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My Lords, I declare an interest as a former Independent Adjudicator for Higher Education and principal of St Anne’s. Let me say at the outset that our universities are a brilliant global asset and, in order to carry out the innovation and research that they do, they must be free to be elite and not be held back by manipulative regulation or excessive preferential diversity targets. In my maiden speech 20 years ago, I pointed out that it was taken as axiomatic that students see themselves as consumers, with rights and outcomes, mainly that higher education is mostly about higher earning power over a lifetime. I begged to differ.
I understand this quantifier now, because the burden of loan repayments is so heavy, but it remains true that HE is not simply about equipping students with skills for employment. It involves unmeasurable assets which add up to a public benefit: induction into citizenship, leadership and employment, instilling ambition and motivation, the ability to savour work and leisure, independence of thought, intelligence and intelligibility, having a stake in the future and control over one’s destiny, and an informed interest in politics. The difficulty in gaining employment is not a weakness of HE; it is the result of this Government’s own policies and the expectations of arguably too many graduates.
Studies show, none the less, that only 8% of graduates regret going to university, and far fewer of them are out of work than in the non-university population. The quantity of a graduate salary should not be taken as a marker of success. Counting success by salary level undervalues the public good of teaching, nursing, social work and the arts—traditionally not so well paid. I profoundly disagree with the ranking of subjects according to how much graduates will earn, with creative arts at the bottom of the table. Is it seriously considered that creative arts, one of the glories of our culture, are to be axed because students will, and they know it, be precarious wage earners?
In sum, the sector faces a significant funding and quality crisis. Without sustainable funding and the maintenance of the standards which have put Britain at the top of the international league, there will be closures, further reliance on international students, who may well find that what they came here for no longer exists, a revolt against fee paying and loans, and lower research input and success.
The Government’s 2025 White Paper, Post-16 Education and Skills, categorises courses rather than institutions. Noble Lords should also read the Policy Exchange report, Tarnished Towers. I propose fewer universities, with a type of return to the former division of universities and polytechnics, and a fee differential. As an aim, I suggest that outstanding quality and differential are to be valued, in contrast to the universality of admission and outcome grades that we have at the moment.
There are some lessons to be learned from Europe. There, lower-ranked universities supply teaching and training and make contracts with local industries. Nearly all have far fewer luxury facilities and buildings than British universities. The pay of staff and leaders in Europe is about one-third that of their UK counterparts and ranks with civil service pay. I urge emulation of the ratio of European university leaders’ salaries, where they earn no more than three or four times what ordinary lecturers get, whereas here it is 13 or 14 times more, a ratio that destroys loyalty and replaces it with distance.
In Europe, grants are more often for living costs than tuition. This is excellent because, as the Sutton Trust has shown, social mobility is achieved here by students leaving home to mix with others who have the same ambitions and where the course is the best in their subject, rather than having to stay at home and going to the local university. The White Paper is right to reintroduce maintenance.
Our great quality is under threat. This is due to the low admissions requirements, the inflated degree results and the lack of data about or requirement of student input. The proportion of Firsts, which is 30%, and 2.1s awarded by each institution should be capped. The National Student Survey asks detailed questions about the education provided to the students and their opinion of it. It asks nothing about how much work they do and whether they have done it as required and on time; in other words, they are treated as passive consumers. The OfS is right to consider the credibility of the inflation of Firsts and Seconds, which does nothing to help employment prospects and contributes to the number of students complaining to the authorities that they have not received the grade they thought they were buying or that they should have received, if their disabilities were taken into account.
The figures about entrants’ lack of qualifications are shocking. Some 8% of UK undergraduates starting in 2024 had no formal qualifications and 75,000 students did not have a single A-level. This lack is concentrated in certain universities, which, I suggest, are ripe for transition to distance learning and skills provision. Ravensbourne, Bath Spa and Leeds Trinity took in more than 60% of students without qualifications. I recommend national entry qualifications; I leave aside mature students. There is a decline in standards of admission and assessment for both undergraduate and master’s degrees in response to many universities’ dependence on foreign student fees and pressure to widen access and close performance gaps in favour of students from disadvantaged backgrounds.
Some universities should transition to being different, low-cost digital institutions, making use of AI learning or merging with further education institutions. This may make room for higher grants for higher-quality institutions. Places should be gradually reduced, student loans tailored, and foundation years and access schemes reviewed for their worth. The OfS has the power to downgrade—although I would not call it that—an institution, or the institution can change itself into a different one.
As the White Paper acknowledges, international students are as much a problem as a benefit. I have no doubt that international students who come here for graduate work are not a problem: they have already proved themselves and are likely to be funded by external sources and collaborating with established colleagues here. So I welcome the Government’s global talent fund. However, universities are far too dependent on international undergraduate student fees. If China, for example, were to reverse its policies—or, as is already happening, the Chinese student-age population reduces and China’s own universities are doing so well that they might even attract non-Chinese students—the financial consequences here would be clear.
It is time for our universities somehow to wean themselves off that reliance, not only for the reasons I have given but because of the integration problems. I know from my time dealing with complaints that some foreign students felt that they were cash cows. They were not given orientation, they clustered together, their English was not good enough, and they had visa and funding problems, and so it was difficult to integrate them into academic work for those reasons. International students have long been overrepresented as complainants to the Office of the Independent Adjudicator. It is also possible that the entry regulations are being abused by those who seek to remain here rather than study in the short term.
I agree with the Policy Exchange recommendation that there should be a cap of 30% foreign undergrad students at each institution. We have universities in the top 35 of the world league tables, and the European Union has none. It is also the case that this top quality brings many more foreign students here than British ones going abroad, where, in my experience, they were disappointed by the lack of pastoral care and face-to-face contact with lecturers. So I am wary about giving any loans to international students as the record of repayment is very bad. They should, of course, pay full fees. Now that Erasmus is being restored, the cost to our Government will increase, because it has always been the case that three times as many overseas students came here as ours who went abroad. The Government have proposed an international student levy, which seems a good idea. However, there are complex issues, given that the number is likely to reduce in any case, while the attractiveness of the UK will remain.
The loans system is a real blot on the landscape. The average student debt is over £47,000. Most graduates will never repay it in full—and if they do, it can take 31 years. Those fees are insufficient in any case. The balance is £492 billion, and less than one-third are likely to repay. The issue is the high levels of unemployment undermining the repayment aim. The scheme is complex and not at all understood by the teenagers who sign up to it without full knowledge or understanding. Unbelievably, they may end up paying more than they borrowed, over decades, with shifting rules. The interest rate is excessive. It pushes graduates into very high tax rates, and it is a regressive system. They see it as a tax on ambition. The way out for women is to get married right after university and not work.
I predict that the outstanding debts will have to be written off sooner or later. After weighing it all up, I have concluded that the way forward is indeed a graduate tax for several decades. It is relatively simpler and easier to understand, avoids huge debts and can be progressive. Still, we should await the report of the Treasury Committee inquiry into the scheme.
I cannot leave this topic without looking into freedom of speech, which lies, or should lie, at the heart of higher education. There was a fight for centuries over freedom of speech in all arenas—freedom from religious domination. Just as it seems to have been won, there have re-entered a new religious repression, gender issues and racism. Because of the misuse of human rights and loss of liberal leadership, respect for divergence, curiosity, courage and tolerance is vanishing. This is a serious rot at the heart of the system. Universities have failed to uphold free speech and have tolerated extremism and antisemitism—which I have spoken about many times here—as if they are frightened of their students’ excesses. The OfS must take this on if the vice-chancellors will not.
The Government have finally implemented the complaints process for freedom of speech complaints, as mandated in the Higher Education (Freedom of Speech) Act 2023 so long ago. The jurisdiction is rather awkwardly split between the OfS and the Office of the Independent Adjudicator. The latter can deal only with students, and then only after the university’s internal procedures have been exhausted. The OIA would look to see whether the university’s procedures have been followed, not at the substantive issue of whether freedom of speech was actually threatened and whether it was permissible. The Office for Students, on the other hand, will deal with academics, staff, external speakers and student unions, and has more substantive enforcement powers.
The danger with both is that they may be too slow. After all, if a free speech issue manifests itself in May, the students and others will be long gone by the time there is a decision, and the costs will be high. There is no mechanism for immediate injunctive relief so, unless university authorities show muscle, we can expect more of the crowd and intimidation tactics that stop a speaker in his or her tracks.
It is time for an overhaul, with fewer, more diversified universities, more skills and technical ones, and a lifelong learning entitlement, and of quality of admission and grades, with caps on numbers, with the courage to deliver quality and free speech and to tell the world about the public good that our excellent system delivers. Will the Minister push for fewer, recategorised universities; capping Firsts and Seconds; the National Student Survey asking students how much work they have done; a national entry qualification; and a cap, even on undergraduates? Will she reconsider a graduate tax to keep our system at the front of the world, as it has been for so long?
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My Lords, I am grateful to the noble Baroness for giving us the opportunity to reflect on the future affordability and quality of higher education in this country. Her interest in HE is of long standing, and I recall her very effective role as inaugural chair of the Office of the Independent Adjudicator for Higher Education.
I will not attempt to address some of the issues that the noble Baroness has raised, but I will address others. This House is well aware that there are real pressures on students, graduates and our universities. Funding has been eroded in real terms, costs have risen, and institutions are being asked to do more for more students with fewer resources.
However, let us be equally clear: this is not a system in decline; it is a system under strain, but one that remains one of the country’s greatest national assets. Our universities are engines of growth. They sit at the heart of the Government’s ambitions for productivity, innovation and regional development. From digital arts in Dundee to naval defence in Plymouth, from graphene in Manchester to advanced manufacturing in Sheffield, and from compound semiconductors in south Wales and the extraordinary film and television industry in Belfast, our universities create opportunity.
In all parts of the UK, universities are doing much more than educating the next generation workforce. They are at the heart of industry clusters; they drive inward investment in towns and cities all over the country; they generate jobs; they spin out companies; and they work with public sector organisations in deep partnerships. Our universities have faults and there are real problems, to which I shall return, but they should not dominate our understanding of a sector which remains, in my view, one of the best reasons to be optimistic about the future of our country. That is why it is so important that this House pays attention to the challenges and is honest about the problems. We must encourage government and the universities themselves towards renewal in the national interest.
I have been pleased to see that Universities UK recognises this need. Following on from the work of its blueprint, published two year ago, Universities UK has now embarked on a programme of work that it is calling “future universities”. It is asking how the university system needs to change and adapt to deliver what the nation needs in the next decades. As a former chief executive of Universities UK, I am pleased to say that it is not afraid of criticism but is thinking hard about how the system can respond to it.
The sector has certainly widened opportunity. Over recent years, more students from disadvantaged backgrounds have entered higher education than ever before. Sutton Trust research shows that
“around two-thirds of upward mobility among people from non-graduate families is accounted for by higher education”.
The Government are right to want to continue to expand and widen participation, because access remains unequal. Higher education transforms lives. We see it in institutions such as Teesside University, which is supporting students from non-traditional backgrounds into high-skilled employment. We see it in the work done by the Open University, whose data shows that higher education study reduces prisoner reoffending by 22%.
Value, as the noble Baroness, Lady Deech, said, is not just about earnings. We know that graduates are more likely to be in work and less likely to be unemployed. On average, they enjoy better health, and graduate parents have a positive impact on the educational outcomes of their children. A newly qualified nurse from the University of Birmingham, a teacher from the University of Cumbria and a social worker from Cardiff University may not enjoy high salaries, but surely we value them. These are the professions on which our public services depend, and they are sustained by our universities and students who choose careers that allow them to contribute to society in a variety of ways.
The Office for Students has an important job to do in safeguarding the reputation of this country for high quality. The sector should be, and is being, held to account. There is very little understanding of the processes that universities use to uphold quality, from the way they design and validate programmes to the sector-wide structures that ensure consistency. They are not understood and may not be fit for the age we live in. The Quality Assurance Agency for Higher Education, once a globally recognised mark of the trust that you can place in our universities, now has a marginal role in England, although things are different in Scotland and Wales.
No one, not even the most ardent supporter of university expansion, would argue that there should not be high-quality alternatives to university education, but improving one should not come at the expense of the other. I strongly believe that those who believe that we have gone too far in the expansion of universities are wrong. We cannot win in a global economic competition by decreasing our ambition and aspiration.
High-quality provision depends on a sustainable financial system, and here we come to the central challenge. The real value of domestic tuition fees has declined sharply over the past decade. Scottish universities received about £2,000 less per student than those in England. The gap between the cost of teaching a vet and the money an English university receives to provide an education is about £10,000 per student per year. The Westminster Government are about to hand another cut to English universities through cuts to the strategic priorities grant. Despite having made the commitment to ongoing increases in the undergraduate fee, which is a good and brave move, the financial position of the sector is getting worse due to tighter immigration requirements and decisions such as the introduction of the international levy. Institutions have responded with innovation and efficiency, but there are limits. We cannot continue to expect world-class teaching, research and student support on a diminishing resource basis.
Finally, we have to resist false choices. This is not a question of universities or skills, or of academic or technical education; we need both. Without underestimating the need for change and the improvements that need to be made, let us be confident in what we have: a system that is of high quality, is globally respected, changes lives and drives growth. At a time of global competition and economic uncertainty, to weaken our universities would not simply be short-sighted; it would be an act of profound self-harm.
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My Lords, I congratulate the noble Baroness, Lady Deech, on calling the debate. I declare my interest as a visiting professor at King’s College London and as a director of Thames Holdings. It would be in the spirit of an education debate to have some set texts. I have two set texts, although I am afraid that they are rather heavily oriented to economics. I should therefore apologise straightaway to the noble Baroness, because she made some very important points.
I am thinking of the Policy Exchange paper for which the noble Baroness wrote the foreword, as well as the very recent report from the Institute for Fiscal Studies on graduate earnings. It is worth focusing on these two documents, because they have very different accounts of what is going on. In the words of the Policy Exchange paper,
“the graduate … premium has plummeted”.
Those are its words and that is a widespread narrative in the media.
The IFS finds no such effect. In its words,
“average net returns … are large”—
and by “large” it means really large. After discounting lifetime earnings at a rate of inflation plus 3%--which is a very high rate that people object to when it is applied to student loans, but the IFS applies it to earnings—you find it is £290,000 extra earnings for a woman and £370,000 of extra earnings for a man over their lives. After you then allow for tax and loan repayments and make some rather heroic calculations about the counterfactual—what someone like that would have achieved by earnings had they not gone to university—even after all those deductions and the very high discount rate, you get a £90,000 gain for women and a £109,000 gain for men. The Government gain too. They are a net beneficiary through the repayments of loans and through the higher taxes paid by people with higher earnings, of £48,000 for women and £107,000 for men.
Unless there is to be a challenge on a comparable methodology—I have to say that the Policy Exchange methodology is not comparable; it takes the national living wage at an hourly rate, multiplies it by 40 in 2026 and compares it with graduate earnings in 2022, including part-time earnings—I think we have to take the IFS assessment as the authoritative assessment unless there is overwhelming evidence to the contrary.
This matters for the policy debate. The noble Baroness, Lady Deech, expressed concern about people with lower qualifications going to university. The IFS has looked at the outcomes for the 30% of students with the lowest prior attainment, and 85% of women and 60% of men are better off as a result of going to university. The evidence, not just in Britain but in other advanced western countries, is that if you take the marginal students—the people who just got in and who have particularly low attainments—and compare them with people just like them who did not go to university, you find a significant benefit from going into university.
However, behind this—behind these averages—on the IFS figures, after all the allowances, there are indeed 20% of men and 30% of women who are worse off, and they are concentrated in the performing arts and languages. That is why I, as the Minister, personally fought long and hard to make this evidence available and to get HMRC to agree that it would make its evidence available so it could be linked with educational data and these calculations would be possible.
However, I occasionally feel like the sorcerer’s apprentice at what has been unleashed, because the noble Baroness is right. This is useful information, it is the kind of information that prospective students should have, and indeed, the IFS research shows it is having an effect: a decline in participation in some of those courses, and an increase in participation in, say, STEM courses, which do better on these earnings measures. But that is supposed to be a useful tool; it should not be the be-all and end-all of the debate about higher education, because then the higher education debate looks appallingly different from at all other stages. On schools, we talk about teaching quality. The only thing we seem to be able to talk about and regard as a measure of quality is earnings, whereas the noble Baroness is right: there is more to higher education than that.
Nevertheless, it is the case that both the Government and the Opposition want to use this evidence to decide which departments, courses and universities they should close. So, they owe us an account of exactly how they are going to use this data, how they are going to interpret it, and what decisions are going to be taken.
For a start, the Government have said that they want fewer people to go on these courses and more to go on apprenticeships. As a minimum, analysis along the lines of that from the IFS should surely also be applied to apprenticeships. We need to compare like with like and, although there are some useful assessments of apprenticeships, they do not have anything like the rigour of this IFS analysis. Will the Minister commit today to apply this analysis to other forms of education and training as well?
Can we also know exactly how granular the information is? The IFS material is not the basis for deciding on an individual course at an individual university. Is that to happen and, if so, on the basis of what information? How up to date will that information be? There is a real dilemma here: the evidence in the IFS assessment is for people who did their GCSEs in the year 2002; is that to be the basis of a decision? If the students are more recent, how can we effectively forecast their lifelong earnings? There are important questions here and I very much look forward to the Minister’s reply, when I hope she addresses them.
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My Lords, I too am grateful to the noble Baroness, Lady Deech, for initiating this debate. It is good to have the opportunity to contribute to thinking about the future affordability and quality of higher education. I do so as the Bishop of Leicester, but also with a close interest in the Cathedrals Group of Universities—14 universities whose distinctive history and mission speak directly to the themes before us: public service, social inclusion and the flourishing of local communities.
At its best, higher education is not simply an individual good but a common good. It forms professionals, nurtures civic responsibility and strengthens the social fabric of our nation. Many institutions across our system, including those in the cathedrals group, exemplify this tradition, with roots in civic purpose and long-standing commitment to education as a vehicle for service inclusion and human flourishing.
Historically, a number of these institutions were founded to train teachers for communities experiencing deprivation. That purpose continues to shape their work today: they now educate not only teachers but nurses, social workers, physiotherapists and paramedics—often in close partnership with schools, multi-academy trusts and health bodies. In my own diocese of Leicester, we see clearly how vital this local and regional role is. Our universities—that of Leicester, De Montford and Loughborough—are deeply embedded in place. They help to sustain public services, provide pathways for local people and act as anchors of opportunity within diverse communities.
This brings me to the importance of widening participation. This is not simply about entry into higher education but about ensuring success beyond it. It therefore requires sustained engagement, starting in schools, continuing through further education and extending into higher education and beyond. In many parts of the country, including areas of Leicester and beyond, the challenge is not only individual disadvantage but structural fragmentation. Too often, the system can feel disjointed, with schools, FE colleges and universities operating under different pressures, incentives and expectations. If we are serious about both quality and affordability, we must also be serious about coherence.
I argue that we need a more joined-up approach across the whole education sector, one that recognises the vital role of further education alongside higher education and the importance of strong, sustained partnerships with schools. A flourishing system is one in which learners can move with confidence along clear and supported pathways, whether academic, technical or vocational. Higher education institutions have a key role to play in this, but they cannot do it alone, particularly in the face of growing financial pressures.
Among these pressures are externally determined and potentially volatile costs, which continue to constrain universities’ ability to sustain the very activities we value most. One example is the increasing costs of pensions across the sector. The teachers’ pension scheme, in particular, has placed significant strain on university finances in recent years, with employer contributions at high levels. While a reduction is anticipated in 2027, this will not resolve the underlying challenge. The point is not to weaken pensions but to ensure that institutions have sufficient flexibility to manage these costs without undermining their broader mission. Without that flexibility, rising costs inevitably place pressure on staffing, investment and the range and quality of provision offered to students.
There is a moral dimension within all of this. If universities are less able to invest in partnerships with schools and further education, or to sustain provision in key professional areas such as supporting social good, the consequences will be felt not only in higher education but across our schools, our health service and our communities. If we fail to build a more coherent system linking schools—both FE and HE—into one flourishing system, then we risk leaving too many learners without clear and supported routes to flourishing.
I therefore urge the Government to take a broad and integrated view of higher education sustainability. Yes, we must consider funding levels and student experience. Yes, we must safeguard equality. But we must also address the structural pressures that sit beneath these debates, and we must strengthen the relationships across the whole education system. Universities know that they need to adapt and continually iterate their offer for a changing world. In order for this to be possible, greater flexibility for institutions and a stronger emphasis on partnership will be essential.
The universities of the Cathedrals Group remind us that higher education is not only an economic endeavour—