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Lord Vinson: My Lords, I wonder whether the noble Lord would be gracious enough to give way. I take the point that he makes about the shortage of finance. I have two daughters currently at university. I am convinced that the three-year term for which they are there could be reduced to two years, or the four-year term reduced to three years. That may not be necessarily right for medics. But if the students worked a little harder, a great deal of resource would be released and money saved, which could then be used for the kind of purposes mentioned.

Lord Winston: My Lords, the noble Lord is perfectly entitled to make that point himself during his own time. Perhaps I may briefly continue and make one final comment despite that interruption. I do not see this as a political issue or even an electioneering issue. It is an issue at which we need to work collectively.

The fact of the matter is that we are in a society which now has a very much reduced manufacturing base and that will inevitably continue. The future of Britain must lie in our science and technology. Looking at the Far East, we begin to see the threat that looms up for our children. We must provide that kind of educational base in order to be competitive, to attract people back into this country and to promote our technology.

In conclusion, the Minister has had a very clear message from everybody in this House. No one has disputed the crisis that now faces our universities. I ask the Minister to take back the message and see what can be done by the Government this time.

5.7 p.m.

Lord Armstrong of Ilminster: My Lords, I should declare an interest in the subject of this debate, as

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Chancellor of the University of Hull. Hull is not a new university but is, relatively speaking, one of the younger universities. It is a sobering thought, I suppose, that I am likely to be the last chancellor of Hull who is older than the university.

Though it was founded on the generosity of locally based industry, personified by Mr. Ferens of Reckitts, it does not have the benefit of private endowments on the scale of some of the older universities. So we are heavily dependent, as are all universities (some even more so than Hull) on the public funding which we receive, through the HEFCE, from the Government, from local education authorities and from research councils.

Our unit of resource--the amount of money paid in respect of each student each year--has been diminishing steadily and sharply for some years now. On the present plans, the reduction will by 1998 have amounted to the best part of 40 per cent. in eight or nine years. Of course, the university has been doing everything that it can to trim costs and improve efficiency. It has cut back desirable expenditure on books and libraries, and on buildings and maintenance, where possible--often short-term expedients with long-term penalties, but they have had to be accepted in order to safeguard core educational objectives and programmes.

We were at one time able to blunt the effect of the reduction on our overall funding by taking on large extra numbers of students with the expansion of higher education. But numbers have in effect been frozen for several years, as the noble Baroness, Lady Lockwood, pointed out, and will continue to be frozen for several years to come. This relief is no longer available to us.

The problems would not be significantly eased by charging students an entry fee. Indeed in our case, and I suspect in the case of many other universities, the consequence of such a fee would be likely to be that fewer students would come forward for admission, because of inability to afford the entry fee. The effect would thus be to deny access to higher education to some students who would otherwise get it and benefit from it. Is that what we want to achieve?

Universities are rightly expected to use their resources prudently and efficiently. But we cannot expect universities to be able to meet rising expectations; to cope with greatly increased numbers of students; to play the sort of role that they ought, and would like, to be able to play in their local communities; to uphold, improve and enlarge the country's research base, and to give a good standard of tuition and pastoral care, on the basis of the present amounts of, and arrangements for, funding.

Reducing the number of students is no answer to the financial problem, even if we were willing to reverse the trend of recent years, since the size of the grant, albeit diminishing, is directly related to student numbers. Our expenditure, as has been pointed out is, above all, on staff, and if we are to achieve spending reductions of the size now being imposed upon us, we can really do so only by reducing the number of staff. Inevitably, the first to go are likely to be younger staff

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on short-term contracts--just the people on whom the quality of future teaching and research specially depends.

The alternative to that is of course to pay older staff public money to take early retirement. Either way we shall be taking measures to meet short-term financial constraints at the expense of long-term quality and effectiveness. What sort of sense does that make?

Apart from the need at least to maintain the amounts of funding for universities in real terms, and the effects of the cuts which we are discussing, there is the separate issue of the uncertainty created by changes year by year in the amount of funding provided.

I am old enough to remember the time when UGC grants were set not annually, year by year, but quinquennially, for five years at a time. Even the Treasury--that tail which wagged the government dog--in those days understood the need for a measure of stability in university funding. Indeed, I believe that in those days the Treasury, led by Mr. R. A. Butler and at official level led by that great, good and wise man, Sir Edward Bridges, would have regarded annual reviews of university funding levels as an unacceptable erosion of academic freedom.

If that view was held, it has long since gone by the board in Whitehall and in Westminster. But the principle was right. If we are to have universities which fulfil all the purposes to which I have referred, what is needed is a wider understanding of the nature and purposes of higher education, and an altogether more stable system of funding.

So we at Hull, and all noble Lords here this evening, very much welcome the appointment of the educationally ubiquitous Sir Ron Dearing as the chairman of the committee on higher education. It must be about the only part of education which he has not honoured and graced with his attention. Some noble Lords have suggested that he cannot be expected to do the sort of job that the Robbins Committee did a generation ago. I disagree with that and I hope that he and his colleagues will be able to do what Robbins and his committee did a generation ago: assemble and set out the facts, figures and arguments, and so provide the universities and the country with a solidly constructed base from which to proceed for the future. They will need to redefine for our day and age the nature and purposes of higher education, the aims to which universities should be working, and the implications of all that for funding, from private as well as from public sources.

Of course, that will take time. I hope that the Government will make sure that the universities have the resources to enable them to sustain themselves until Dearing's report is available and can be acted on. If we cannot do that, and as a result establish a greater measure of trust between the world of universities and the world of government and politics, we shall be at grave risk of doing serious damage to our system of higher education, from which it will take a generation to recover. We owe our young people a duty to do better than that.

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5.15 p.m.

Lord Goold: My Lords, I, too, would like to thank the noble Lord, Lord Annan, for initiating this debate on higher education which comes at a most opportune time. I must also declare an interest as the Chairman of Court of the University of Strathclyde. Like others, I welcome the appointment of the Dearing Committee of Inquiry. I believe that this review is timely because higher education is at a crisis point.

The past 10 years have been a period of great achievement. There has been a massive expansion--over 50 per cent. in student numbers. Research funding has been focused on areas of excellence, and the management and the output of university research have improved considerably. New systems of public accountability have been introduced, and rightly so, with both teaching and research now subject to rigorous peer review--not, I hasten to say, from your Lordships' House.

There is an evident concern on the part of the universities to maximise the beneficial impact which they have on their communities--and it is immense. In Scotland, the tremendous economic impact of the higher education sector has been analysed in the McNicoll Report, published recently by the Committee of Scottish Higher Education Principals. Scottish universities generate some 68,000 jobs, and more than half of these are created in other sectors of the economy through the knock-on effect of the universities' activities. The economic impact of the universities on the Scottish economy is equivalent to some £2.5 billion each year--significant achievements indeed.

Higher education has therefore been a success story for the Government, and the achievements have depended on the commitment and dedication of university staff. So what of the future? I am afraid that the achievements of the past decade are now being threatened by a misguided belief that universities will continue to provide a first-class service with sharply reduced levels of finance. An efficiency gain of some 30 per cent. has already been achieved by the sector in the past five years. There are few, if any, similar gains still to be made.

If, as planned, the Government now cut funding by a further 10 per cent. over the next three years, many of the staff who have contributed to the successes of the past decade will soon be redundant. Staff numbers will be driven sharply down. University estates will deteriorate as institutions try to protect staffing budgets by making savings on maintenance. Some will try to weather the storm by borrowing and will simply mortgage their future. Some may even go out of business. It is essential that the Government should take stock before taking this policy further.

The Dearing committee has been asked to consider the size, structure and funding of the university sector. In doing so, particular note should be taken of the following points. As regards the size of the university sector, the Committee of Vice-Chancellors and Principals has for many years urged further expansion. That is an understandable line for such a body to take,

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but I am strongly of the view that the maintenance of standards is now a far more important issue than the promotion of expansion. Further growth is not vital: the protection of standards is.

Regarding the structure of higher education, I would like the Dearing committee to address three issues. The first is the question of so-called "research universities". Here I am sorry to take issue with the comments of my noble friend Lord Beloff and agree with the noble Lord, Lord Walton. The Russell Group is a small club of prestigious universities which would like to monopolise funding for research, leaving their fellow institutions with the less glamorous job of teaching. Sir Ron Dearing and his committee should quash those ambitions. The Government's current policy of focusing research funding on areas of excellence is the correct one. There are areas of excellent research in universities the length and breadth of the country which will be starved of vital funds if the ambitions of the Russell Group are realised.

Secondly, Dearing must consider the role of further education. Many of the newer universities would like to expand through merger with further education institutions. That development concerns me. It may undermine the role of the FE sector, reducing the commitment of FE institutions to meet the nation's need for basic skills training. Dearing should support a strong, independent FE sector.

A third issue in relation to structure is Scotland. We hope that Dearing will recognise the distinctive nature of Scottish higher education and the value of a distinct Scottish funding system. Since 1992 when the Scottish Higher Education Funding Council was established, Scottish universities have benefited from close dialogue with their funding body and with Scottish Office Ministers. That close dialogue has had tangible benefits. Scotland has led the way in developing its academic computing infrastructure through the Metropolitan Area Networks. Those networks may now be the key to realising the vision of a University of the Highlands, as set out by my right honourable friend the Secretary of State for Scotland in his recent statement to the Scottish Grand Committee.

The final and perhaps the most significant area of the Dearing committee's work relates to the funding of higher education. In terms of the funding of the universities themselves, if the Government are serious about high academic standards and enhancing the quality of teaching and research, the current policy of progressive funding cuts must be halted. If we will the end, we must also will the means. While the Dearing committee is deliberating, the current level of funding should be maintained.

The funding of students is another vital issue, as many noble Lords have said. Graduates already contribute enormous amounts to the Treasury through income tax. It can be argued quite plausibly that they already pay for their higher education. That being said, with the financial pressures which the Government face, it may be reasonable for student maintenance to be funded in future through loan rather than grant. Alternatively, some form of graduate tax or fee could be the answer. What the Dearing committee can contribute to this issue

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is clarity. Uncertainty over student funding has now been a cause of distress to students and their parents for several years. We should hope that a committee of inquiry which has cross-party support can come to a clear recommendation which will settle the matter.

In conclusion, therefore, I welcome the establishment of the Dearing committee. The past decade has seen great things achieved in higher education by the Government and by the higher education institutions. Perhaps I may be the first in this debate to congratulate the Government and my noble friend the Minister on those achievements. However, our priority now must be to maintain the fine standards which have been set by our universities.

5.22 p.m.

Lord Ashley of Stoke: My Lords, like other noble Lords I must declare an interest because I am Chancellor of Staffordshire University. I thank the noble Lord, Lord Annan, for initiating the debate and congratulate him on his splendid speech.

We have heard many speeches critical of the Government and underlining the havoc that has been wrought by the many cuts in the higher education budget. However, after that bombardment of criticism from both this House and outside it is amazing that the Government do not seem to comprehend the magnitude of the cuts or their effect on the universities. That is astonishing.

Members of this House, Members of the other place, the Committee of Vice-Chancellors and Principals, university lecturers and students have all complained about the cuts, yet the Secretary of State made a remarkable statement in another place a little while ago. On 19th February, when responding to the legitimate claim that higher education faced a crisis, she said:

    "I cannot accept that any sector that receives £7 billion of funding--21 per cent. of the total funding of the education system--is in crisis".--[Official Report, Commons, 19/2/96; col. 24.]
The official declaration of the Secretary of State in another place was "no crisis". However, speaker after speaker today has talked of a crisis. The noble Lord, Lord Annan, was outspoken in his criticisms and he was followed by the noble Lord, Lord Renfrew--unfortunately he is not in his place--who referred time and again to a "crisis". In fact, as noble Lords will remember from our recent debate on student fees, the noble Lord said then that there was a crisis which may lead to a "catastrophe". There should be no doubt in people's minds about the present situation or about the Government's failure to appreciate that the universities are facing a crisis.

Perhaps one of the reasons why the Government do not fully understand the seriousness of the situation is that many universities are afraid of acknowledging that they face a crisis. When Ministers meet members of universities, they may be given a false sense of security and a complacent impression. The universities are understandably reluctant to admit publicly that they are in crisis. They are trying to attract students from both home and abroad and do not want to declare themselves

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a disaster area. That is understandable, but it may well be misleading. I should like the universities to be able to be more outspoken about the seriousness of their situation. If the Government continue to turn a Nelsonian eye to the crisis in our universities, they are storing up trouble not only for themselves, but also for the universities.

The CVCP has warned time and time again that major building programmes will be abandoned, about massive reductions in library books and computers, and that salary bills may have to be reduced, leading to redundancies and closures. Anyone connected with the universities knows about the larger classes, the queues waiting to use computers and the unfilled academic posts. Despite the Secretary of State's £7 billion, but because of her cuts, our universities are resembling decrepit firms worrying about bankruptcy. There is blight at every level of our university system. There has been negligent corrosion of the system that is designed to develop our seedcorn.

I shall speak only briefly because a number of other noble Lords are waiting to speak, but I must point out that I believe that the Dearing inquiry and the subsequent report will be of great benefit to our universities. I do not agree with the noble Lord, Lord Beloff, who, as always, made a marvellous speech, but who criticised the fact that Sir Ron Dearing is to lead the inquiry. It does not matter that Sir Ron is not as knowledgeable as the noble Lord would like him to be. In fact, I think that that is a positive advantage because Sir Ron will not be full of the prejudices, anxieties and partisan views which can affect so many of those who have been involved in the university debate for so long. I think that that will be a great asset. Sir Ron Dearing is an outstanding individual, whom I have had the great privilege of meeting. He is a marvellous, well-endowed man. Apart from the singular note struck by the noble Lord, Lord Beloff, he is rather like David Attenborough. They are the only two men who are universally loved and admired. Sir Ron Dearing will do a marvellous job, but his report will not come out until after this Government leave office.

I do not wish to make a partisan point, but we must face facts. The Labour Government will have to cope with Sir Ron Dearing's report. In the meantime, this Government will have to cope with the crisis. All of these facts, which are adduced by people who are far more knowledgeable about the universities than I am, add up to a condemnation of the present university system. Students and university staff are suffering, and therefore the nation is suffering. University education is being neglected and is going downhill. I hope that the Minister will be able to respond in the constructive fashion adopted by all speakers who have participated in the debate.

5.31 p.m.

Lord Broadbridge: My Lords, I too am grateful to the noble Lord, Lord Annan, for securing this most timely debate. Like others who have spoken, I am dismayed at the magnitude of the budget cuts announced last week. I think of the well-known literary adage:

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    "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery".
But that statement treats only of a marginal situation. The prospect that faces some 200 universities and higher education colleges is far from marginal. A steady decline in budget income has prevailed for several years, but now, instead of a breather without budget cuts to allow for rebuilding and consolidation, out of the blue come the most swingeing cuts of all, in both recurrent and capital expenditure.

The implications have been variously stated and referred to by earlier speakers. The one that I should like to stress is that of the Association of University Teachers. Last Thursday that body said that many universities were their town's biggest employers and claimed that the cuts would lead to more than 10,000 job losses. As to this, I think of a university like St. Andrews in Fife, Scotland. It is one of our most ancient. The town is the university and the university the town. I know it well, because my eldest daughter obtained her degree there. The situation is analogous to that of a large firm that is cutting back. There are actual job losses and, in real terms, a decrease in spending power of the directly employed. But there is a halo effect throughout the community which affects the viability of shops and suppliers of services such as restaurants--in fact nearly everybody.

Professor Gareth Roberts, vice-chancellor of Sheffield University (where I have a house) and chairman of the CVCP, warned that some universities could close as a result of the cuts and that four--which he did not name--were already in trouble. The Government appear to rely for mitigation of the effects of their cuts, in my opinion unwisely, on two matters: first, the inquiry into the funding of higher education by Sir Ron Dearing, who is due to report in the summer of next year. The principle of this move is admirable and will, I am sure, be extremely valuable, but the results will come much too late to mitigate the present cuts. Even if he meets his deadline--it is an enormous task--it is hard to see how legislative teeth can be put into his recommendations before 1998 at the earliest, probably 1999.

Secondly, the other tactic upon which the Government seem to rely is the application or the private finance initiative (PFI) to higher education. The CVCP's reaction is that such funding, if appropriate at all, is relevant and can be effective only in a tiny segment of their members' area of capital costs, for example student accommodation and perhaps sports facilities and catering outlets, because these are revenue-bearing, especially with an eye to conference and seminar use during vacations. They argue persuasively that the great bulk of capital expenditure on construction and maintenance of academic buildings, laboratories and computer systems will have no appeal whatsoever to PFI providers. There are also significant costs in putting together a PFI bid. They may be as high as £500,000 without any certainty that the project will go ahead. There are only a few successful PFI projects in the pipeline, and in any case the costs of leasing

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capital under PFI will have to be taken from the now reduced recurring funding, which is not meant to be used to pay for capital.

The funding per student is in very worrying decline. Having fallen by over 28 per cent. over the past six years, the prospect of a further near 10 per cent. over three years is profoundly alarming. I believe that this point was made forcefully to Mr. Eric Forth, the Minister of State for DFEE, on 11th January. The reduction in funding per student should particularly alarm your Lordships. Supervisors have a corporate responsibility not only for their students' academic progress but their general welfare. For example, if a student repeatedly attends for supervision looking worn out, the supervisor has a responsibility to inquire why and, more time-consumingly, perhaps to do something about it. One university has reported to the CVCP that each member of staff now has to take responsibility for 40 per cent. more students than as recently as 1989.

It is a worrying fact that student stress, drop-out and breakdown are increasing as, more tragically still, is student suicide. The announced student funding cuts are in a literal sense most unhealthy. They are also unhealthy for academic staff. Salaries are often falling in real terms and stress-related illnesses are rising. We face the real prospect of the increasingly sick having responsibility for looking after the increasingly sick. Book purchases per student are falling. Outside, overseas and more highly paid staff cannot equitably be recruited generally and, in particular, to research teams for which Britain is famous. Staff drop-out and chairs cannot be filled. It is a litany certainly not in line with the strategic general and economic aims of this country.

While I am the last to say that a degree is essential to the production of leading men and women--arguably, the greatest Briton of this century, Sir Winston Churchill, hardly shone in his early education--nevertheless significant numbers of graduates tend to enhance the performance of industry, commerce, the professions, the arts and the public and administrative sectors. Although both of my degrees are from Oxford, nevertheless I believe Cambridge to be a wonderful place. I am sad to see that it heads the list of budget cuts at 7 per cent. or £6 million in real terms. That is a sad state of affairs for a country renowned as a centre of innovation, invention and academic excellence. One Cambridge College, Trinity, has produced more Nobel laureates than the whole of France.

I turn to capital grants. I have already mentioned the CVCP's argument that PFI is inappropriate for the bulk of academic buildings and equipment. Whether for arts or sciences, equipment that is required for teaching today, particularly for research, is frequently computer-based and very expensive. With the pace of modern change, it requires constant renewal and maintenance, as do buildings. When in the late 1930s Sir Howard (later Lord) Florey and his team at Oxford developed penicillin and tested it successfully on the first human being, it was done largely on the basis of bucket chemistry. Perhaps it should be described as bucket bacteriology. Buckets come cheap. Not so today's equipment. New universities, without the riches of medieval, post-medieval or Victorian industrial

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magnates' endowments, are at a particular disadvantage, as are new colleges within older universities. I think of my own college, St. Katharine's, Oxford. It is particularly relevant as the founding master, the noble Lord, Lord Bullock, is a Member of your Lordships' House, as is the present master, the noble Lord, Lord Plant. Some donations have been embarrassingly large, but it is difficult to compete with, say, Henry VIII.

In conclusion, I both deplore and am greatly saddened by what is happening. I very much bear in mind the biblical words that as ye sow, so shall ye reap. I fear that we shall reap the wind if we go on like this.

5.39 p.m.

Lord Tope: My Lords, when the debate started this afternoon I thought that I would be one of the few people with no interest to declare. Earlier, the noble Lord, Lord Renfrew, made an unfavourable comparison with the pay increases of school teachers and university lecturers. I suppose that I should now declare that my wife is a school teacher. I feel a little as the noble Baroness, Lady Dean of Thornton-le-Fylde, did in looking at the list of distinguished speakers. Having heard 19 of them, they have expressed an astonishing degree of unanimity. Comparisons have been made with the debate on the subject of student loans the week before last. I recall that in that debate there was one speaker who supported the Government. Today, we have yet to hear a speaker support the Government, although I suspect that there may be one before the end of the debate.

Speaking as the fifteenth speaker, the noble Lord, Lord Winston, said that many points had already been made. That is even more true speaking as I do as the twentieth speaker, but most of those points bear repetition of course. Much reference has been made to the Dearing review. It was in fact announced on the day that we had the Second Reading debate on the student loans Bill. I gave it then a qualified welcome which I am happy to repeat now. We welcomed it as being at least a recognition by the Government that there is a problem in higher education which needs addressing urgently.

But, as others have said, the Dearing review will not be reporting until the summer of 1997. That is after the general election, and it is hoped that many of its proposals will need some legislative action, certainly if the funding arrangements are to change. We are probably looking at real changes not coming into effect until the end of the century. That assumes that we have a government who are willing to tackle these difficult problems.

The funding crisis is now; it is here; and it needs to be tackled now. We cannot do nothing until the end of the century, merely waiting for a useful report to be made. By then, the damage will have been done. Today people have spoken with real feeling, knowledge and experience of the problems that they know that their universities are experiencing. Reference has been made to the fact that since 1989 student numbers have increased by 45 per cent., yet funding per student has

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decreased by 28 per cent. Mention is often made of economies of scale. I read that one institution had put starkly to the CVCP its own experience:

    "Each member of staff now has to take responsibility for 40 per cent. more students than in 1989 ... there are no economies of scale in the need for individual attention to each student's work ... their examination papers or their pastoral care".

Reference has also been made to efficiency savings. To someone who is much better versed in the role of an LEA than a university, reference to efficiency savings comes as nothing new. Speakers have pointed out that we are long past being able to make savings on anything like the magnitude expected by the Government through increased efficiency. The sort of things being euphemistically called "efficiency savings" now are real cuts and damaging cuts. That is the case in local government, and I am certain that it is equally the case in the world of our universities.

Capital funding has also been mentioned. Reference has been made to the 30 per cent. reduction in next year's capital budget, and its halving over the next three years to 1999. I was going to talk of the effects of the PFI. It has been well and fully covered in the debate. I shall not allude to it except to repeat what others have said. PFI is in no way an answer to the capital crisis facing our universities. Indeed it can worsen the crisis. Significant costs are usually involved in preparing a scheme for the PFI. Those costs must be borne, and there is no guarantee that the application will be successful.

What will be the effects of the cuts? New and much needed projects will have to be abandoned or, at best, postponed indefinitely. Urgently needed, up-to-date equipment will not be acquired. Our universities will no longer be able to offer modern state-of-the-art facilities. That is bad enough, but I have sufficient confidence in the energy and initiative of our universities to believe that against all the odds they will overcome some of those difficulties. What concerns me even more are the effects on the unglamorous but vitally important area of care and maintenance budgets. As we all know, one can postpone maintenance and care for perhaps a year or two years, but one cannot do it year after year after year without there being some disastrous effects.

I wish to quote from the National Audit Office report entitled The Financial Health of Higher Education Institutions in England. In 1994 it noted that a backlog of maintenance work and work needed to comply with health and safety legislation was putting pressure on the majority of the sector. In its submission to the public expenditure survey the following year, the CVCP estimated:

    "a backlog of maintenance work totalling £1,269 billion across the university system, as a result of government underfunding".
Those problems are urgent and they will not go away. We need to find a means of tackling them.

Earlier in the debate, my noble friend Lord Russell trailed my giving some information about my party's proposals in this area. There are few people who are fortunate enough to have my noble friend as a warm-up man, but I shall do my best in the few minutes that remain to me. I need to say for the benefit of my colleagues, if not for the House, that the proposals are

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to be debated at our spring party conference the weekend after next, and only then will they be party policy.

The proposals recognise that we can no longer expect the taxpayer to bear all the cost. We say that as a party which is committed to increasing taxation if necessary to fund education. We recognise that the cost needs to be shared among the three stakeholders--we claim that we thought of the word first--in education. The first is the Government. We would increase contributions from the Government to tertiary education, although that would not be our top priority. We recognise that employers have a role to play in contributing towards the education of their employees and society generally. We propose a 2 per cent. remissible education and training levy on company payrolls, although we would exempt small firms.

Perhaps most important and relevant to the comments that have been made in the debate, we recognise that individual learners themselves will have to make some contribution. We do not propose a graduate tax. We propose an income contingent repayment scheme. We will establish what we would call a learning bank into which the contributions will be paid, and in which each student can open an individual learning account to receive contributions, if necessary, borrow from it, and to repay in the way I have described.

I cannot do full justice to a 17-page document which is not yet party policy in the few moments left to me. Those are our proposals, and as my noble friend Lord Russell pointed out to the noble Lord, Lord Renfrew, there is more than one opposition party on this side of the House. Those are our proposals. They are up for discussion and consultation. As my noble friend also pointed out, our leader Paddy Ashdown in launching the proposals said that there are only three alternatives to them or something like them: one is to let quality continue its rapid decline; the other is a 4 pence increase in income tax; and the third is to lie. We know which policy the Government have chosen. We wait to hear which policy the Labour Party is going to choose. I look forward to hearing the next speaker outlining that. She has had at least 10 minutes more notice of it than I had earlier.

To conclude, the terms about which we are talking, and the implementation of the Dearing review, which may well bear a startling resemblance to what is in the document, will need to be implemented, but they are not likely to be implemented before the turn of the century. We need an urgent solution to the problem. We need the Government to tackle it. We cannot wait for the Dearing report. We cannot wait for the election of a Liberal Democrat Government, although the two may well be coincidental in timing.

By setting up the Dearing review, the Government have recognised that there is a problem with higher education that needs addressing. The Government must be brave enough to recognise that the funding crisis is here and now. After the debate today they cannot possibly not recognise that. It cannot wait for another two or three years, especially with the cuts proposed for those years. Action is needed now. We should support

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the CVCP's call for a significant reversal of the proposed funding cuts next year, and especially over the following two years. Preserving the quality of our education for the future is much more important than tax cuts now.

5.50 p.m.

Baroness Farrington of Ribbleton: My Lords, I congratulate the noble Lord, Lord Annan, on initiating what has been for me, as a comparatively new Member of this House, one of the most informative debates that I have attended and in which the unanimity of views has been remarkable. In introducing the debate, he referred to the parameters of the cuts during the past six years, the collapse of the tutorial system and the need for us to recognise that in this and other areas the Government have increased the cost of bureaucracy and paperwork by the policies they have introduced. It is also important to note, as he did, the need to obtain agreement on how higher education is to be funded.

The Government are in danger of pretending that the problems arising from the cuts in revenue and capital spending will go away during the period in which the Dearing Committee is to produce its report. The problems will not go away, as so many speakers have made plain. I echo the words of the noble Lord, Lord Annan, in referring to the danger of students dropping out and the problems which are faced if the cost of student drop-outs begins to come into the equation. Perhaps I may refer to a university lecturer who pointed out that as regards tuition, maintenance and infrastructure costs British university degrees are the cheapest in terms of public funds for completed degrees within the OECD. However, the same lecturer went on to point out that part-time students are so tired that the drop-out rate is increasing. That is a problem not only for the universities but for the country.

The noble Lord, Lord Renfrew, referred to the importance of the cut in capital funding. That point was raised by speaker after speaker in terms of its effect. My noble friend Lord Morris of Castle Morris spoke of the problems of capital funding having to cover libraries, health and safety equipment, maintenance and computer equipment. He gave graphic illustrations using Sheffield and UMIST. He could have cited many universities across the country. What answer will the Minister give in the light of such widespread anxiety?

The issue of PFI capital has run like a recurrent thread through the debate. In introducing PFI as an idea for funding, the Government in the early stages recognised that it must be additional to essential underpinning capital expenditure and not used as a substitution. The much referred to Treasury dog is now turning it into a substitution as an alternative to the full and necessary funding. What is the Minister's answer to the fact that many universities are unable to match the private-sector funding which is essential to their ability to develop PFI initiatives?

The noble Earl, Lord Russell, referred to the problem of most of the capital having to be spent on repairs and maintenance, and not on investment and equipment. The noble Lord, Lord Dainton, referred to the Government's

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misuse of language in efficiency savings. As a comparatively new Member of this House, but as a much more longstanding member of the local government team, I cannot but echo and strongly underline his point. It is pointless for the Government, in the teeth of the detailed, knowledgeable, carefully researched opinions put forward by the universities, to maintain that efficiency savings during the next three years, and during the wait for Dearing, will solve the problems of the cuts which now face the universities. The noble Lord, Lord Dainton, also referred to the growing concern about contract research and the conditions in which young people work. We are in danger of losing them.

The noble Lord, Lord Beloff, surprised me somewhat, if he will forgive me for saying so. I had not realised that he was so close to being recruited to New Labour. I was delighted by his contribution in which he raised extremely important comparisons with other European Union countries. We hope that that factor will be taken into account by the Dearing committee because of the mobility of students and the need for us to be effective in competition with our European Union partners. As someone whose father was a plumber, I hope that the noble Lord was not suggesting that Sir Ron Dearing is in danger of behaving like a plumber as regards timing, because if so the universities will be in deep trouble.

My noble friend Lady Dean referred to the problems facing the Open University. It would be a tragedy if the cuts were to go ahead. It would be a particular tragedy for the students because of the exciting work that is being developed by the Open University in collaboration with other universities in credit transfer schemes, which may be a solution in particular for mature students. Furthermore, the European Union has recognised the contribution of the Open University to the quality of the different styles of learning developed in the UK.

It is impossible to cover all the points raised by all the speakers. The noble Lord, Lord Walton, referred to the quality of the science base in our universities which attracts inward investment. That point is critically important in terms of the economic viability of the country and the fact that partnership schemes are being put at risk.

The noble Earl, Lord Limerick, and the noble Lord, Lord Beloff, referred to the question of whether there should be concentration. The only point that I would raise in advance of Dearing is the importance of accessibility in as many parts of the country as possible to the full range of course options because of the growing number of non-standard entry students.

My noble friend Lord Sewel was right in saying that the current Government policy penalises and punishes success. It is extremely important to recognise that it would be a tragedy if during the period leading up to the Dearing Report the Government believed that they could rest on what today's debate has demonstrated are some pretty shaky laurels in terms of the position of the universities during the next two or three years.

We cannot say that efficiency savings will protect our universities from cuts. The noble Lord, Lord Broadbridge, referred to the tragedy that would be caused

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to the local economy were any of our institutions to become bankrupt during that period. I come from a small town whose former polytechnic is now a university and I know the importance of that point. We cannot afford to allow any of our universities to become bankrupt in quality or bankrupt in terms of finance.

It has been a wide-ranging debate. The Government are on the witness stand in terms of what they intend to do. If before it is possible to implement Dearing the Government have money to subsidise a private-sector loan scheme, would it not be better to use that public money to protect the system so far as possible before changes are made with all-party support after Dearing reports?

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