Lord Willetts
Main Page: Lord Willetts (Conservative - Life peer)Department Debates - View all Lord Willetts's debates with the Department for Education
Higher Education Policy
Lord Willetts Excerpts(13 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister for Universities and Science (Mr David Willetts)
I welcome this opportunity for us to set before the House the Government’s approach to higher education and to clear away the farrago of confusion, misplaced speculation and plain old-fashioned errors that we have just heard from the shadow Secretary of State.
I congratulate the right hon. Gentleman on one thing: his sheer audacity in standing in the Chamber and denouncing cuts and financial black holes, when he was in the Cabinet of a previous Government who got our finances into the crisis that the coalition inherited. So yes, we are having to take some tough and difficult measures, but that is because, as always, Labour left behind a mess and then denounced us for clearing it up.
Sheila Gilmore (Edinburgh East) (Lab)
Some months ago the Minister indicated in the House, in response to a question from me, that his proposals were not to do with the deficit, but were to do with a new way of providing for the financing of higher education, yet he introduces his speech by referring to the deficit.
Mr Willetts
I will turn to that point as I develop my argument. I hope the hon. Lady will accept that the Government whom she supported left behind a fiscal crisis. We were borrowing £120 million a day and were heading for the largest budget deficit in the G20. In fact, the position was so bad that the previous Chancellor had set out proposals for bringing down the deficit by reducing public spending. It is an irony that the Opposition called this debate in the very month when the previous Government’s spending cuts would have started to take effect—£14 billion of cuts planned for this financial year by the previous Chancellor, £16 billion of cuts that we are implementing.
As the shadow Secretary of State knows because he was in the Government at the time, it is clear from the pre-Budget report of December 2009 that there was a commitment to £600 million of cuts from the higher education and science and research budget. It was never explained what those were to be. As we know from the work done by the Institute for Fiscal Studies when it tried to assess Labour’s plans when the previous Government left office, there were to be reductions in public expenditure that the IFS estimated as a 25% reduction in the budget of the Department where the Secretary of State and I serve. So we inherited a mess that we have to sort out.
Hugh Bayley (York Central) (Lab)
The question is not whether the deficit needs to be reduced, but whether the decision to impose cuts of 80% on universities is the right way to do it. How will students benefit when they pay three times as much in fees but get less spent on the quality of their education in our universities?
Mr Willetts
Let us turn to that. Given that we face a crisis in the public finances, and given that even the previous Government had planned £14 billion of saving, how does one best deliver those in a departmental budget which I do not think any of the three parties represented in the House said could be exempted from reductions? Fortunately, the previous Government set in train an exercise that helped tackle precisely that problem. In November 2009 they commissioned Lord Browne to review the financing of higher education, and they made perfectly clear the wide range of options that they wanted him to look at.
Mr Willetts
I will give way in a moment to the right hon. Gentleman, not least because of his role as a Minister in the previous Government, but I hope he will accept that Lord Browne’s report was commissioned precisely so that when public expenditure had to be saved, the finances of higher education would be examined.
Mr Willetts
It was made perfectly clear—[Interruption.] Let me quote from the very first sentence of the terms of reference of Lord Browne’s report. It was to
“analyse the challenges and opportunities facing higher education and their implications for student financing and support. It will examine the balance of contributions to higher education funding by taxpayers, students, graduates and employers.”
So, the previous Government left us a deficit, recognised that they needed to make £14 billion of savings and set up an inquiry under Lord Browne to look at how universities should be financed in those circumstances—almost in the same month, incidentally, that we had the plan from the right hon. Member for Edinburgh South West (Mr Darling) for large reductions in public spending.
After considering Lord Browne’s report, which took him a year to produce and in which time he took a large amount of evidence, the coalition has adopted a strategy that, although not in every respect his strategy—[Hon. Members: “Ah!”] I do not know why Opposition Members react with such glee; in many ways, we have improved on the strategy that Lord Browne put forward. The fundamental proposal in the report that the previous Government commissioned is the one that we are now implementing in order to put the finances of higher education on a stable footing.
Tristram Hunt (Stoke-on-Trent Central) (Lab)
Will the right hon. Gentleman give way?
Mr Willetts
Let me just develop this point, because crucially the best way to save money is not to go for reductions in the teaching grant per student, as that simply means a lower-quality experience for students in our universities; instead, the aim is to provide universities, as the teaching grant is reduced, with an alternative source of income from fees and loans which does not involve students paying any money up front.
Mr Willetts
I am just going to carry on explaining the basic finances of the measure, because they are so important and the Opposition clearly do not understand them. The point is about lending students money to pay fees. For example, if we lend them £1,000, we can reasonably expect, on the basis of outside forecasts, about £700 of that to be repaid, so we account for the £300 of the loan that is written off—that will not be repaid—but know that we will get approximately £700 back. That is the financing model in Lord Browne’s report, which the Labour party commissioned, and that is what enables this coalition to save money for the Exchequer, to continue with high levels of finances and to ensure that students do not have to pay any money up front. That is an excellent combination of policies at a time when money is tight.
Tristram Hunt
I am grateful to the Minister for giving way as he digs himself ever deeper and reveals the fallacy of the sums involved. The whole point of the Browne review was that it would introduce a market in higher education, but, if we strip away the teaching grant and everyone charges £9,000, we do not have a market. That is why the policy is such a car crash.
Mr Willetts
I will move on to that stage of the argument in a moment, but let me just explain to the hon. Gentleman why this measure, which is not mine but that of the report commissioned by the Government whom he supported, is very straightforward, simple and absolutely the right way to tackle the challenge of financing higher education at a time of fiscal crisis. It enables us to save money for the Exchequer, because the money that goes into universities is lent to students and is not a grant, and at the same time we ensure that universities are well financed.
The shadow Secretary of State sounded as if he was willing to contemplate large reductions in the amount of resource going to universities, but that would affect the quality of students’ education. On our estimates, the cash going to universities rises from about £9.2 billion in 2010-11 to £10 billion in 2014-15, so we save money, there is more resource going into universities and, crucially, at the same time the money is accompanied by reform.
Mr Willetts
I give way to my hon. Friend the Member for Beverley and Holderness (Mr Stuart).
Mr Graham Stuart
Will my right hon. Friend nail the misinformation, peddled not least by Opposition Front Benchers, about the increase in fees putting people from lower-income backgrounds off going to university? The truth is that the payments per month will be lower under the new system, that those who earn lower amounts will pay less, that the new system is more progressive and that Opposition Front Benchers, who cry crocodile tears for caring about those from the lowest incomes having access to a university, are scaremongering and providing misinformation. Will he please put them right?
Mr Willetts
That was an excellent intervention. After this debate, I hope that Members on both sides will agree to commit ourselves to visit, between now and the summer, the secondary schools and colleges in our constituencies and explain to them that not a single young person is going to have to pay up front for their higher education. They will repay only if they are earning more than £21,000 a year and that means that their monthly repayments under our proposals will be lower than under the system we inherited from the previous Government.
Mr Willetts
I will accept the hon. Lady’s intervention, especially if she makes that commitment.
Dr Whiteford
Last month, the BBC published figures from the accountants Baker Tilly. They suggested that a student who borrowed £39,000 to complete their higher education would end up paying back something in the region of £83,000. What does the right hon. Gentleman make of those figures?
Mr Willetts
I am afraid that I do not recognise those specific figures. We are talking about a system whose powerful logic is simple—no student pays up front, a point that my hon. Friend the Member for Beverley and Holderness correctly made.
Mr Willetts
I need to make some progress because this is not simply a matter of finances, important though they are. It is essential that the measures be accompanied by reform. Above all, that means a focus on the quality of the teaching experience for students. Many students, and their parents, come away from university not convinced that they had the teaching that they needed during their time in higher education. The third challenge, therefore—as well as saving money for the public finances and ensuring that proper financing gets into our universities—is to focus on improving the quality of the teaching experience. We do not achieve that by—
Angela Smith (Penistone and Stocksbridge) (Lab)
Will the Minister give way?
Mr Willetts
I am responding to the point made by the hon. Member for Stoke-on-Trent Central (Tristram Hunt); it is an important stage in the argument. The money must be accompanied by reform that puts teaching up front and enables students, for the first time, to choose the course and university that they believe will best meet their needs. That is why the Secretary of State and I are absolutely committed to ensuring that it is easier for universities to escape from the shackles of the detailed quotas and restrictions set, university by university, in the system that we inherited from the previous Government. One of our highest priorities is to ensure that our reforms also improve the quality of the student experience. That will be at the heart of our White Paper.
Graham Stringer
Will the Minister explain how the quality of education will improve? Due to his miscalculations about the number of universities charging £9,000 and the structure of the students who will be going, there will be a huge deficit. That will lead to cuts in universities or in the number of students going to universities.
Mr Willetts
Let me deal briefly with that point. A fortnight ago, the Labour party was claiming that there was a £1 billion shortfall; last week, apparently, the shortfall was £450 million. We simply do not recognise those figures. We will see in autumn next year exactly what students are paying and how much they choose to borrow; they do not necessarily even need to borrow the full amount of fees that they face. That will be a decision for them. At that point, we will assess the financial situation that we face, but we see no reason to amend the broad estimate that we put before the House last autumn.
Angela Smith
Given what the Minister has just said, will he guarantee that there will be no cuts in quality or numbers in higher education?
Mr Willetts
We have a set of proposals that ensures that increasing resources will go to our universities, so, absolutely, I see no reason why quality should suffer. Indeed, I believe that as we liberalise the system in the way that the Secretary of State and I wish to, we will see improvements in the quality of the student experience. I do not see any need for a reduction in student numbers; on the figures that we have in front of us, I do not believe that that will be necessary.
I want to deal with another point made by Labour Members. There is so much confusion and misapprehension on their part that there is a large amount to sweep away.
Mr Willetts
I wanted to move on to the improvements that we have made to the Browne plan, but of course I give way to the shadow Minister.
Mr Willetts
We will obviously have to keep a very close eye on the situation. When one looks behind the headline figure of the £9,000 fee, there are so many waivers and special arrangements that the average fee will be significantly lower than that. Given the evidence that has so far come through, we do not recognise the so-called figures for fiscal black holes that are being perpetrated by Labour Members. I suggest that they calm down and wait until the autumn of 2012 when we see what students are actually paying in fees when they arrive at their universities.
Mr Thomas
The right hon. Gentleman was asked a very straight question—does he, or does he not, agree with his Secretary of State, who clearly threatened universities at the HEFCE conference with either further cuts in teaching grant or further cuts in student numbers? Does he agree with him—yes or no?
Mr Willetts
I am always in agreement with the Secretary of State. The position that he was describing related to options that would be necessary if the financial position was very different from the one that we estimated last autumn. On the basis of the evidence that we have, we do not believe that that will be the case.
Margot James
Does my right hon. Friend agree that university costs should be looked at very closely, just as with every other kind of public sector institution? Lord Browne found that the average fee was £6,000 if one took into account efficiencies that universities could make in relation to what would be the break-even point compared with what they currently enjoy in terms of funding.
Mr Willetts
My hon. Friend is absolutely right. We look forward to the report that Ian Diamond is preparing on precisely how we can improve efficiency in our universities.
Mr Willetts
No, I am going to make some progress because Members in all parts of the House wish to speak and I have a lot more ground to cover.
We have not only taken on Lord Browne’s proposals in the report commissioned by the previous Government as their way of reforming the finances of our education system, but tried to improve on those proposals. The crucial way in which we have done that is by improving the repayment terms for graduates. A very important feature of the new system is that instead of the repayment threshold of £15,000 that was left to us by the previous Government, we propose a threshold of £21,000. The only way in which people pay for higher education is as graduates repaying their loans, so the level of threshold and the amount of the repayment that they make is crucial. Under our scheme, a care worker graduating in 2016 with a £20,000 starting salary would repay nothing. Under Labour’s £15,000 repayment threshold, that care worker would have been repaying £37.50 a month. Under our scheme, an accountant graduating in 2016 with a £25,000 starting salary would repay £30 a month. If the repayment threshold had remained at £15,000, that accountant would have been repaying £75 a month.
The crucial figure that matters for young people thinking about the cost of their higher education is how much they will have to repay. Under our scheme, their monthly repayments will be significantly lower. That is why the Secretary of State and I are confident that these reforms are the right way forward and are genuinely progressive. We are discharging our obligation to future generations in exactly the way the shadow Secretary of State set out at the beginning of his speech. That is the crucial challenge and we believe that our reforms rise to it.
That is not just my view or that of the Secretary of State, but the view of bodies that have scrutinised our financing proposals. The Institute for Fiscal Studies said that
“the Government’s proposals are more progressive than the current system or that proposed by Lord Browne.”
The OECD endorsed the coalition’s policy:
“The increase in the tuition fee ceiling is reasonable and should pave the way for higher participation in tertiary education”.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Can the Minister quote any vice-chancellor of any reputable higher education institution in this country who has said that the Government’s record in their first year of office has been good for higher education in this country?
Mr Willetts
I have been at many events with university vice-chancellors at which they have all accepted that, given the circumstances that we inherited and faced with the policy options of reducing teaching grant, reducing student numbers or implementing Lord Browne’s proposed changes in student finance, we took the right decision. I am confident that we have improved on Lord Browne’s proposals by making the repayment threshold more progressive.
Let me quote someone who is not a vice-chancellor, but who is perhaps still treated with a degree of respect by some Opposition Members, namely Lord Mandelson. The new postscript to his excellent memoirs, which I commend to Opposition Members, states:
“When the university fee debate came up before the Lords, for example, there was a large part of me that felt I should weigh in.”
I am sure that there was. It goes on:
“It was I, after all, who had set up the Browne Review”—
the Labour party seems to have forgotten that—
“into what future changes were necessary to ensure proper funding for universities in the best and fairest way, for both them and their students. When I did so in November 2009 I assumed, as the Treasury did, that the outcome would have to include a significant increase in tuition fees. I felt that they would certainly have to double in order to offset the deficit-reduction measures that we too would have implemented had we won the election. The alternative would be a disastrous contraction of higher education.”
Those are the words of the previous Secretary of State, and I take them as an accurate account of what was in the minds of Labour Ministers when they set up the Browne review.
Andrew Bridgen
I remind the Minister of the words of Professor Steve Smith, the president of Universities UK, who said that the coalition Government’s higher education policies
“will bring in the resource needed to allow students to go to university regardless of their financial circumstances, provide financial sustainability for universities, and ensure that we can maintain the UK’s international competitiveness in terms of undergraduate education.”
Mr Willetts
Absolutely. That is the view of Universities UK, and, as I have explained to the House, it holds that view because in the difficult circumstances that we inherited from the previous Government, we have taken the correct strategic decisions.
I have set out our approach to higher education. What was striking in the speech of the shadow Secretary of State was the complete absence of how he believes higher education should be financed in tough times. What was particularly noticeable was the absence of any reference to what we understand to be the preferred policy of his party leader, namely a graduate tax. We are still waiting to see the move to the graduate tax, which we understand is now the view of the shadow Secretary of State. Of course, the last Labour Government produced a helpful document on the subject entitled, “Why not a Pure Graduate Tax?”, which sets out clearly some of the issues surrounding a graduate tax. We are still waiting to hear whether the shadow Secretary of State advocates it.
Of course, our proposals involve a capped graduate tax, which has a threshold of £21,000 and a rate of 9%, is linked to the university that one went to, and is extinguished when one has discharged the cost of one’s higher education. That is the right way of delivering a graduate tax to pay for higher education. I would be very interested to hear from the shadow Secretary of State whether he believes that that system should be improved in some way. Does he prefer a model of graduate tax with, perhaps, a lower threshold and a lower rate?
Lilian Greenwood (Nottingham South) (Lab)
Will the right hon. Gentleman give way?
Mr Willetts
No, I am going to make some progress on this important point.
Would the shadow Secretary of State prefer a model with a 3% tax for graduates? That is one possibility, but of course it would bring low earners into the burden of graduate tax, whereas they will be exempt from it under our proposals. It would have another significant defect, because whereas we can collect student fees from people across Europe, there is no way in which a graduate tax could be collected from a graduate who has been educated in Britain and then goes to live abroad.
Once again, the memoirs of Peter Mandelson are very clear on this point, and we now know where the Labour party’s policy comes from. He writes:
“To be fair to Ed”—
he is referring to the current Labour leader”—
“from his days in the Treasury when we were first introducing the top-up-fees scheme in government, he shared Gordon’s preference for an alternative graduate tax”.
So it was Gordon who wanted a graduate tax—that is where this bold, new Labour idea comes from. The memoirs continue that the current Labour leader held that view
“even when our research concluded that it was simply unworkable.”
That is what Peter Mandelson says. Labour’s research showed the defects of a graduate tax, and we are still waiting to hear from the shadow Secretary of State what his policy is on such a tax.
The position is clear: the Government have a plan for financing higher education in tough times. We are financing it in a way that continues healthy support for our universities and enables us to save funding for the Exchequer at the same time. We are doing that without any cuts to student numbers or to the teaching resources going to universities, without any burden on students when they are at university and while improving the regime for graduate repayments after they have left university. That is why our plan is realistic, sober, reformist and progressive. We believe it is the right way forward, and in the absence of any constructive proposals from the Labour party, we remain convinced that ours is the correct strategy.
Mr Wilson
Indeed I do agree with that. There are some fabulous FE colleges that could easily deliver high quality higher education degrees.
Thirdly, if we are to have a Treasury-imposed affordability limit on student numbers, we need to think more creatively about how we tease the best out of a more limited market system. As I have said, we need to encourage the best high-quality, sought-after courses that students actually want to take. We have to design a system that allows good universities with good courses to expand, and poorly performing universities with poor quality courses to decline, or at least take action to improve their offering.
Mr Willetts
My hon. Friend is focusing on the crucial issues of how we get more competition and choice into the system. I assure him that these are absolutely the issues that we will focus on in the White Paper.
Mr Wilson
I am grateful to my right hon. Friend for that reassurance.
Let me turn quickly to my other point about the Office for Fair Access. As Professor Eastwood rightly argued, more higher education places should mean more social mobility. Although I welcome any constructive suggestion to increase social mobility and opportunities in this country, I am concerned that a heavy-handed attempt to do so would risk another cornerstone of our university system, which is academic freedom.
In a commendable feature of the Higher Education Act 2004, OFFA was given a legal duty
“to protect academic freedom including, in particular, the freedom of institutions…to determine the criteria for the admission of students and apply those criteria in particular cases.”
The first guidance letter issued by the Labour Secretary of State in October 2004 confirmed that the Government’s priority was financial support for the poorest students, and noted that
“institutions that generally attract a narrower range of students may want to put more money into outreach activity to raise aspirations”.
The guidance also made it clear that institutions’ admissions policies and procedures were outside OFFA’s remit.
This Government’s new guidance to the director of fair access is much more aggressive, and I believe that it has clear and serious implications for universities’ admissions policies. It instructs OFFA that it
“will want to ensure that each institution is making sustained and meaningful progress towards a more balanced and representative student body, reflected year on year in its own benchmarks, measures and targets.”
Under the February 2011 guidance letter, if an institution is deemed to have seriously or wilfully breached its access agreement, OFFA can decide not to approve or renew the agreement. That would remove the institution’s right to charge its students above a basic fee level. I understand that a fine of up to £500,000 is also available.
The message to universities, via OFFA, appears to be that unless they make progress each year towards achieving a “more balanced and representative” student body, they can expect OFFA to set much more onerous obligations and require them to devote more of their resources to outreach and financial support. In addition, they could be fined. So, while the Opposition call for new powers for OFFA, will the Minister confirm that the Government remain committed to protecting the academic freedom of universities, and that they have no plans to interfere with university admissions policies through access agreements?
Mr Willetts
I can give that assurance. We have no plans to change the legal framework guaranteeing the freedom of universities to run their own admissions procedures.
Mr Wilson
I thank my right hon. Friend for that assurance, but the legal framework is slightly different from the access agreement. I do not have time to go into that now, however.
I agree with the Russell group when it argues that too few poorer pupils are getting the right grades and that the achievement gap according to socio-economic background is getting even wider. It also argues that the most effective way to get low income students into the best universities is to help them to improve their academic performance at an early stage. It is in the schools that we should be looking to change things, not in the universities. As I have said, I am passionately committed to raising aspirations and spreading opportunities more widely in our society, but it would be far better to tackle the real cause of unfair access to higher education—too few poorer children achieving the right grades at school—than to bring the Government into conflict with the legal duty to protect university independence and academic freedom.