My Lords, I declare a previous interest in that some time ago I worked in what is now Edinburgh Napier University. My wife is a governor of a university in London and I have two children, believe it or not, currently studying at British universities and one who graduated two years ago.
The Higher Education (Basic Amount) (England) Regulations 2016 and the Higher Education (Higher Amount) (England) Regulations 2016 set variable limits on the maximum fees that publicly funded English higher education institutions can charge students. They are negative instruments and the time for praying against them has long passed. However, in its 21st report, the Secondary Legislation Scrutiny Committee drew these instruments to the special attention of the House,
“on the ground that they give rise to issues of public policy likely to be of interest to the House”.
I am taking up that challenge. Despite the fact that we spent something like four months looking at the Higher Education and Research Bill, I still hope to engage the interests of Members of your Lordships’ House.
I am going to argue that the neoliberal marketisation of our higher education system is wrong in principle, because higher education is not a market; that it loads students with personal debt; that it will not improve opportunities to study for young people from disadvantaged and low-income backgrounds, mature students and those who wish to undertake part-time courses; and that linking fee rises, thereby increasing the personal debt of students, to only one of the attributes of a good university is a mistake. I will end by arguing that the cost of these polices to the public purse is now so complex and uncertain that it is virtually impossible to challenge what the Government are doing: we need more and more regular information and I call on the Government to provide it.
I went to university in the 1960s: my fees were paid by the state and I received a full maintenance grant. I would not, and indeed could not, have gone to university without that support, and I am sure my life would have been very different had I not had those chances. Education has been, and always will be, an important ladder out of social disadvantage.
In the period since 2012, our higher education system has been transformed. The tripling of fees, the introduction of income-contingent tax liabilities—loans in common parlance—and the ending of maintenance grants were described as market-driven, aimed at putting students at the heart of the system. According to classical economic theory, those 2012 reforms, with their direct grant payments to institutions, and fixed undergraduate recruitment caps replaced by a voucher system financed by loans, should have improved student choice as the money followed the applicant. Good institutions would expand to meet demand and those that struggled to recruit would have to either up their game or exit the market.
But have these reforms actually achieved what they set out to do, and has it been for the good? According to the IFS think tank, we have students leaving university with personal debts of around £53,000 for a three-year course. A large majority will not repay their loans in full. We have the most expensive courses in the world, and there has been a complete collapse in part-time provision, mature students have all but disappeared, and there is a dearth of home-based postgraduate students.
Even if the reformers of 2012 were right to bring competition into the sector, it was hardly a resounding success. First, all institutions gravitated to the highest possible fee—then £9,000. Those that did not were regarded as inferior, so that in truth all that was created was a monopsony: a rigged market where prices are set by producers. Secondly, the undergraduate tuition fee is not a price. As 90% of eligible students take out a loan to fully cover tuition fees, the cost of the degree is actually determined by the loan repayments made, not the amount borrowed, and this can vary widely. Somebody who never earns more than the repayment threshold pays nothing, and very high earners have to repay it all. The price signal is determined primarily by future income, not graduating debt. It is smoke and mirrors. That is why the expert commentator in this policy area, Andrew McGettigan, argues that,
“the tuition fee cannot signal as a price should in a perfectly competitive market”.
At this point, in my view, Ministers should surely have given up the experiment in neoliberalism. Instead, they have decided—and brought forward in the current Bill—that what was missing from the 2012 reforms was better information and a thorough shake-up of the system by stimulating an influx of challenger institutions. One cannot argue against changes that improve information, but it has to be high-quality. The current proposal for a teaching excellence framework to provide the market with a proxy indication of teaching excellence in each HE provider is, to my mind, hopelessly flawed.
There is widespread agreement on the need to ensure teaching of the highest quality in our higher education system. Indeed, students paying £9,000 or more a year are surely entitled to expect a consistently high quality of teaching, wherever they undertake their degree. But there are, I suggest, four main practical reasons why the Government’s present approach is wrong.
First, the TEF is not ready. There is not yet a settled methodology, no agreement on the metrics to be used, and no agreement on the balance between the metrics and provider submissions. We are clearly some way off where we need to be on even the basic wiring. Secondly, currently the TEF rating will relate to the university and not to the subject or course. We will not see subject-level ratings until 2020, and even that may be an ambitious target. Thirdly, the customers who are supposed to be benefiting from this behemoth—the students—are vehemently against the proposal. Fourthly, universities are not just teaching machines, and linking fee rises to a faux framework which does not even address teaching in the classroom is to diminish the regard we should have also to scholarship and research excellence, engagement with wider society, and the dissemination and application of knowledge. A good university should be judged across all its missions.
However, there are also principled reasons why the current TEF proposals should be abandoned. As the noble Lord, Lord Sutherland, who created Ofsted, said at Second Reading of the Higher Education and Research Bill, it is simply not possible to devise a robust and sustainable scheme of evaluating teaching excellence if it does not start in the lecture theatre or classroom. Any scheme that relies on second-order metrics is simply not fit for purpose. Any scheme to measure teaching excellence, particularly if it is to operate at course or class level, surely has to be based wholly or mainly on the systems already in place in higher education providers which ensure that the courses offered are taught to a high standard. Most current HE providers of high standing already have such systems in place. Why duplicate them?
Surely the better way is to build trust and co-operation with the institutions themselves to get this right, subject only to a proportionate and risk-based assessment procedure. Assessing that good-quality teaching exists is one thing, but a system of rating universities gold, silver or bronze with the flawed TEF will jeopardise the excellent international reputation of British higher education, which does so much to attract overseas students and extend British influence and soft power abroad. Why rush to introduce an untested system, which will create the impression that some universities are failing when they are not?
We must not forget that there is a huge downside at a personal level. Students who get a bad deal from a course or institution have very limited abilities at present to revisit their choices. They even seem to have their own initiatives penalised by the current system, which does not support transfers or credit accumulation —although I hope that that will change. In any case, caveat emptor is surely not the responsible policy for higher education, which is still the main ladder for those striving to escape from social disadvantage. I conclude that these latest market reform measures will not provide the sustainable HE sector that this country will need in the medium term, let alone in the long run.
The SIs before us change the system of inflationary fee increases, which have been in place since 2004, to one which ties the fee level that may be charged to an assessment of teaching excellence in the sector. According to the Secondary Legislation Scrutiny Committee, the department’s assessment is that the potential increase in fees will not be significant enough to alter participation decisions by prospective students. However, at the same time as laying these regulations, the DfE published an equality analysis covering detailed changes to maximum fee caps for 2017-18 and their impact on protected and disadvantaged groups of students. It is a good report. In its EA, the DfE accepts that one impact will be an increase in student loan debts. However, it also accepts that the current evidence suggests that students from ethnic minorities, less advantaged backgrounds and mature students are more debt averse and cost sensitive than the others. But are these not the very groups that we want to attract?
The committee rightly asked the DfE to comment on this astonishing admission. The department’s response includes a statement acknowledging that there is still much to do. It says that,
“Young people from disadvantaged backgrounds are still much less likely to go to university than their more affluent peers”.
Am I alone in finding that comment deeply troubling?
Where are the policies to reinvigorate part-time provision? The collapse in enrolments at Birkbeck, University of London and the Open University coincided with the hike in course fees and the introduction of maintenance loans. No real change in approach is signalled in the higher education Bill or in the Technical and Further Education Bill, which passed through this House yesterday. There are plenty of good ideas out there. It is a pity that suggestions such as have been made for a specialist advice and admissions service for lifelong learning courses, similar to UCAS, the creation of a community learning centre in every major city and the reintroduction of individual learning accounts to support flexible learning throughout life have not been given more consideration in either of those Bills. So we have a policy approach which will not work: a system of fee increases, and thereby personal borrowing increases, which will not enhance social mobility or improve part-time provision.
What about the impact on students themselves? In Budget 2015, the Government confirmed that they would freeze the loan repayment threshold for five years and lower the official financial reporting discount rate for loans from RPI plus 2.2% to RPI plus 0.7%. Those of your Lordships who are not numerate in economics or in the detailed and sophisticated analysis of interest rates may wish to drift out for the next few minutes because this is quite technical—I did not say leave, as noble Lords would miss what might be my last speech from the Front Bench, which would be terribly upsetting. I play all the plugs when I need the support.
On the question of abolishing maintenance grants, the IFS said:
“The poorest 40% of students going to university in England will now graduate with debts of up to £53,000 from a three-year course”,
which is up from £40,500. It also points out that high earners coming from poorer backgrounds will now repay for longer,
“with the average individual contributing an extra £9,000 towards the cost of their degree”,
in net present value terms. The IFS concluded that freezing the repayment threshold for five years means that graduates would see their repayments increase by £3,800, on average, and that a median lifetime earner would see an increase in repayments of £6,000. For those who started between 2012 and 2015, this represents a sizeable retrospective price hike on what they were promised before signing up to their loan agreement. That is bad enough but, as the IFS points out, compared to the 2012 reforms the 2015 measures are regressive. They affect those coming from the poorest backgrounds adversely and affect median earners the hardest.
Finally, in some ways the most worrying thing of all is the huge uncovered gap in public finances which this system is creating, although I fully admit that it is very hard to untangle the figures as so little is published on this issue. According to a recent report of the Education Policy Institute:
“The contribution of student loans to net government debt is forecast to rise from around 4 per cent of GDP today to over 11 per cent in the 2040s”.
There are some published figures about the value of the student loan book, which the Government are trying to sell. At the end of March 2015, existing student loans had a face value of £64 billion—what was nominally owed to the Government—and were expected to generate repayments equivalent to only £42 billion in net present value terms. Who is covering that gap? Where is it held in the government accounts? Have the figures been audited? To which department are all these debts being booked?
By the end of March 2016, following changes in the discount rate, which have been described by some commentators as window dressing for the purposes of the sale of the loan book, the face value of the book had increased to £76 billion, with a fair value of £57 billion. There is still a stonking great £19 billion gap which has to be financed, presumably on the market.
If noble Lords do not follow the maths here, I can sympathise. We are trying to understand a system that requires long-range forecasts, upwards of 30 years, of complex issues including: estimates of gross and average salary levels; emigration; morbidity; and likely future participation in the workforce. These are mind-bendingly difficult to model, let alone to comprehend, even if we could see all the figures.
The issue is that we are kept totally in the dark. The only thing I have been able to find on this issue is figures in the BEIS accounts, which are a year late—that is no criticism, it is just that they are published a year behind. They report that the official RAB estimate for new loans issued is 23%, down from more than 40%, which was the original estimate, but that the Treasury has set a target RAB of 28%, which is plus 5%, although it is down from 35% in the forward plan, which mainly reflects the rebasing of the discount rate change. What does that actually mean in plain English?
This is not good enough. This is why my Motion calls on Her Majesty’s Government to report annually to Parliament on the impact on the economy of the increasing quantum of graduate debt and asks them to provide estimates of payback rates and an estimate of the annual cost to the Exchequer of the present system. It is not a lot to ask, and it is a no-brainer if the Government want to convince us that they are on the right track. I beg to move.