longer on our agenda. Why not? It is there for secondary and primary education. If we really take the fulfilment of our fellow citizens seriously, why should this not be an overriding priority that deserves consideration? This is about not simply the financing of higher education but the esteem in which higher education is held. That is why so much of what has been said in the debate is so important. It is about how that is reflected in the quality of life of the academics and others who provide educational facilities through their contribution.

I also believe that it is right to emphasise going back to the concept of quality apprenticeships and what that can mean; as ever, I was fascinated by my noble friend Lord Blunkett’s contribution on that point.

We must take seriously the confusion that has arisen in discussions, particularly in political quarters, about education and training. We need highly trained, highly skilled people—that is indisputable—but training itself is not education. Education is about enabling people to discover themselves and fulfil their potential, academically and creatively or in another way. For example, I grieve that so many of our fellow citizens have never really been able to enjoy, access or be excited by classical music. Last weekend I was at the opera with my wife and a friend. I looked at the audience and thought that, although it was a wonderful experience, it did not begin to be a socially representative one. Why should this be? Why should other people not get the same joy and pleasure from an occasion of that kind as we do? Our education also means that we can enjoy an art exhibition, crafts and literature. Why should it be that only a small section of the population has the opportunity to read and fulfil a great need through what they derive from great writing, be it fiction, non-fiction, historical or biographical? We need a bit more idealism in the debate about our strategy for education. We are saying that we in the United Kingdom want to live in a society that pats itself on the back not only for being one of the wealthiest nations in the world but for the quality of life of its people, with all their potential.

In making these remarks, I am a little surprised that we have not really mentioned the Open University and the extension courses provided by many universities across the country. They have been invaluable. It is also true, particularly in the history of the political movement to which I belong, of places such as Ruskin College, which has made a fantastic contribution over history to the emancipation and fulfilment of people from the working classes.

We need lodestars. I would assert that the crucial one for education is making maximum life fulfilment for all our citizens our ideal—that is, making sure that all citizens are enabled to discover what they are capable of being. It is not just about what they earn; their experience and quality of life are so important. Our deliberations and this interesting review must be judged in history by how far they carry us forward in our idealism for education as distinct from our functional management approach to higher education.

My Lords, I join noble Lords in thanking the Minister for the thoughtful way in which he introduced this important debate. In doing so, I declare my interests as professor of surgery at University College London, chairman of UCLPartners and a member of your Lordships’ Science and Technology Committee, which is chaired so ably by my noble friend Lord Patel.

Quite rightly, the debate has welcomed many of the findings in this important review in achieving the important objective of driving forward greater equity in post-18 education and emphasising the importance of providing opportunities for our fellow citizens to avail themselves of lifelong learning. However, I will concentrate on the potential implications of some of the report’s recommendations in terms of our universities’ ability to conduct research.

Of course, it is clear that the question of research was not in the review’s remit or terms of reference, but it is important for Her Majesty’s Government, when considering the review’s recommendations, to understand how they might have an impact on the capacity of higher education institutions to conduct research. Clearly, those institutions are complex ecosystems where potentially affecting one funding source will have knock-on implications on universities’ ability to perform other functions, such as research.

As a country, we recognise the importance of research for our future national interests. Of course, we have a newly identified target to devote 2.4% of GDP to research and development expenditure in our country by 2027. That is important, but many people have argued that it does not go far enough to secure an innovation economy that will be able to compete globally in the decades to come. Nevertheless, that is the target. To achieve that expenditure, we will need to produce by 2027 at least 150,000 graduates capable of contributing to that research and development effort in both the public and private sectors.

Yet when we look at our universities, the research base is vulnerable, as things stand. We know that, despite the objective of achieving full economic cost recovery for research in our universities, this is currently not being achieved. On research expenditure for Research Council projects, universities have to find some 28% of the cost from other sources. If one looks at research supported by the European Union, universities have to find 35% of that cost from sources other than the funding source for that particular research. From UK charities, they have to find some 40% of the cost, and even for industry-supported studies, some 22% shortfall is identified in the funding provided for those research projects. Overall, in the year 2010-11, some 78% of full economic cost was recovered from the funding source. In 2016-17, that had fallen to 69.4% of the full funding requirement. This cost universities in that particular financial year some £3.7 billion of funding that they had to find beyond the support provided from research. Clearly, that is an unstable situation. Bearing in mind the importance of that research to our broader national interest, that is something that needs to be considered.

Your Lordships’ Science and Technology Committee has recently been receiving evidence for its inquiry into the funding of the research base in universities and heard from members of the independent Augar review at a session last week. Members of the review rightly identified that this was not a question for them but doubted that there was a very significant cross-subsidy between the tuition or teaching income and research activity in universities. However, evidence provided by the universities themselves to that same inquiry indicates that there is a very substantial cross-subsidy between teaching and research, some of it from domestic tuition fees and a substantial amount from international tuition fees. Therefore, when the Government consider the important and justifiable recommendations on increased support for further education and lifelong learning, they must consider how they are going to address the question of stabilising the research base in our universities.

As we heard from my noble friend Lord Patel, on the one hand there is an important move towards greater equity for our fellow citizens, as demanded by the education establishment, but on the other hand we must be clear about how we secure a research base to drive broader economic benefits. In this regard, do Her Majesty’s Government believe that it is appropriate to undertake some kind of formal evaluation of potential cross-subsidies in our universities, understand what the extent of those are and then determine how best to address them? Do they believe that there should be cross-subsidy between teaching—whatever the source of that teaching income—and the research base? If they do not, how would they propose to address that question going forward in a more transparent fashion?

The other issue about which I am concerned in respect of securing the research base in our universities is the future disposition of the teaching grant and the particular emphasis on the teaching grant being set in some way with regard to either the social or economic value of the taught subject. This is an interesting concept. Will it apply purely at the national level, where the subjects being identified in that fashion would then have a teaching grant equally distributed across institutions, or will that assessment be made for individual institutions in terms of the economic and social value derived from an individual subject? Which institution or body will undertake that evaluation and what metrics will be used to determine that? This is an important question because, if teaching income is in some way going to continue to cross-subsidise research, will research metrics also inform that particular evaluation?

Then we must consider other government policy, such as the industrial strategy that has a place or geographical emphasis, for instance on the development of the northern powerhouse. That could equally be affected if the teaching grant for subjects undermines the capacity and sustainability in universities. It might undermine the capacity to deliver that broader geographical agenda with regard to the industrial strategy and drive a research base for economic development in different regions of our country.

My Lords, I am grateful to my noble friend for his introductory remarks. I am also grateful to my noble friend Lord Willetts, who very helpfully this morning dropped off a copy of his rather weighty tome, A University Education, with a note saying, “I hope you find Chapter 3 useful, which is how to pay for it”. I am afraid that this will have to wait for holiday reading, and I look forward to that. He is very sorry not to be here today. I also declare my interest as chancellor of Writtle University College.

British universities have a worldwide reputation for excellence, and deservedly so. These institutions play a vital social and economic role in our country. Many are world-class, but many are not. The necessity of a review into post-18 education and funding is indicative of a broken system. There are serious issues to address regarding the price of tuition, who should bear responsibility for paying these costs and the long-term value of university courses for those who undertake them. The Augar panel has asked the right questions and its report contains the right analysis. For instance, it was right to expose the scandal of low-value courses and highlight the undersupply of graduates in strategically important sectors.

This increasing prevalence of low-value courses is particularly worrying. To illustrate the point, research from the think tank Onward has shown that 41% of students are enrolled on courses which delivered earnings of less than £25,000 after five years. However, it gets worse. Onward’s report, A Question of Degree, reveals that nearly one-fifth of male students are enrolled on courses that deliver lower graduate earnings than work or technical education. In other words, they would have been better off not going to university. Male students doing creative arts, communications, English, agriculture, psychology, philosophy or language degrees are more likely to earn less after three years at university than if they had spent three years in employment or doing a technical course. At some universities, male students doing these degrees can expect to earn less on average than the national living wage five years after their graduation.

For the average graduate, the fee loan scheme acts as a 9% permanent tax for the duration of the payments. This means that graduates who are higher-rate taxpayers can face a marginal tax rate of 51%. This is truly striking, given that the Government have abolished the 50p tax rate for the very highest earners. This is hardly a temporary tax. Due to the high interest rate of CPI plus 3%, unless graduates manage to quickly land a job paying a substantial salary, they are unlikely ever to pay off their student debt. In fact, 83% of students will not repay their loans in full. They will effectively be paying this additional 9% marginal rate for the next 30 years of their lives.

Let me illustrate this with two brief case studies. If we model the repayments of a high-flying graduate versus those of the average graduate, there are some points worth noting. For a high-earning graduate—someone in the top 5% of earners within five years of graduating—the total value of their debt would start shrinking around four years into repayments. After 15 years, it is fully paid off: that is, the debt and the interest. The total repayment equals roughly £88,000. For the average graduate, at no point would the total value of their debt decrease. Due to the high rate of interest, the debt will keep climbing some years after graduation and they would be unlikely to repay that loan for 15 to 20 years or even longer. At the end of this period, when the debt is written off, they would eventually have accumulated £164,000 of debt and paid a total of £75,000. I hope that I have got those figures right, but how on earth can this be right or make sense?

Incentives are currently structured so as to encourage some institutions to inflate their student population, with little regard to the quality of education. They do this by abusing unconditional offers, and the results of this can be striking. Those universities that issue unconditional offers sparingly—less than 1% of their total offers—deliver average graduate earnings £8,000 higher than those universities that issue the most unconditional offers, more than a third of their total offers. To give a particularly egregious example of this phenomenon, one university hands out 76% of its offers as unconditional offers, but it delivers earnings five years after graduation of only £17,000 for women and £20,000 for men. Universities that are abusing unconditional offers in this way, to pressure sell their degree courses, leave students worse off than vocational alternatives with a higher earnings return.

It was a bold and admirable vision to give more people, particularly from disadvantaged backgrounds, the opportunity to attend university. But as the examples that I have given show, growth in student numbers has not benefited all young people. Many of those young people understandably feel angry and aggrieved and, as a result, 44% of people think that too many students now go to university, compared with only 25% who think that too few students go to university.

This does not apply across the board. Many British universities are of course world-leading institutions. But a small number are ripping off students and giving university a bad name. We do this current generation of students no favours by cramming them on to courses that saddle them with decades of debt repayments, the full costs of which are complex and difficult for school leavers and their parents to comprehend, while simultaneously delivering little or no financial return on their investment and hard work.

This unfolding debacle is a disaster for intergenerational inequality. I was a member, along with the noble Lord, Lord Bichard, and the noble Baroness, Lady Blackstone, of the Intergenerational Fairness and Provision Committee, and we detailed in our recently published report that the millennial generation is likely to be the first to be worse off than their parents. We risk exacerbating this inequality if our broken and unsustainable higher education funding system is not fixed.

While the Augar review presents a detailed and welcome analysis of these problems, we are right to question the solutions. I am not convinced by the proposal for an across-the-board tuition fees cut from £9,250 to £7,500 which does not tackle the issue of low-value courses or make funding fairer. It would help only future students, rather than all those recent graduates and current students who would still spend the next few decades haunted by the spectre of persistent debt. It would create unfairness between these two groups—the damaging cohort effect—and would leave the intergenerational inequalities between recent graduates and their parents or grandparents unaddressed. An across-the-board cut in the headline cost would render some valuable courses unviable—courses with relatively high running costs such as those in STEM fields. But it would leave some courses in place, which would be poor value even at the lower rate.

Indeed, there is already support for prioritising funding for higher-value courses. Polling by the think tank Onward shows that a quarter of people are in favour of using taxpayer money to reduce fees for those students studying science, medicine, nursing, engineering, and maths; and young people aged under 35 were the most supportive of this idea.

Poor-value degrees and a broken repayment system are letting down students at the expense of the taxpayer. Of course, we need to look at reducing the cost of university, but in a way that is fair and helps current students as well as recent graduates. We must also look carefully at rooting out courses that are making school leavers a false promise, delivering low earnings and huge debts. But we must also end the unacceptable situation where young people finishing university face higher marginal tax rates than millionaires. We cannot go on like this. The next generation deserves better.

My Lords, I will focus my remarks in particular on the accelerated degree mentioned in the Augar report, but first I welcome the fact that so many speeches in this debate have concentrated on the really important recommendations in the Augar report relating to those 50% or so post-education people who are not in university. Those recommendations will, I hope, provide the better skills that are needed in an increasingly technological age, and encourage better jobs, more social mobility and a growth in productivity—and, I hope, will achieve greater parity of esteem with universities. The proposal for lifelong learning allowances is particularly imaginative.

As far as the other 50% are concerned—those in university—I, like others, welcome the proposal to introduce maintenance grants for those in need, but I join the noble Lord, Lord Norton, in being concerned about the regressive effects of reducing fees to £7,500 per annum and including the extension of the payback from 30 to 40 years, which could lead to middle earners losing out while the better off may well benefit. The challenge is to protect and guarantee the unit of resource for each student, and to do this, as we have heard, would require the injection of an extra £1.8 billion by the Government. Judging by past experience and all the increasing bids being made in the present debate by the two potential Prime Ministers, I am not very confident that that can be achieved.

We have had very impressive speeches in this debate by noble Lords with wide experience of education, and I have learned from experience that it is much wiser in this House to speak on a subject that you know something about. Therefore, I am limiting my remarks to the accelerated degree mentioned in the Augar report—better known in my mind as the two-year degree—which needs to be part of the pattern of choice that the Augar report so strongly recommends. I declare an interest as a former vice-chancellor of the University of Buckingham, so dynamically led today by Sir Anthony Seldon. The University of Buckingham, as everyone knows, has pioneered over 43 years the two-year degree.

I welcome the overall aim of the report, which is for more flexible learning opportunities, more diversity and more choice. The two-year degree fits into this pattern. I am glad that the Government have declared their aim to encourage the two-year degree. But we must ask ourselves why only 0.2% of all students—about 4,500—study the two-year degree today. The impact assessment for accelerated degrees produced by the Government forecasts growth in the next decade in two-year degree students of between 23,000 and 40,000 students. But to succeed in this requires two things. First, there must be more awareness of the value and availability of the two-year degree. Secondly, we must get the incentive right through the fees structure.

On awareness, on 28 February, the Minister, the noble Viscount, Lord Younger, helpfully circulated a letter following the debate on the regulation of accelerated degrees that revealed a remarkable lack of awareness and knowledge of the two-year degree. The Student Loans Company customer survey of 2018 showed that 92% were glad that they had chosen a two-year degree rather than the standard one, but 55% of the standard degree students had never heard of the accelerated degree, of whom 60% said that they would consider an accelerated degree if they were starting again as a fresh student. That demonstrates the need for there to be a major effort by the Government and universities to increase awareness, knowledge and understanding of what is involved in a two-year degree—the Minister referred to the term “more informed choice”.

To be clear, at the University of Buckingham, students save one year of living costs and tuition fees and are released one year earlier for a job or to carry on with further education. Over two years, with four terms a year, there are 80 weeks of studying and 24 weeks of holiday. In a three-year degree, there are the same number of weeks of study but 18 months of holiday, achieving the same standard of degree. It is not therefore surprising that the University of Buckingham has come top of the national student survey for student satisfaction and top in the teaching excellence framework, and that employers are deeply impressed by the motivation, judging by the jobs that the students get. It clearly suits certain types of students—not all, but certainly mature students and many who are highly motivated at a younger age.

Secondly, we should get the incentives right to encourage more two-year degrees. The fees for them are now at £11,100 per annum for approved fee-capped providers. Students will pay 20% less in fees over two years than in three, but universities will have to provide 50% more teaching for an income that is 20% less than for three years. The University of Buckingham judges that it needs to charge £12,500 per student in order to achieve high standards, but that means that it is an approved provider and loses some of the other advantages of fee-capped providers. In these circumstances, for-profit and other universities may be tempted to go for cheaper courses, for example in business, law or accountancy, rather than engineering, science or medicine. This could undermine the reputation of the two-year degree.

So I hope that the Government will examine the possible implications of the Augar proposals for reducing fees by £2,500 and look at the options for the two-year degree so that there is no disincentive to people going into those courses. The Government will need either to reduce the two-year degree fees proportionately, from £11,100 to £8,900, or to simply freeze the fees for two-year degrees at the present level, whereas the three-year degree fee will be reduced to £7,500. I simply ask the Minister that the Government give careful consideration to the options here, so that assurances can be given that the priority is to incentivise and encourage the two-year degree through a fee structure as well as by other means.

My Lords, I declare an interest as chancellor of Cranfield University and as chairman-designate of the Royal Veterinary College.

I support calls by many Peers for improvements in further education and benefits for the 50% who do not study for a higher degree. However, I am unsupportive of many of the Augar proposals for higher education, although perhaps I ought to be more statesmanlike and follow the subtle way in which the noble Lord, Lord Patten, praised the report and then systematically demolished it.

First, on the reduction in fees, Philip Augar says that the report is a package that cannot be cherry-picked. He says that the reduction in fees must be reimbursed in teaching grants to universities by the Treasury. I hear the sound of hollow laughter on both these points. This could just end up being a major reduction in university funding. Philip Augar is on the record as saying that he believes universities have had a bonanza time since the introduction of fees and that the amount of capital development currently happening on campuses is a sign of that. He even recommends removing the 10% future sustainability element of the fee structure, which is aimed particularly at ensuring that universities stay well developed, well housed and well equipped for the future. He recommends freezing the average per-student resource.

All these seem very short-sighted. If the Government’s industrial strategy is to be delivered, if the post-Brexit strategy of the UK as a world player in industry, research and economic development is to be delivered, if the research budget is to be increased to the government target of 2.4% of GDP, universities have to be well resourced and have excellent facilities for teaching and research. They must also have good student facilities if they are going to continue to attract the brightest and the best students and teachers globally, as well as benefiting the national economy, the UK’s standing and students and businesses in this country. So a cut in fees that was not reimbursed by the Treasury would come upon universities when they can least take it because they are already facing pressures from a loss of confidence in the UK as a result of Brexit. There has been a reduction in EU student applications, additional demands for funding for pension schemes and growing competition from the global higher education sector.

My second set of worries is: if the Treasury were to have a rush of blood to the brain and reimbursed the loss from fees in the way in which Augar proposes, I would have concerns. Reimbursement being targeted to qualifications that are high-value for students and taxpayers puts excessive emphasis on post-graduation salary performance. I am a classics student with a postgraduate degree in business studies—that denigrated subject—who earned hardly anything for the first few years I was employed. I seem to have come reasonably good in the last half of my life, but I would not be a candidate for a course that was highly valued by Augar. We could face a situation where focusing entirely on economic benefits would denigrate and devalue courses in arts, humanities and those professions with lower post-qualification salaries. The noble Lord, Lord Blunkett, gave an eloquent exposition of how this would penalise courses taken by entrepreneurs and public servants who take up lower-paid jobs and contribute markedly to their local communities.

The idea of prioritisation also flies in the face of the Robbins principles that he outlined comprehensively and cogently in the introduction to his report. He said that there were four objectives of higher education—skills to play a part in the economy, promotion of the general processes of the mind and its powers, advancement of learning and the transmission of a common culture and standards of citizenship. Robbins added a sneak fifth one: participation by institutions in the life and culture of the community. He said that higher education needed to deliver all these and not just be about, in modern parlance, skills for the industrial strategy and value for money for government and students. We must preserve these Robbins principles because they are important and integrated.

I was taken aback that in his report Augar said that in the face of the changed funding arrangements there should be no bailouts for failing institutions. What about left-behind communities if their local institution that participates and adds hope for the future in the local community fails? Philip Augar says that that is a matter for the Office for Students. That leads me on to another point of concern. If the Treasury reimburses the loss of tuition fees, the money will no longer go directly to the universities but be mediated by the OFS, which does not seem to be the right body to make important decisions on what the national future priorities should be for skills.

My third point concerns the vexed question of cross-subsidy between different activities in universities. I happen to believe that cross-subsidy is an excellent thing. Subsidies are wide and varied: a major one is the cross-subsidy from overseas tuition fees to research and higher-cost courses. But they come into play across the full range of income streams, from the state, corporate concerns, commercial ventures and philanthropic income. The flexibility that this gives universities to spend the money they raise in the most effective way is very important. The changes proposed by the Augar report mean that there would be much more central direction from government and the OFS. Is this what we really want? Is not the principle of academic freedom important? Should we not be encouraging universities to be even more entrepreneurial and innovative, rather than being directed top-down and focusing their efforts on providing things that attract a higher teaching grant?

The Augar report worries me in another way—it feels dangerously close to being politically driven. The scenario goes thus: Jeremy Corbyn and the Liberal Democrats say that they will cancel tuition fees. The Conservative Government have to offer something to students to get their vote. These proposals would benefit only some students, as the noble Lord, Lord Bichard, outlined. So I will finish by putting some questions to the Minister. Will he confirm that the Treasury would reimburse any tuition fee cuts? Will the Government adopt Robbins rather than Augar principles for targeting any reimbursement? Above all, will the Minister commit to the much-needed improvements in further education, but not funded punitively at the expense of our universities? This is not a zero-sum game—this is where Philip Augar got it wrong. What we need is both a thriving higher education function and a thriving further education function.

My Lords, first, I declare my interests as chair of the board of governors of Sheffield Hallam University and chair of the UPP Foundation Civic University Commission.

Philip Augar and his panel have, in my view, produced a thorough and thoughtful review that deserves serious attention. It describes post-18 education in England as a story of both care and neglect, depending on whether students are among the 50% of young people who participate in higher education or in the other half—the rest. In my view, the report is particularly strong in its recommendations to tackle the neglected part. Many other noble Lords have spoken about this and I will not repeat what they have said, but I shall highlight two recommendations from the report.

Ensuring that the route to further education is as streamlined, consistent and clear as possible, and providing additional capital and revenue support to reverse some of the previous catastrophic funding reductions are the two recommendations that I particularly commend as deserving widespread support. Addressing this disparity is, as Philip Augar said, a matter of fairness. I hope that today the Minister can give us an assurance that the recommendations on further education will be taken forward without delay. The Augar report is also surely right to recommend reversing the decision to replace the maintenance grant with loans and bringing back a grant of at least £3,000 for disadvantaged students.

On a personal level, I am pleased that the report recognises two key issues from the Civic University Commission report that I chaired: the need to restore part-time adult and continuing education and the importance of the civic role of universities.

Where the Augar report is less convincing for me is in its analysis and in some of its recommendations on higher education and, in particular, on student fees and loans. I believe that this is in good part due to the review having to reconcile four conflicting elements in its brief: delivering a headline reduction in student fees; sorting out the chronic funding issues in further education; avoiding a cap on student numbers; and keeping within the current funding envelope.

Those four things individually make sense but collectively they do not. They risk significantly weakening higher education finances, while doing little to assuage young people’s feeling of unfairness about the costs that they currently incur. Freezing fees for a further three years will amount to a real-terms reduction of 14% once the rising costs of pensions are taken into account. Fees will then have been frozen for a decade, apart from a £250 increase in 2017.

Reducing the maximum fee to £7,500, unless fully covered by government funding, will have a drastic effect on the finances of most universities. Some would struggle to survive and all would certainly need to curtail their spending on performing their civic role and on wider student support. The changes in fee levels, interest rates and repayment terms will benefit students on higher incomes post graduation and hit hardest those on middle incomes post graduation, as the IFS report in our excellent Library briefing makes very clear. Equally seriously, students may well see this as a sleight of hand—the headline fee level comes down but the total effective cost increases.

If we go beyond the question of fees, fundamental questions are raised about what universities should provide and how to establish whether that represents good value to the taxpayer and the student. The Augar report looks at these questions but, for me, it does not provide compelling answers. Judging the value of a degree on future earnings, for example, strikes me as a very limited approach, and, as the noble Lord, Lord Blunkett, said, the data is particularly weak.

None of that is to suggest of course that universities should not review their course provision to meet the needs of the local economy or strive to get the best possible job outcomes for their students, as we do at Hallam. However, this is likely to be best done through local initiatives and through the civic university agreements rather than through top-down prescription by government.

In having this debate, we are in danger of forming a perception of a typical student that is some way from being a general truth. At Hallam, for example, over half of our students are the first in their family to go to university; around a third are commuter students who travel from home; and half of them stay in the wider region on qualification.

Finally, I would like to make two important general observations. First, Augar will have done us a great disservice if it creates a false dichotomy between further and higher education. Restoring the deeply damaging cuts in FE and increasing the number of those at levels 1 and 2 who go on to benefit from further education is its own distinct issue. There is no great nobility in austerity that should compel us to transfer funding from one part of the sector to the other.

Secondly, the Government need to move speedily to complete their own part of the review following the Augar report and bring forward recommendations. It is worth remembering that the Augar review was commissioned in February 2018 and was intended to be published in time to allow the Government to conclude their review by early 2019. We now have a commitment to report by the time of the spending review, but with the uncertainty of Brexit it is far from certain that we will get a full spending review in November.

Any delay in the Government’s report will bring a definite planning blight to the sector, for both potential students and the higher education and further education sectors. We need a prompt and definitive response from government. I would be grateful if the Minister could respond on both those final points.

My Lords, it is always a privilege to speak in your Lordships’ House but noble Lords might wonder why I am spending my birthday waiting to speak in tonight’s debate. I should perhaps declare that I received a technical education and studied at a further education college, so I could not let the opportunity pass to influence what happens as a result of the Augar review.

I am of course delighted that the review recommends more investment in this much-neglected area of adult education. The remarks made by many noble Lords this evening in support of technical and vocational education and their recognition of the importance of further education colleges have been very encouraging. However, funding alone is not enough for us to address the inequality and unfairness that exist between those who go to university and those who do not.

The EU referendum, the 2017 general election and Donald Trump’s election in the US all exposed educational attainment as the biggest, most significant divide in our society. Non-graduates were more likely to vote leave in the UK or for Donald Trump in the US, not because, as some highly educated people have—I would describe as insultingly—suggested, people did not know better or because those who voted that way were stupid. They did so in part because they have lost faith in too many of those more highly educated, highly qualified people whom they feel have disrespected or disregarded much of what matters to them and who, for all their qualifications, have got so much wrong. It is really important for us to understand that. As much as your Lordships have debated a lot of matters to do with Brexit over the past two or three years, I am still unsure that enough of us do. When non-graduates voted predominantly to take back control in 2016, they were voting for change—to be heard and be taken seriously.

Rebalancing the importance and status of different types of education, skills and talents is one of the most fundamental changes that those of us in positions of power and authority must make in response. However, we must understand why it is important that we do. It is not just about more skilled people, as much as we need them. If we get our response right on this very important matter, we will open up new channels for people to reach the upper echelons of authority, which are now a closed shop for graduates. In doing that, we will create the conditions to devolve more power. If that happens, we will all collectively achieve more.

The first step to getting there is recognising that good technical education is not a consolation prize for people incapable of doing a degree. We need to give technical and academic education equal status. The attitudes and behaviours needed to succeed are the same for both. Recognising this will allow common bonds to be more easily formed between university and FE students, graduates and non-graduates. We need to respect and cherish not just what is the same about students who follow different paths but the differences, which are vital to increasing our collective success and expanding the rewards. Some of us learn to know; others learn to do. Some of us learn through study; others must observe and absorb through practical experience to gain and retain expert knowledge. This does not make some of us intellectually inferior. It means that we bring something different. We will often see the world differently, join up different dots and paint a different picture—very often, the bigger picture. Not encumbered by theses, we often see things more clearly and for what they are.

Our collective success relies on mutual respect. The more we understand how much we need each other, the more we will achieve. That is how we will start to bridge social divides, create more opportunities, expand the benefits of wealth and, most important of all, make it possible for people with different types of education and skills to be in positions of power and influence. That is what social mobility should mean, not more young people following the same route to one definition of success. The real test of our success will be if Members of this House and the other place—and anybody in positions of real achievement—genuinely welcome their children or grandchildren coming home and saying that they would rather go down a vocational or technical route than follow the more traditional path to university. That is when we will know that there is a genuine mutual respect and opportunity for all of us who are dedicated, work hard and want to succeed in whatever line of work we choose. I do not know whether Augar is the answer. Whatever policy we adopt, this is what we should be seeking to achieve.

My Lords, I draw attention to my declaration of interests in the register. In particular, I point out that I am an emeritus professor of civil engineering and director of research at Cambridge University.

When the Augar review was published, the headline recommendations were that the cap on higher education student tuition fees should be reduced from the current £9,250 per year to £7,500, and that the term of repayment should increase from the current 30 years to 40 years. However, there is significantly more in the comprehensive, 200-page report, with potentially very important consequences for higher education and substantial benefits for provision in further education. The report’s findings and recommendations for further education—which has been overlooked for so long—are most welcome aspects. This has been noted by many of your Lordships in the debate. Yet almost all the media coverage has been focused on the impact on higher education.

The recommendations in relation to further education could have a potentially major impact on reviving the fortunes of vocational and technical education; these are also critical for engineering. It is highly significant, for example, that in Germany 20% of 25 year-olds have a higher technical qualification, whereas in the UK the figure is only 4%. I therefore warmly support the report’s recommendation that the Government should provide FE colleges with a dedicated capital investment of £1 billion over the next spending review period. This is in addition to funding for T-levels, allocated in line with industrial strategy priorities. I also strongly support the recommendation that the Government should restore maintenance grants of at least £3,000 per year for socio-economically disadvantaged students.

These two recommendations alone clearly have important financial consequences for the Treasury. However, there is a danger that other important financial recommendations in the report will not be adopted, particularly in the current uncertain political climate. Reducing the higher education student tuition fee from £9,250 to £7,500 would mean a very considerable reduction in fee income to universities. The Augar review clearly recommends that the Government should replace in full this lost fee income. If the Government decide to reduce the tuition fees as recommended but not to replace in full the lost fee income, there will be considerable financial strain on the universities.

If the lost income is not replaced by the Government, universities will be faced with tough choices. Faced with a cut in income for teaching, there is a risk that they will decide to cut provision in expensive courses such as engineering, despite the country badly needing more engineers. There is potential for the unintended consequence of universities reducing the cost of engineering and other physical science courses by reducing or removing the most expensive elements, such as practical, design-based, hands-on, active- learning modules, and instead increase the classroom-based content. This would be a regressive step that would mean graduates would not have the practical experience increasingly demanded by industry and by the industrial strategy. The damaging effect might be felt most acutely by post-92 universities, which are using industrial, hands-on experience as a selling point and do not currently have the reputational protection of Russell group engineering courses.

It is very clear that the Augar review has taken a systems approach to the funding of the whole post-18 landscape. In Dr Augar’s own words to the Science and Technology Select Committee of this House, it is,

“a coherent package, and all parts are intended to fit together”.

The report’s recommendations make sense for financial sustainability only if implemented as a whole. It would be highly risky to cherry-pick and implement only individual recommendations in the report.

The key principles of the recommendations for higher education are a proposed fee cut and a directed top-up; in other words, a managed market. There may well be difficulties with the directed top-up, which entails the adjustment of teaching grants for different subjects. The Augar review recommends that the teaching grant attached to each subject be adjusted to reflect more accurately the subject’s reasonable costs and its social and economic value to students and taxpayers.

How is the social and economic value of a particular subject to be determined? The review recommends that this be determined by the Office for Students—OfS—taking account of the subject’s relative importance with respect to alignment with the Government’s industrial strategy and a range of other factors, such as the financial viability of the university and its contribution to the local economy. This exercise by the OfS will be far from straightforward and is bound to be controversial, as has been highlighted by the noble Lord, Lord Kakkar, and the noble Baroness, Lady Young of Old Scone.

Any measure that seeks to assign value to courses based on social and economic value is likely to favour engineering. Engineering courses typically offer some of the best value for money for the taxpayer in terms of economic returns and graduate salaries. However, while more money for underfunded engineering courses is to be welcomed, it must be understood that modern engineering is a multidisciplinary endeavour that increasingly relies on close collaboration with the arts and social sciences. Any changes in funding must not adversely affect universities’ ability to produce outstanding graduates in these sectors.

It is imperative to guard against a Soviet-style approach in which only science and engineering are regarded as worth while. There must not be a risk of penalising important disciplines such as languages, social sciences, humanities and arts in favour of STEM subjects. I fully agree with the noble Baroness, Lady Blackstone, and the noble Lord, Lord Patten of Barnes, on this point. By assigning to the Office for Students the task of assessing which subjects should receive larger teaching grants, which may affect the viability of putting on certain courses, there is a real risk of undermining the autonomy of universities. This is surely highly undesirable.

My final point relates to the effects of the Augar review on research. This has already been addressed by the noble Lords, Lord Patel and Lord Kakkar. It is important to note that many, if not most, universities already lose money on two core activities: home undergraduate education and research. This is because they do not recover the full costs of these activities through tuition fees and public grants, nor through charity and public research contracts. They therefore subsidise both these activities, as well as access work and bursary support, from their own resources, distinct from student fees and public grants. Although no cuts are envisaged by the Augar review, what the Government decide to do is another matter. In the event of any funding cuts, universities would need to switch a greater proportion of their own resources to subsidising education and student support. For example, at Cambridge, my university, a £1,000 cut in the funding currently received for each home undergraduate would mean a net loss of £10 million per annum to the university. This would represent a considerable opportunity cost for other crucial activities. It would be at the expense of not only funding outreach and access initiatives but meeting the costs attached to research.

It is therefore most important that any changes to the funding resulting from the Augar review do not impact on the sustainability of research and innovation activities within UK universities. It is also important that changes in funding do not discourage the young from pursuing STEM subjects. If the Government’s stated ambition of 2.4% of GDP being spent on research and development in science is to be met, this will require a 50% increase of active researchers in the UK. That means we will have to attract considerably more people into STEM subjects. If this does not happen, we will not deliver the 2.4% agenda.

In summary, the Augar review is comprehensive and contains important recommendations. It is excellent on the long-underfunded further education sector, which stands to benefit substantially from the review. This is to be welcomed, and it is crucial for higher education that the Government fully compensate universities for the recommended reduction in tuition fees. A pick-and-mix approach will have serious consequences. The proposed adjustment by the Office for Students of teaching grant for different subjects is far from straightforward, and bound to be controversial. Finally, it is vital for the country that our world-class research is not jeopardised in any way by the Augar review.

My Lords, I start by congratulating Philip Augar and his review team on a thoughtful and comprehensive report on post-18 education and funding. Alongside housing and long-term care, this is one of the three great unresolved issues crowded out by Brexit.

The area they investigated was looked at last year by the Economic Affairs Committee, of which the noble Lord, Lord Layard, and I are the survivors here this evening. While some of the details are different, Augar has come up with pretty much the same conclusions on the key questions. The first, and by far the most important, is recognising the division between the university graduate stream, comprising about 50%, and the non-graduate stream. The fact that no one has come up with a name that identifies the other 50% by its positive characteristics, rather than by what it is not, is symptomatic of the problem. The graduate stream has been heavily favoured—the noble Lord, Lord Adonis, would probably say pampered—in recent years, and the other stream has been neglected, even vandalised. This has produced a divide in our society. It is the San Andreas fault which runs down through Britain, corresponding closely to the polarisation of the Brexit debate and the north/south divide. It is a crucial blockage and is growing concerns about social mobility.

At the start of the debate, the noble Lord, Lord Storey, set out the simple figures: 1.2 million undergraduates in higher education receive £8 billion of public funding and 2.2 million in further education receive £2.3 billion. Noble Lords can work out the arithmetic for themselves, but it is pretty indefensible. The report identifies a gap between level 2 and level 6, describing it on page 33 as “the missing middle”. I would describe it as more like a blasted wasteland. The problem is that someone who reaches only level 2 at school rarely goes on into this middle zone, still less beyond. Those who do reach level 3 overwhelmingly opt to go straight to level 6. This has represented a decline in the middle-level qualifications that we used to be familiar with—HND, HNC, BTEC and so on. This fault line is divisive, unfair and quite unlike anything seen in other countries. It does not map on to where the UK has the greatest skill shortages. The balance must be redressed, and if we take one message from the report, this is what it should be.

The second headline conclusion is that what was called the student loan scheme had a solid rationale—that students who benefit from graduate studies should contribute more than those who do not—and should be repaired rather than abolished. But Augar rightly argues that it should be described as what it really is: a student contribution scheme. All sorts of distortions have come into the scheme as it has been modified over time. The review has come up with a counterproposal of its own. I prefer a scheme with a £7,000 fee and a teaching grant, provided that it happens and is intelligently used, to one with a £9,000 fee and no teaching grant.

The third conclusion is that the university sector, of which we are rightly proud and which contains some genuinely world-class institutions, has developed some bad habits, largely induced by the funding framework, inflation of costs and salaries, and the encouragement to recruit as many students as possible using devices such as unconditional offers and grade inflation. Augar points out that some of this expansion has provided poor value for students and for the nation. Significant numbers of graduates have emerged struggling to find work of the quality they expected and to earn enough to pay back the loans. Many disillusioned graduates would have done better to go through other channels, had they been of suitable quality. Augar is quite blunt about this. The report is reluctant to return to micro-control of student numbers but recommends putting universities on notice that they must address poor-quality courses and poor outcomes.

The next major observation is that abolishing the means-tested grants was a mistake. When the Economic Affairs Committee spoke to students, their major grievance was not about the repayment system, which they under- stood quite well, but about maintenance that was enough to live on during their years of study. I believe this was a decision taken for what I would call dishonourable motives, by which I mean it was done to produce not the best educational outcomes, but what looked best in the way the public accounts were drawn up. Make it a loan and it can be written off 30 years later. That game is up thanks to a recent belated decision by the ONS to change to an accounting treatment that recognises write-offs from the start.

I also welcome the lifelong learning allowance and, in particular, the abolition of the equivalent learning qualification rules, which have been very damaging, restricting the ability of adult students to choose a course that takes them on to the next stage and provides the skills that they want.

There are details that I have reservations about. I do not think that the real rate of interest should remain at 3%—and still not if added to the RPI. This is higher than the long-run growth rate of the economy and the long-run growth rate of earnings, as the recent briefing note from the Library tells us. In consequence, debt will tend to rise faster than the ability to repay it. I prefer the EAC’s recommendation that students be charged what it costs HMG to raise the money: the 10-year gilt rate. I suspect the dead hand of my alma mater, the Treasury, because the interest cost is treated as current income.

I also wonder about the 40-year repayment period, which means that graduates will still be making repayments into their 60s. Another part of the policy framework will be encouraging people of precisely that age to start putting money aside for long-term care. I am not sure that they can really do both. However, one should be wary of picking bits from the package. The cap on interest payments and delaying the real interest rate rise from kicking in until studies are completed might off-set some of my concerns.

By the time I came to the section on apprenticeships, I thought that the review was rather running out of steam. The present regime is severely flawed and underpowered. A lot more needs to be done to breathe life into a scheme that can provide an excellent earn-as-you-learn route into the world of work.

I am picturing a school reunion 10 years hence. One student asks another, “What have you done?” He says, “I got a degree, I’ve had various jobs since, but I still haven’t found the job that I want, so I don’t think I’ve really started my career yet”. The other says, “Well, I got a rather good apprenticeship, I’ve been working for the same employer, I’m loyal to them and they’re backing me, and I’ve nothing like the debts that you’ve got”. Eventually the word will get around that there are other good options beside university, but they will be taken up only if they are adequately signposted. Also, I strongly agree with the recommendation that degree-level apprenticeships should not be made available to those who already have a degree.

What should happen? The Government should stay firm to the principle of redressing the balance, even though they will face opposition. However, as the noble Lord, Lord Layard, advised us, it will happen only if the mechanisms to make it available are there. Simply saying that the money is there will not be enough—we need to find the people, the institutions, the mechanisms and someone in the Government to champion this. The other major change is that there needs to be a lot more education of teachers, careers advisers and parents on what the options are and how one does not have to pursue a straightforward degree, but can pursue other things and thrive perfectly well.

My Lords, I too thank the Minister for initiating this debate on the long-awaited Augar review. We owe a debt of gratitude to Philip Augar and his team for such a comprehensive review, and like the noble Lord, Lord Patten, I welcome the fact that it is clear and very well written. Like my noble friend Lord Storey, I thank too all those who sent briefings for this debate—far too many to credit, and many of them came yesterday, which is a little late for many of us who try to plan our speeches slightly ahead of time. We have had some wonderfully insightful and informed contributions from all around the Chamber this evening.

Dr Augar was speaking to the All-Party Parliamentary University Group last week, and he expressed his disquiet that all the attention has been on the university proposals, particularly the proposed reduction in student fees, whereas, as the noble Baroness, Lady Wolf, made clear, the reviewers were more concerned that we should look at these proposals in the round, and more concerned to publicise further and part-time education, and adult learning. But ’twas ever thus. Further education and vocational qualifications have always been treated as the poor relations, when in fact they are the bedrock of the country’s economic prosperity and quality of life, and it is really good to know that they served so well the noble Baroness, Lady Stowell.

I repeat my concern that vocational qualifications have been renamed “technical” qualifications. So many work-based skills are craft, not technical, yet this new terminology suggests that craft is not important. At meetings of the All-Party Parliamentary Group for Craft, we have heard from inspirational people who make watches, hand-crafted paper or embroidery, and from expert stitchers who work closely with surgeons to share skills which can be beautiful and save lives.

I am a vice-president of City and Guilds, and have long been totally convinced of the value of practical skills, which are sadly undervalued. We heard from the noble Lord, Lord Layard, about his part in the Robbins review in 1963—the last time that any report from a Government addressed part-time study. The Open University, Birkbeck and other proponents of part-time study warmly welcome the attention, and, broadly, the proposals in this report. I declare an interest as a fellow of Birkbeck.

The report recognises the role that further education colleges must have in aligning the skills system with the needs of the economy—particularly at levels 2, 3 and 4—and in delivering high-quality alternatives to traditional three-year residential bachelor’s degrees, as well as enabling more adults to progress to intermediate skill levels. It understands that employers and communities need more high-quality technical and professional education and training, industry-standard facilities, expert staff and the unique curriculum that colleges already provide. Colleges are the key vehicle for the flexible, local delivery of national strategies, supporting industrial policy, productivity, skills development and genuine social equity. It clearly acknowledges that all this requires real investment. We need more investment to answer the calls from business and in direct response to the pending challenges of technological change and Brexit.

In the realm of post-18 education, FE has been the prime victim of financial cuts, policy churn and the insistence on market solutions. As other noble Lords have said, it is illogical, damaging and unfair that over the last 10 years colleges have had to deal with an average funding cut of 30% while costs have increased dramatically. Further education is the only part of the education budget to have had year-on-year cuts since 2010. The value of staff pay has fallen by over 25% since 2009 and staff turnover rates in colleges averaged 17% in 2017, with the hardest-to-fill posts still being teaching jobs in engineering, construction and mathematics.

One in 20 college students study a higher education course in a college. This is nothing new. Colleges have been running higher education courses since the 1920s. Some 218 colleges provide undergraduate and postgraduate courses, and they provide 86% of technical foundation degrees.

We have long expressed serious concerns about adult and lifelong learning. Funding for adult education has had a cut of 62%. In the last 10 years, we have seen total enrolments for adults drop from 5.1 million to 1.9 million. The Open University has seen dramatic decline, as has Birkbeck—both great institutions, which have given people second chances at education, have changed lives and made major contributions to quality of life and to the economy. We need adult skills to make up for the inevitable shortfall from young learners as their numbers decrease.

There is a compelling need for a fairer society which works for everyone, based on a strong economy in which businesses can be even more productive. We certainly support the Augar recommendation for a national adult education network, building on the existing FE college network. While this call for revenue and capital funding is welcome and long overdue, we would also recommend investment in adult learning facilities in the wider community. These may be more accessible for adult learners who respond to more informal settings than an FE college.

We are concerned at the emphasis in the report on courses and qualifications which are “economically valuable”. There is a risk that this may narrow the curriculum, particularly at the expense of arts and humanities. At entry level and for non-accredited courses in adult education, arts and humanities courses can be an accessible starting point for learners, and indeed continue to have value at all levels. When national vocational qualifications were introduced, the much-maligned level 1 often opened the gates for those with few or no qualifications and gave them a taste and a confidence for learning. Learning to learn is important among disenfranchised non-learners.

We support the lifelong learning loan allowance, but we acknowledge that adult learners may be averse to loans. I entirely agree with the right reverend Prelate that nurses may very well be averse to taking out loans. Like the noble Lord, Lord Blunkett, we were sorry to see the demise of the individual learning account. In this space, we would prefer the personal education and skills accounts proposed by Sir Vince Cable’s lifelong learning commission with contributions, which can be used at appropriate times for learning.

We welcome the abolition of certain restrictions concerning the equivalence and intensity of courses. The equivalent or lower-level qualification rule has had damaging effects on people’s learning. Could the Minister say what exactly the lifetime learning allowance actually means, especially in relation to the ELQ rules? Further clarity on that would be helpful. Giving the student more flexibility by allowing funding to be used for one module at a time, without having to sign up for a full qualification, is welcome. This was the practice with NVQs, where units could be acquired which could eventually lead to a full qualification. When I worked for City and Guilds, we contested the change in funding as we could see the real value in unit accreditation, but funding was available for full qualifications only.

Between them, universities are spending over £1 billion a year on measures to improve the access of disadvantaged students to higher education, but there is a need to clarify the statistical basis on which disadvantaged students are identified. Like other noble Lords, I strongly support maintenance grants. We continue to express disquiet over the metrics of the teaching excellence and student outcomes framework. The Royal Statistical Society has decreed these to be profoundly unreliable. We look forward to Dame Shirley Pearce’s review. Can the Minister say when we might expect this? I think the answer may be “shortly”.

The National Student Survey continues to register high levels of satisfaction overall with the courses that students are getting, which should be reassuring. Like the noble Lord, Lord Aberdare, I note that education in many areas is devolved to the four countries of the UK. What are the implications of Augar for the four countries of the UK? The only university to cover all of the UK is the Open University, which is obviously watching the outcome of this review with interest.

If the reduced tuition fee is introduced, what reassurances can the Minister give that expensive courses—in science, engineering, technology and medicine, as well as many of our wonderful creative arts—will not be targeted? Another concern which I expressed to him last week is that minority subjects might disappear, in particular some of the minority languages where retaining proficiency is significant for international relations as well as security. Universities see real threats to the humanities and social sciences from these proposals.

I agree with the noble Lord, Lord Bichard, that graduate salaries do not reflect the value of their studies, and with the noble Lord, Lord Judd, about the quality of life. One university has expressed to me that, with Brexit and Augar, life would be very tough and that trying to maintain the extraordinarily high record of our universities would be extremely challenging.

On the repayments, we see the changes as discriminating against disadvantaged graduates—especially women, who these days still tend to have disrupted careers. Like the noble Lord, Lord Turnbull, I query why the interest rate is still at a swingeing RPI plus 3%. Will this be reviewed?

As a last question, the 2018 CBI/Pearson education and skills survey found that 60% of employers rate skills such as resilience, communication and problem solving among their top priorities. Does the Minister agree it is therefore vital that courses across all disciplines, including arts and languages, are properly funded to provide these skills, which workforce employers need?

Once again, I give our thanks to the Augar panel. This review should give a real incentive to those in further education and colleges—a boost to be in their rightful place thanks to the massive contributions they make to the country, the community and individuals. While we still have some concerns, and look forward to those being addressed, I look forward too to the Minister’s reply and the Government’s response. We shall watch with interest the actions which should be taken as a result of this welcome review.

My Lords, like other noble Lords, I am extremely grateful to the Minister for leading off this debate, and for persuading his colleagues in the usual channels to have the debate in the first instance. I ought to declare my interest in this: I am one of those who had his education rescued by further education. I went to an old tech college, which served me well and meant that I did not end up at what is now described as a low-tariff university. I enjoyed the benefits of that university education.

The debate has been wonderfully illuminated by a stellar cast of speakers. I have enjoyed all the contributions that I have listened to, particularly those of our colleagues, the noble Lord, Lord Patten, my noble friends Lord Adonis and Lady Blackstone and others who have far more knowledge of, and insight into, the world of higher and further education than I can muster. A contribution from my noble friend Lord Blunkett on this is always worth listening to.

It is true that post-18 education funding is a highly politically charged subject, and fraught with difficulty. What is clear is that the current system is not working for students, particularly those from poorer, disadvantaged backgrounds, or of course for the FE colleges and universities as they struggle to plug the staggering funding gap of around £1.8 billion a year. Since the long-awaited Augar review was published on 30 May, noble Lords have had several, albeit brief, opportunities to question the Government on the various elements covered. I am in no doubt that colleagues around the House share my frustration at the lack of commitment on those occasions to implement, or indeed preclude, any of the 53 recommendations made. The noble Lord, Lord Kerslake, was right to say that we are unlikely to get any real answers to the Augar review until well past the initial spending review; it may be in October or November.

It is clear that decisions will certainly not be forthcoming while the Conservative Party is engaged in an internal conflict over its leadership. It is obviously not capable at this stage of taking action to ensure that the extra funding and reforms which our system of education urgently needs are put in place. I too observed, as did the noble Lords, Lord Bichard and Lord Storey, and others, that, interestingly, as yet neither of the two candidates vying to take over from Mrs May has approached the Tory money tree and given it a shake to see if more money for the FE and HE sectors will be forthcoming. No doubt they are worried that Philip Hammond will give them a wigging before they take office.

The review’s recommendations include some positive measures. We certainly welcome the focus on encouraging more flexible learning, including support for more bite-size courses, with improved opportunity to ensure that the most diverse range of learners can benefit from both further and higher education.

The report recommends the reintroduction of maintenance grants for disadvantaged students. Along with many others in this debate, I agree that a grant of at least £3,000 a year and an increase in the amount of teaching grant funding that follows disadvantaged students, as well as a greater focus on individual-level measures of disadvantage, such as free school meals and household income, in the allocation of funding through the student premium are advisable. As the Prime Minister now admits, the Government’s decision to abolish grants worth about £3,500 and replace them with additional loans that will have to be repaid was a huge mistake—a mistake which has left some of the poorest students saddled with a lifetime of debt. I hope the Government will accept these proposals with the commensurate level of funding required.

Inevitably, as colleagues have noted, the debate about the Augar review has been dominated by the proposals relating to universities, which included cutting tuition fees from £9,250 to £7,500; extending the repayment term from 30 to 40 years; and reducing the loan repayment threshold from £25,000 to £23,000. I must say that my youngest daughter did not welcome the idea that she would still be paying for her education as a pensioner. She thought that this was a signal failure in the report.

However, the modest reduction does little to address the problem of the expanding burden of student debt which puts many young people and families off seeking a university education. On the contrary, lowering the repayment threshold and extending the repayment period before the debt is written off is an inherently regressive proposal that will increase the total payments made by lower- and middle-income earners particularly —including the professions, teachers and nurses—while providing relief for those on higher incomes. Indeed, as other noble Lords observed, Universities UK estimates that those changes would result in middle-income earners paying back more—£11,000-plus over their lifetime—while higher earners would pay back less, saving in the region of £19,000 in repayments.

Other colleagues have observed that the LSE highlighted that this would disproportionately impact on female and black and minority ethnic students. For those who leave university owing £50,000 or more, with an interest rate of 6%, the cumulative effect can be eye-watering in terms of the impact on personal finances. The higher education finance system needs to be more progressive, not less. How can these changes, particularly for graduates paying off a debt that lasts 40 years, possibly encourage more talented, disadvantaged young people to see university as an option? This is why Labour supports the abolition of tuition fees completely.

Although the report recommends that the Government increase central funding, the fear is that these recommendations, if adopted, will generate costs to be borne by universities and colleges which are already struggling to plug the funding gap. The report contains scant analysis of how this wider reduction in headline tuition fees will impact on individual universities. These institutions are often big employers in their communities, and the risks it would create for their financial sustainability and stability are not to be underestimated. Although some universities will increase their efforts to recruit more lucrative high-fee-paying international students, the reality is that without a substantial and appropriate increase in central government funding, the shortfall will grow, to the detriment of students and the wider society, which benefits from a skilled workforce.

Of course, not every university has the option of seeking new student markets abroad. Some are commuter universities, reliant on a more local customer base. These smaller, modern local universities tend to have the most diverse intake of young people and are therefore core engines of social mobility. They are most vulnerable, as they do not benefit from alternative funding streams in the form of research grants or international and postgraduate students.

Other institutions, encouraged by the lifting of the student numbers cap, have ramped up significant support service costs too, expanding accommodation and teaching capacity. Budget shortfalls will inevitably mean reduced spending, involving redundancies, recruitment freezes and smaller annual wage rises. Any practical and reputational damage to universities will also decrease the number of highly skilled employees that business needs and reduce our international competitiveness precisely at a time when modern Britain needs it most, facing, as we do, a potentially disastrous Brexit. Cuts will also inevitably mean reducing the other services universities provide for their students, be that academic—courses offered, contact hours, resources and equipment —or support in areas such as mental health and employability.

It is hardly reassuring for students and parents, who are increasingly asking whether university courses offer value for money. Choosing to study with a higher education provider is a big decision, particularly given the cost of tuition fees and the commitment in time, with the commensurate loss of earning that comes from studying instead of working either part-time or full-time. Students and prospective students are increasingly questioning whether a university course represents value for money, and are looking carefully at what they can expect to gain from their education, both during and after their studies. However, the array of factors is not fully reflected in the review, which places a disproportionate emphasis on graduate salaries as a proxy for the value of study. While the panel claims to be making no judgments about the worth of different degrees, it parrots the common line that some courses are low-value because of the low salary levels of some graduates.

While graduate outcomes are undoubtedly a key consideration, such a measure is fundamentally flawed, as earnings data does not take into account self-employment or business ownership, which is the route for many graduates; nor does it account for long-standing structural inequalities in pay between men and women. Moreover, many graduates leave university and work in jobs that are vital to their community, wider society and the economy, or in regions that have lower than average pay. Determining the value of courses in terms of earnings ignores their contribution and importance. Education has always been more than simply a vehicle by which people can make more money for themselves. In our view, using such a crude metric would be a serious mistake, risking undermining student choice and creating incentives that could have profoundly undesirable consequences.

This can plainly be seen when we consider the importance of the arts to the rich cultural fabric of the UK. However, creative arts degrees fall foul of this approach, with the review questioning whether they,

“constitute good value for taxpayers’ money”,

given that they require more government subsidy than other degrees, because graduates are less likely to pay off their student loans as they do not earn enough over the current 30 years to pay back the full amount. The IFS estimates that the public subsidy amounts to about £30,000 per student for those studying arts and humanities subjects such as English, communications and media, and as much as £37,000 for those taking courses in the creative arts. The equivalent public subsidy is £28,000 for engineering students and £24,000 for those studying maths and computer science. The irony is that by extending the payment window to 40 years, this situation is much less likely to occur. The creative economy contributes significantly to the UK’s prosperity and comprises a large and growing share of UK jobs, with a substantial share in almost every UK region. Creativity also contributes to the wider public good. I hope the Minister can assure the House that future funding policy will be based on a broad range of factors beyond simply graduate salaries.

The review makes a number of recommendations relating to further education, proposing that the reduction in the core funding rate for 18 year-olds be reversed and that the Government should provide FE colleges with a dedicated capital investment of at least £1 billion over the next spending review period. The recommendations on improving the funding for further education and improving the grants and loans financing for vocational courses are, of course, welcome. While we welcome the overarching desire to change the relationship between further and higher education, we feel that the proposal to freeze HE funding for three years to help fund investment in other parts of post-18 education is unhelpful. Such a proposal represents a false choice, as it is a lack of parity with schools that has hit the FE sector harder in recent years. That is why Labour has committed to bringing funding for 16 to 18 year-olds in line with key stage 4 baselines and restoring the EMA for 16 to 18 year-olds from lower and middle-income backgrounds.

The Augar review was designed by the Prime Minister to solve a problem of perception: that the current Government did not understand students and, in particular, student finances. Philip Augar was given a narrow range of options to work within to come up with answers to an impossible question. He has made a brave effort to answer other, wider questions about the financing of FE and HE education. Sadly, he has come up short, particularly on funding, although for our part we will continue to focus positively on those parts of the report worth looking at, especially those which make a start on undoing some of the damage that has been done to the FE sector over the last few years.

My Lords, we have had quite a debate and I am most grateful for all the contributions made today. Such debates in the House of Lords are often not just informative but forward-thinking, and today is certainly no exception. There have been many interesting insights and ideas promulgated, and we are listening. One point is certain; many Peers have praised the quality, thoughtfulness and thoroughness of the Augar report, and it is good to know that it is broadly welcomed and recognised.

I will address the points that have been made. Let me start with some remarks on student finance. Unsurprisingly, many Peers raised this issue, including the noble Lords, Lord Adonis and Lord Patel. The panel’s recommendations on student finance are detailed and interrelated, and cannot be considered in isolation. As my right honourable friend the Secretary of State for Education set out when the panel’s report was published, we will need to look carefully at each recommendation in turn and in the round to reach a view on what will best support students and the institutions they study at, and what will ensure value for taxpayers. This will include such proposals as the in-study and post-study interest rates, the proposed reduction from £9,250 to £7,500, the longer payback period, up from 30 to 40 years, and maintenance grants, about which I will be making some remarks later.

In answer to my noble friend Lord Norton’s point about the wider issues to consider, he is right; we should be thinking about links to the industrial strategy, to future skills needs and to research. I will be speaking more about that issue, which was raised not least by the noble Lord, Lord Kakkar.

To set a marker, the Government and the review panel are in agreement that the costs of post-18 education should be shared fairly between learners and the taxpayer. The taxpayer subsidy of higher education is a conscious and significant investment in the long-term skills capacity of our economy. It is crucial in enabling everyone with the ability to benefit from post-18 education to undertake it.

In my opening speech, I noted that our student funding system is progressive, with built-in protections for borrowers, but that those elements are not always well understood. My noble friend Lady Jenkin highlighted this fact and detailed it in her speech. I understand the concerns that she raised. She gave several examples, but I will give one whereby a graduate earning £27,725 a year will repay their student loan at a rate of £15 per month. Our income contingent loan system makes sure that student loan contributions are affordable and progressive, and that any unpaid loans are cancelled after 30 years at no detriment to the borrower.

The most recent forecasts from my department show that around 30% of plan 2 full-time higher education entrants in the academic year 2018-19 are expected to fully repay their loan within their 30-year repayment term. This rises to 45% for part-time higher education borrowers and 70% for master’s loan borrowers. This applies to all 53 recommendations, including those on student finance.

On the subject of the timetable, which was raised by my noble friend Lord Norton and the noble Lords, Lord Kerslake and Lord Bassam, we will be concluding the 18-plus review at the three-year spending review in the autumn, and not before. On the point raised by the noble Baroness, Lady Garden, about the TEF, Dame Shirley Pearce’s review—as I mentioned in the Chamber I think last week—is expected later in the summer. Maybe that falls into the category of “shortly”.

Moving on to student finance, the teaching grant is an important issue raised by a number of Peers, including my noble friend Lord Patten, the noble Lords, Lord Patel, Lord Kakkar and Lord Mair, and the right reverend Prelate the Bishop of Winchester. I was pushed to give a categorical guarantee on teaching grants by the noble Baronesses, Lady Deech and Lady Young of Old Scone, the noble Lord, Lord Kerslake, and the noble Baroness, Lady Blackstone. As they might expect, I cannot do that today, as I made clear in my opening speech.

I do, however, have some remarks to make. We want to ensure that universities continue to deliver world-leading education and are properly funded to do that. Since 2012, the total income of universities in England has increased by around £6 billion, driven by rising student numbers and the amount of funding they receive. Resource per student is at a near-historic high: the IFS estimates that the 2012 reforms increased real funding per student by almost 25%.

It is, however, true that the current context presents significant challenges to institutional management, efficiency and financial planning in the higher education sector. The leaders of higher education providers, which are autonomous bodies, are responsible for ensuring their institutions’ financial sustainability. Those leaders are adapting to a more competitive, uncertain environment and must continue to rise to the challenge.

The Office for Students will continually monitor and assess higher education financial sustainability, working closely with any provider that shows increased risk of financial difficulties. As I have made clear, however, neither the OfS nor the department will prop up failing providers.

The noble Baroness, Lady Wolf, raised the subject of higher education funding and sustainability. She said that she found it hard to believe that the cost of English had risen faster than that of chemistry, and that the fees are often higher than the cost of the provision itself. However, alongside the Augar report the Government commissioned a detailed study, through the good offices of KPMG, of the costs of provision, and this will form part of the evidence base for consideration alongside the report. This issue was also, I think, raised by the noble Lord, Lord Adonis.

We have given the OfS powers to ensure that all registered higher education providers have student protection plans in place to safeguard students’ interests, including against the risk of provider financial failure. The DfE also contributes to the teaching costs of higher education by providing the teaching grant to eligible providers via the OfS. This funding promotes student choice and skills for the country by maintaining the supply of high-cost subjects through support for teaching costs that exceed the tuition fee cap. Through the teaching grant provision the Government also support a range of important activities, such as access, successful participation and specialist provision.

In 2017-18, total higher education income in England was £32.3 billion. Tuition fee income represented nearly 50% of this, with universities receiving £15.7 billion in total from home, EU and non-EU students. Furthermore, it is important to mention that in 2018-19 the Government provided almost £1.4 billion in teaching grant funding to higher education providers, of which £681 million was steered towards high-cost subject funding and £277 million went to support the students most at risk of discontinuing their studies.

The Augar proposals on maintenance grants are another important subject, raised by the noble Lords, Lord Storey and Lord Mair, the noble Baroness, Lady Blackstone, and others. It is essential that we provide the right support to enable people from all backgrounds to access and succeed at university and other higher-level courses. That is why students from the lowest-income households now have access to the largest-ever amounts of cash-in-hand support for their living costs, as I said in my opening remarks. Living costs support increased by 10.3% for eligible students on the lowest incomes in 2016-17 compared with the previous system, with further increases of 2.8% for 2017-18 and 3.2% for the current academic year, 2018-19. The Government have announced a further 2.8% increase for living costs for the 2019-20 academic year to a record amount. We have also recently made a number of changes to support part-time and mature learners. This academic year, part-time students are able to access full-time equivalent maintenance loans for the first time. To clarify, I assure noble Lords that we will look carefully at the Augar proposals with respect to maintenance grants.

The right reverend Prelate the Bishop of Winchester mentioned nursing bursaries, so I will make a few remarks. On the question of a public service covenant—an interesting idea—the right reverend Prelate may be interested to know that in our Teacher Recruitment and Retention Strategy we have committed to rolling out phased bursaries for more subjects and will announce further details in due course. Our teacher student loan reimbursement pilot also aims to increase recruitment and retention in biology, chemistry, physics, computing and languages. Teachers of these subjects who qualified from the 2013-14 academic year onwards and teach in one of the 25 eligible local authorities can apply for a reimbursement of their student loan repayments. Applications for such reimbursements open this autumn. I would be pleased to meet the right reverend Prelate to discuss his idea and take it further.

The previous funding system for nursing, midwifery and allied health profession students was not working for patients, students or universities. Training costs were largely borne by the NHS, resulting in a capping of the number of trainees. The tuition fee model means that universities can offer more nursing places and students can access more funding than under the bursary system. Under this system, healthcare students will typically receive an increase in financial aid of up to 25% while studying. The Department of Health and Social Care has opened new routes into nursing for those who do not want, or are unable, to study for a full-time degree at university; this includes the nurse degree apprenticeship and the new nursing associate role.

Many noble Lords, not least my noble friend Lord Patten and the noble Lords, Lord Kakkar and Lord Mair, mentioned higher education research. We recognise the important contribution of universities to research, innovation and working with business. This is critical to achieving the ambitions of our modern industrial strategy, including delivering a spend of 2.4% of GDP on R&D by 2027, a target mentioned by the noble Lord, Lord Kakkar. That is why, since 2016, the Government have committed an additional £7 billion for R&D by 2021-22 through the National Productivity Investment Fund, the largest increase since records began. We are committed to making sure that funding reflects a sustainable model that supports high-value provision, meets the skills needs of the country and maintains the world-leading reputation of UK higher education. This includes not allowing the credibility of our world-class universities to be damaged by pockets of low quality.

My noble friend Lord Patten spoke about higher education autonomy. As he will know only too well, we enshrined that issue in the Higher Education and Research Act 2017, in which I played a part. We must remember that universities are autonomous. The Government’s role is to create the right conditions so that universities can respond to our economic and strategic priorities. Our ability to direct universities is therefore necessarily limited in legislation.

The noble Lord, Lord Kakkar, raised concerns about the sustainability of research funding if and when fees are reduced. We will also work with the Office for Students to make sure that overall funding supports high-value provision, supports access and successful participation for disadvantaged students, and maintains the world-leading reputation of UK higher education. I assure him that it is very much on our radar.

I should also like to touch briefly on value for money for higher education, raised by the noble Lord, Lord Bassam, and others. I say again that outcomes are not just about economic returns. We want to ensure that higher education improves the lives of students and the wider society. Even within subjects, however, data shows that there is a variation in returns across institutions. Every subject for men and most subjects for women have at least one institution that offers a negative return and one with a positive return. As I said in opening, we want to equip students with the information to make the right choice for them about where and what to study.

The noble Lord, Lord Bichard, and my noble friend Lord Patten stated that the review placed too much emphasis on graduates’ salaries as a proxy for value, to the detriment of creative arts institutions, for which there is already a deficit in funding. In response, the Government, via the OfS, provide funding to support the cost provisions not met by tuition fees, including for art and design. The Government also provide funding to specialist providers with world-leading teaching, including providers that specialise in performance and creative arts. This funding totals £44 million for 2019-20.

I will touch briefly on contact hours, which is an important subject raised not least by the noble Lord, Lord Blunkett. It is clearly an important consideration for Government because contact hours for students, and particularly the information on contact hours, is known to be an issue. The Government consider that it is important for students to have clear and accurate information about their course, including methods of assessment, expected workload, contact hours and information about total costs. Consumer protection law can provide important protections for students in this regard, but providers should ensure that they meet their legal obligations. Again, this is something that Augar has touched on and we will be looking at carefully.

I turn now to a very important area raised by a number of Peers, that of further education and levels 4 and 5. We want our workforce to have world-class skills and we want our education system to provide opportunities for everybody to improve their position in life. That is why we are undertaking a review of higher technical education at levels 4 and 5 to ensure that these qualifications can better meet the needs of learners and employers and benefit the economy. We expect to publish our higher technical proposals for formal consultation this year.

The matter of levels 4 and 5 was raised by the noble Baroness, Lady Blackstone, and my noble friend Lord Patten. It is interesting that they both made a series of points about further education funding and specifically about further education teachers’ pay. We have also made significant investment in further education, specifically in teaching. Since 2013-14, we have invested in further education teachers and leaders. As part of our package of support for further education teaching, we have invested £20 million over two years to prepare for the introduction of T-levels, which, the House will know, are coming in in September 2020. To reassure the House, this is not to say that more cannot be done, but there has been some progress.

More meaningfully, I want to address a point raised by the noble Baronesses, Lady Blackstone and Lady Garden, my noble friend Lord Patten, the noble Lord, Lord Bichard, and my noble friend Lady Stowell, whom I wish a happy birthday today. All of these Peers raised the importance of further education. The noble Baroness, Lady Blackstone, said that further education had been poorly funded. My noble friend Lord Patten said that it had been treated rather badly by Conservative Governments: I think the word was plural rather than singular. I recognise that appropriate attention to our college sector—the backbone of technical education in this country—is required to ensure that technical education is an equally valid path for a young person as academic routes. If it was not clear in my opening speech, I emphasise now how important it is to promote further education for all pupils and students.

In the meantime, we have protected the base rate funding for 16 to 19 year-olds for all types of providers until the end of the current spending review period in 2020. Overall, we plan to invest nearly £7 billion during this academic year so that there is a place in education or training for every 16 to 19 year-old who wants one. Our commitment has contributed to the current record high proportion of 16 and 17 year-olds participating in education or apprenticeships since consistent records began.

On the question of skills raised by the noble Lords, Lord Aberdare and Lord Bichard, our reforms to the skills system place employers at the centre, making the system more responsive to deliver the skills that employers need and which the economy demands. Skills advisory panels aim to bring together local employers and skills providers to understand and address local skills challenges. That is why £75,000-worth of funding has been allocated to all local enterprise partnerships, mayoral combined authorities and the Greater London Authority to help build their analytical capacity.

Flexible learning is a big subject. It includes the decline in part-time learning and, importantly, the accelerated degree which was raised by the noble Lord, Lord Luce. The Government recognise the importance of studying part-time and the importance of promoting accelerated degrees or even undertaking degrees over a longer period of time. The benefits can be brought to individuals, employers and the wider economy. As the noble Lord, Lord Judd, said, it is for all people to fulfil their potential. He is right. Shorter degree courses appeal to those who want to retrain and enter the workforce more quickly than through a traditional course. We have legislated to increase the total tuition fees for accelerated courses to make them more affordable. But I say to the noble Lord, Lord Luce, that there is much more to be done to market two-year degrees. We have spoken about that, but on the back of the regulations that we have taken through the House, I very much expect and wish that to happen.

Time is rather against me and I want to make some concluding remarks, which means that I will have to write quite a long letter to noble Lords because there are a good number of questions that I have not addressed, including career hubs, raised by the noble Lord, Lord Aberdare. I also wanted to make a few points about career management, which was raised by the noble Lords, Lord Blunkett and Lord Turnbull. We are doing a lot in that area, as I have said in the Chamber before, but let me put that into a letter.

Certainly, on apprenticeships, I am pleased to say that we are having a debate on Thursday. I have a lot to say on apprenticeships, which were mentioned by the noble Lords, Lord Layard and Lord Aberdare. I will write a letter. Maybe I can combine it with a letter on the back of the debate on Thursday—who knows? We will have to wait and see. Productivity is also very important. I could spend ages speaking about the importance of productivity.

But I conclude by recognising what the noble Lord, Lord Judd, said about the OU. I pay tribute to the OU and wish it a happy 50th birthday because it embodies the ideal that no one’s background or circumstances should hold them back from a university education. I was lucky enough to pay a visit to the OU the other day. I found it fascinating and I was struck by the sophistication of the technology there.

Once again, I offer my deep gratitude to the Augar panel for bringing its recommendations, which the Government will consider in turn. I look forward to further discussions on this important subject.

Motion agreed.

House adjourned at 9.23 pm.