My Lords, we are dealing with a world where the giants of China and India are surging ahead. How will a tiny country like ours compete? I have built a business from scratch and I have always tried to focus on core competences and unique selling propositions. Even when I have nearly lost everything on three occasions, when you have had to cut costs to survive and adapt or die, the one thing you never cut is your core competence because that is what enables you to survive, grow and compete. One of the utmost core competences of the United Kingdom, the jewel in our crown, is our higher education system. As we have just heard, on any ranking we have four out of the top 10 universities in the world-after the United States we are No. 1-including Oxford and Cambridge. We have ancient universities and modern universities. I was chancellor of Thames Valley University for five years and proud of it. It is now the University of West London. At the other end of the spectrum, I hold four positions at Cambridge, my old university. We are to elect a new chancellor this weekend.
I thank the noble Lord, Lord Giddens, for initiating this debate. I agree with a lot of what he said and will reinforce it. This Government's decision to cut public expenditure is absolutely right. It has been far too high, approaching 50 per cent of GDP.
It is cutting away at the Government's call for us all to be in this together. The Government are using a broad-brush approach to cutting expenditure when they should be much more selective. Why did they have to cut university teaching funding by 80 per cent? Why, as a result, did they have to force student fees to increase nearly threefold to £9,000? The average fee is going to be £8,200. The Government's higher education White Paper, Students at the Heart of the System and the review of my noble friend Lord Browne on higher education funding are all very well. My noble friend produced an excellent report, but he was conned. That report was used by the Government as a way of cutting higher education funding, as a result forcing the fees to go up by nearly three times.
There is a basic misunderstanding about the starting point, which is that we as a country spend between 1.2 per cent and 1.3 per cent of our GDP on higher education, while the United States spends 3 per cent. The OECD average is 1.5 per cent and within the United States, as we have heard, public spending is more than 1 per cent. So we should not have cut higher education spending, we should have maintained it, increasing and encouraging more funding from student fees, philanthropy and the private sector. That is what we have not done.
Universities generate £60 billion of revenue, £12.5 billion from foreign students. This is phenomenal. They employ 700,000 people, a workforce that benefits the whole country. It is wrong to say that the public who do not go to university should not pay for those who do go. Those who leave university benefit the whole country and its competitiveness. What the White Paper completely neglected was postgraduate studies, Masters and PhD research. The Government have frozen funding. They have not cut it, although they have done so in real terms. We spend 1.7 per cent of our GDP on research, while the United States spends 2.7 per cent. How can we compete and continue to punch above our weight when this is the situation?
Students will leave higher education with loans repayable over 30 years. It is a noose around their necks. Is this the way to encourage wider access? Is it not going to deter students going to university, particularly as we have heard, those from poor backgrounds? Also, what about the burden of these loans on the Exchequer? Many indications say that the taxpayer would have been better off by keeping funding for university teaching and not providing long-term loans, which are expensive.
We are letting down our universities and the Immigration Rules do not help. I sit on the advisory board of Cranfield School of Management, where I am an alumnus, and we have noticed a drop in foreign students, particularly those from India. Anecdotally we hear comments from students from India, asking: "Does Britain want us any more?". Do we not want to attract the brightest and the best from the world? As the noble Lord, Lord Giddens, said, there is far more to it than the fees that foreign students bring in. There is also the soft power and the generational links. My grandfather came to university in this country. My mother did and so did I and that will carry on for generations to come.
What about philanthropy? At Cambridge, to celebrate our 800th anniversary, we raised £1 billion. That is what we can do. What about access? Thames Valley University has so many part-time students, and I am delighted that there is to be funding of part-time students. It is wonderful news and I congratulate the Government. The Open University has been doing great work in this area for years.
We are being penny wise and pound foolish, trying to save £2 billion in teaching funding when the cost of running the Department for Work and Pensions, whose expenditure is £200 billion a year, is also £2 billion. I was privileged to write the foreword to Big Ideas for the Future, published by Universities UK and Research Councils UK. This is a publication of more than 200 world-changing research initiatives coming out of our universities, in health, humanities, business, high-tech, energy, food and drink. These are transforming this country and the world. This is what our universities produce and they enable us to be the best in the world: in high value-added manufacturing, engineering, design and creativity. These are the things that put the "great" into Great Britain and come from the foundation of our universities. By cutting university funding and deterring access to universities, we are shooting ourselves in the foot.
What about this ivory-tower mentality of trying to create a market? Who are the Government trying to fool? What nonsense is this? We need a balanced education in humanities, science and the arts and in every way. If we are to provide a balanced higher education, we need a balanced economy and society.
We are tampering with something very precious and I urge the Government to reconsider what they have done, not just in the interests of our students, nor of our universities, but in the best interests of this country to enable us to compete in the future.