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Unit of Student Funding

12.30 pm

Mr. Tim Boswell (Daventry): This Adjournment debate has had an unusual genesis. In my view, it need not have taken place, but for the triumphalism and intransigence of Ministers in the Department for Education and Employment in declining to answer some simple questions tabled by my hon. Friend the Member for Maidenhead (Mrs. May). In a point of order on 19 December--the Tuesday before Christmas--she drew the House's attention to their extreme reluctance to give straightforward answers to specific questions. She commented, drily but fairly:

This debate, which I requested and was fortunate enough to be granted, seeks, at least initially, to draw out specific facts that should have already been established in response to questions. I pursue them not in a spirit of partisanship but because it is important that Ministers answer questions from both Government and Opposition Members. In addition, these are important issues that affect all universities, higher education institutions and the 1.5 million students, and their families, who are scattered across every constituency.

I shall begin with the narrow issue of student funding. On 20 December 2000, my hon. Friend the Member for Maidenhead, who has now joined us in the Chamber, elicited an answer from the Under-Secretary of State for Education and Employment, the hon. Member for North Swindon (Mr. Wills). Although he does not always deal with higher education, we should appreciate the fact that Ministers work together. That answer was a late entry in the parliamentary lists, just before Parliament closed for the recess. Following eight days of thinking time, and after a holding answer had been given, she elicited that, of the claimed £1 billion increase in higher education funding over the next three years--a claim made by Ministers--a significant proportion, around 10 per cent., is to be funded by students in the form of tuition fees, rather than by the Treasury. At this stage, I shall only comment that, if the Treasury treats that as part of planned public funding, it is ipso facto conceding that student tuition fees are, in effect, a tax on students, and not a charge for services rendered.

Getting information about the unit of funding has proved difficult for my hon. Friend the Member for Maidenhead. On 30 November, the Minister who will reply to this morning's debate said simply, though rather extensively:

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It is of some interest to Parliament that, although the Government were prepared to be selectively precise about the record of their Conservative predecessors and to quote large chunks of the report of the inquiry chaired by Lord Dearing--for whom, I am happy to say, we all have great respect--they declined to answer the question. They failed to give the actual figures on which their own projections and assertions about the maintenance of the unit of student funding were based--hence the perhaps understandable disappointment of my hon. Friend.

I can report a further, late twist in this matter. Only yesterday, the hon. Member for City of Durham (Mr. Steinberg) asked the Minister about publicly planned funding for higher education institutions in a series stretching, broadly, from 1995 to 2004. In doing so, he elicited some interesting answers. The information was not usable, as it were, for the purposes of the earlier inquiry, because it brought in capital. If nothing else, we need to be told what is actually going on.

The Minister knows that, on the whole, he and I have had pleasant personal relations, and I do not wish to sever them this morning. However, this is not the first time that Ministers have been, shall I say, less than helpful in this area. As an example, I shall recall an incident of some 12 months ago. In another place, my noble Friend Lord Baker of Dorking asked a written question that probed the trend in the proportion of gross domestic product that is spent on higher education--a similar, although not identical, issue. The figures that he was given included science budget expenditure, so I took the matter a stage further and tabled a separate question, asking that science be excluded. Ministers may have become tired by their labours since 28 February 2000, but at least their answer of that date compared figures including science with those excluding science. It also showed that, as a proportion of GDP, the trend was still downward.

This is a matter of ministerial conduct. From time to time, Ministers put spin on their words and seek to make presentations in the most favourable light. These Ministers are not the first ever to do so, although they are perhaps the first to do so on this scale. At no point in my ministerial career did I seek to avoid answering a direct question. To be frank, the Ministers involved have been giving my hon. Friend the Member for Maidenhead the runaround.

I turn to wider issues. As was explained, Ministers are taking the line that the downward trend in the unit of student funding in the past decade--in other words, the trend under both this and the previous Government--is to be reversed by a real terms increase in funding per student in 2001-02 that will be sustained in the following two years. We understand the triennium for planning of public funding, so I ask for no further extension. However, it should be remembered that the pressure of unit funding under the Conservative Government, which was referred to in the previous ministerial answer, was accompanied by a rapid increase in total student numbers that preserved the overall envelope of funding. As a result, expansion of student numbers was at least feasible, and it manifestly took place. In 18 years of Conservative government, the percentage of young people involved in higher education virtually trebled.

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Let us consider the Government's responsibilities and what happens next. The issue is whether the Government can simultaneously meet their claim to increase the real terms unit of student funding and finance the expansion of student numbers from roughly 30 per cent. to 50 per cent. of young people by 2010, as again they plan to do and claim to be feasible.

That would require an increase in total student numbers of the order of 25 per cent. Even to maintain the unit funding at real 2000-01 levels must mean increasing publicly planned funding by the same 25 per cent. as student numbers, requiring a real increase in funding of around £1.5 billion over the decade. Conversely, if the higher education budget stays constant in real terms and that expansion takes place, the unit of funding would fall in line with increased student numbers by 20 per cent., or around £1,000 at current prices.

These calculations are derived from figures supplied to us by the Library of the House of Commons. I should mention that Universities UK, the former Committee of Vice-Chancellors and Principals, drawing on a study carried out for it by London Economics as part of its analysis of university funding, suggests a lower cost progression of £260 million in annual extra requirement from 2004-05--not quite half a decade. However, it also points out that the extra academic and pastoral costs of those from disadvantaged groups, as one reaches further into the pool of potential students, were estimated at a further £50 million per annum. Whichever of those figures is right, substantial extra funds are required and Ministers should give us an explanation.

The question also arises as to whether there is already a funding gap. The London Economics report estimates it at £1.4 billion by 2004-05. The issue may well become buried or confused among other factors, including the funding increases that the Government have announced, the cost of implementing the Bett report--which may well be upwards of £1 billion--and the need to address anti-discrimination issues in employment as well as the separate cost of compliance with the inclusion of education as currently covered under the Disability Discrimination Act 1995.

There is also a problem with pay scales, particularly at the start of academic careers, especially as many lecturers have transferable skills, with a market value either in other sectors of employment or in academic employment abroad. I pass briefly over the issue of student support itself. The recent Callender and Kemp South Bank university report commissioned by the Department itself must have made uncomfortable reading for Ministers.

I do not suggest--nor does anyone else as far as I know--that these are easy issues, inviting an easy one-shot solution. There is no strain gauge in higher education that could indicate imminent danger of failure, nor is it possible to specify the nature of any such failure. More likely, I fear, is a gradual process of decline, disappointment and disillusion. The Government's present policies seem to be leading inexorably to a solution through top-up funding, even if

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not--in his memorable phrase, uttered at Greenwich university last year--in the lifetime of the present Secretary of State.

What is required from the Minister today is a bit more than mere euphoria about statistically circular funding increases. This is where we came in. First, we need simple answers to the fair questions posed by my hon. Friend the Member for Maidenhead about the unit of funding. What is it now and what, on reasonable assumptions of expansion, will it be over the next three years? Secondly, and no less importantly, we need a wider perspective on how Ministers intend to balance their claims to maintain or improve the unit of funding with their wish to expand student numbers and with the wider need to sustain quality and excellence in our universities.

12.44 pm

The Parliamentary Under-Secretary of State for Education and Employment (Mr. Malcolm Wicks ): I hope that the hon. Member for Daventry (Mr. Boswell) will not find me euphoric if I wish him and his team a happy new year. I extend that to all others present.

I congratulate the hon. Gentleman on securing this short debate on university funding. He asked about the Government's plans for funding universities and higher education colleges, especially in relation to the amount of funding per student. I am happy to respond to his questions. The Government have nothing to hide: the figures are published regularly in our annual departmental report. Indeed, I am bound--not in a spirit of triumphalism, but in the interests of historical accuracy--to set the Government's record against that of the Government of which the hon. Gentleman was a member. We do very well out of the comparison.

The hon. Gentleman mentioned some of the background facts, but they are worth repeating. Between 1989 and 1997, under the previous Government, planned public funding per full-time equivalent student fell by more than 36 per cent. from just under £7,600 to just over £4,800. That was the pathetic record that we inherited. As a result--as the hon. Gentleman reminded us--Lord Dearing's national committee of inquiry into higher education concluded in 1997 that higher education institutions could not absorb the further reductions of more than 6 per cent. in the unit of funding per student that were contained in the previous Government's plans.

Mr. Boswell rose--

Mr. Wicks : I think that an apology is coming up.

Mr. Boswell : I assure the Minister that there will be no apology. However, in order not to give an incorrect tone to the debate, I should say that I am grateful for, and reciprocate, his wishes for a happy new year.

Does the Minister accept that any reduction in the unit of funding would be likely to have a progressive effect over the years, because efficiency gains may be easier to secure in earlier years--especially when expansion is taking place--than later, after the unit of funding has been scaled down? Does he further accept that the expansion and dynamism of the university

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sector that was shown under recent Conservative Governments has not been so evident in a world that includes tuition fees for students?

Mr. Wicks : Although I do not expect an apology--I was jesting about that--I am puzzled by the hon. Gentleman's professed concern, which is, I am sure, sincere, about the need to maintain the unit of funding, given that the Conservative Government oversaw a record decline in unit funding.

The Government responded positively to the Dearing inquiry's recommendation that higher education institutions should not be asked to deliver more than a 1 per cent. reduction in costs in 1998-99 and 1999-2000 while student numbers continued to expand. We built that recommendation into our funding plans and put it into our plans for a further year. Since last year's spending review, which provided funding for higher education to 2003-04, we have announced that, for the first time in over a decade, the unit of funding per student will rise in real terms in 2001-02 and will be maintained over the next three years. That means that the total additional investment in higher education since April 1998 will be £1.7 billion--an increase of 37 per cent. in cash terms over the six years to 2003-04. That is an 18 per cent. increase in real terms.

Mr. Boswell rose--

Mr. Wicks : I am happy to give way to the hon. Gentleman, but I should like to answer the questions that he has already asked.

Mr. Boswell : It is a very short question. The Minister repeated the assertion that the unit of student funding is to increase. How much will it be?

Mr. Wicks : One of the hon. Gentleman's new year resolutions should be patience. I am coming to that point. The overall increase in public funding for higher education in England, which will total more than £7 billion a year by 2003-04, is clearly significant.

To return to the question, we acknowledge, as does the hon. Gentleman, that the process of calculating funding per student in higher education is complex. I cannot cover all the details now, but I shall write to him setting out the figures that I cite today and how they were arrived at. There are one or two important caveats. It was for those reasons that I was reluctant to give a more detailed answer to the parliamentary questions tabled by the hon. Gentleman and the hon. Member for Maidenhead (Mrs. May).

This short debate gives me an opportunity to explain the position at greater length. [Laughter.] Perhaps the two hon. Members will share the joke with me later, but I hope that it did not come from a Christmas cracker, because I may not find it funny. This short debate gives me an opportunity to explain the position at greater length without the risk of misleading anyone.

On the caveats, the figures are projections based on the best data available to the Government. Inevitably, the figures will change over time, for two principal reasons. First, the Government's projections of student numbers will be replaced with more up-to-date figures based on the number of students in the sector and the

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precise proportions of part-time and full-time study. Secondly, better estimates of the GDP deflator will be available over time, affecting the conversion of cash into real terms figures.

My right hon. Friend the Secretary of State wrote to the Higher Education Funding Council for England on 29 November setting out his plans for funding higher education in England from 2001-02 to 2003-04. There are cash increases of £412 million, £268 million and £298 million over those three years. Coupled with the projections for increasing student numbers to make progress with the Prime Minister's aim for participation, that implies annual increases in publicly planned funding of 3.2 per cent., 2.5 per cent. and 2.9 per cent. per full-time equivalent student, which, in turn, implies real terms increases in funding of 0.7 per cent., 0 per cent. and 0.4 per cent. over the next three years. That is the Government's best estimate and I am confident that, for the first time in more than a decade, the funding per student will increase over the three years covered by the announcement.

It is fair to ask who will pay for the extra funding. Overwhelmingly, it will be the Government on behalf of taxpayers. Only 10 per cent. of the increase will be in the form of tuition fees paid by students and their families, and those tuition fees are paid only by those who can afford them.

Caroline Flint (Don Valley): I have written to my hon. Friend about an anomaly in the system whereby tuition fees are based on household income. Parents who remain together until their children go to university are liable for the full cost, but when there is marital breakdown, the absent parent is not required to pay anything, unlike the formula for educational maintenance allowances which is designed for lower-income families.

Mr. Wicks : These are important questions and we are considering them. I am conscious that whatever the Government do--our approach to educational maintenance allowances is different from student finance for higher education--will be controversial. I am conscious of the need to strike an equitable balance between the stable, natural family providing for young people and the circumstances when there has been a family breakdown. That is another debate and relates, for example, to the Child Support Agency--but we are actively considering the issues.

Some 40 per cent. of students pay no tuition fees and that proportion will rise to 50 per cent. next autumn when the income thresholds in the means test are raised.

The hon. Gentleman asked why the figures included tuition fees paid by students and their families. The answer is that that is the income that the universities will receive. It would be peculiar to leave that income out, because it would distort the picture. On the matter of university finance, we need to see the whole picture.

Universities raise income from a variety of sources. On average, only 40 per cent. of the income of higher education institutions comes in the form of grant from the Higher Education Funding Council for England. Universities will benefit from the £1 billion of funding to support improvements in the research infrastructure in 2002-03 and 2003-04. An additional £250 million in

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recurrent funding is available for research through the research councils, which universities will be able to bid for.

Adding those sums to the HEFCE grant shows that universities will do well over the next three years. That extra funding will help to fulfil the Government's commitment that places should be available to all who have the capacity to benefit from higher education. Following increases in total enrolments at UK higher education institutions in each of the past two years, we are on course to achieve our aim that, in time, 50 per cent. of young people will have been able to benefit from higher education by the age of 30.

In summary, the higher education funding situation that the Government inherited was somewhere between a shambles and a crisis, and the hon. Gentleman has said nothing to refute that. We, however, have set higher education funding on a far firmer footing. The significant increases in funding made under this Government mean that the HE sector can now plan with greater confidence than for more than a decade. That has been recognised by the HEFCE and Universities UK, which said:

The Government are determined to ensure that, as the number of young people going to university increases, quality will not be sacrificed--unlike the pattern during the Tory era. That is why the unit per student is such a crucial indicator. The settlement is good news also for industry and the country as a whole, but it must be bad news for the Conservative party. It was extraordinary today--I hope that it continues during the next few months--to hear the Opposition drawing attention to their underfunding and neglect of the universities and allowing us to contrast that with our positive approach to funding British universities while maintaining unit funding per student. That must be the first political own goal of 2001.

It was noteworthy that, while the hon. Gentleman looked in some detail at our plans for funding, he had nothing to say about the Conservative party's plans. The more we hear from the shadow Chancellor, the more we understand why the shadow Education team is wholly silent on the point.

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