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What the two amendments have in common is that they would have an impact on the funding delivered to higher education. I hardly need to remind the House that providing HE institutions with a sustained income stream to address the funding gap in higher education is one of the principal reasons why we have introduced variable fees with a cap of £3,000 to replace the current system of fixed up-front fees of about £1,000. The Government believe that we should give universities greater freedom and flexibility to charge fees within the prescribed limits. The Lords amendments are an odd combination, professing to understand the value of additional fees income to universities on the one hand while taking a substantial chunk of that money away with the other.
Lords amendment No. 2 would not only stop universities charging higher fees, but abolish all fees after the third year. Not only would it remove the universities' ability to increase fees in the fourth year and beyond but it would take away the fees that they already receive in that period, which raises questions about whether universities would want to continue to run longer courses. They might prefer to close those courses rather than run them without fees. Key courses to be affected include medicine, dentistry, veterinary science, architecture, engineering, modern language courses in which students spend a year abroad, and sandwich courses in which students spend a year working in industry. All those courses are strategically important for the country.
Abolishing fees beyond the third year would be a major disincentive to universities to offer those long courses. The other place hoped that the amendment accepted on Report would protect such courses, but in fact it would jeopardise them. Third Reading was interesting because it demonstrated that their lordships realised what they had done and were concerned about it. A parallel amendment that would have had the same effect in Wales, for instance, was not pressed to a vote, demonstrating the inconsistency of their actions. An amendment seeking to make the Secretary of State pay for the costs was defeated because it was accepted that there is only one pot of money and, come what may, the higher education sector would end up paying for that ill-considered proposal.
As for costs, it is difficult to be precise because fees are variable and we do not know yet what universities will charge, but we estimate that Lords amendment No. 2 would cost universities £130 million to £180 million a year, depending on the level of fees charged and the proportion of students on longer courses. As hon. Members will know, we have asked Sir Alan Langlands to conduct a review, "Gateways into the Professions", which will look at the relevant disciplines. Under the amendment, however, his work would be made much harder, with institutions closing such courses before the review was complete.