Education: Treating Students Fairly (Economic Affairs Committee Report) - Motion to Take Note

– in the House of Lords at 3:37 pm on 16th January 2019.

Alert me about debates like this

Moved by Lord Forsyth of Drumlean

To move that this House takes note of the Report from the Economic Affairs Committee Treating Students Fairly: The Economics of Post-School Education (2nd Report, HL Paper 139).

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Chair, Economic Affairs Committee, Chair, Finance Bill Sub-Committee

My Lords, it is a pleasure for me to introduce the report of the Economic Affairs Committee, Treating Students Fairly: The Economics of Post-school Education. The Committee set ourselves the following exam question: “Is the current structure of post-school education and training, and the way it is financed, appropriate for the modern British economy?” I fear that our short answer was, “Absolutely not”.

Before I explain our conclusions, I would like to thank our excellent specialist advisers for the inquiry, Professors Nick Barr and Andy Westwood, and the committee staff who produced the report, Ali Day, Ben McNamee and Ayeesha Waller. I have been told that I can speak for 20 minutes but everyone else can speak for only five. This is ridiculous and therefore I intend to keep my remarks rather shorter so that my colleagues can speak for longer, although of course I recognise that the five minutes is only advisory. My fellow members of the committee will take up some of the points I will not cover: my noble friend Lady Harding and the noble Lord, Lord Sharkey, will discuss our findings on part-time education, flexible learning, apprenticeships and maintenance support.

Tony Blair announced in 1999 that he wanted 50% of young people to go into higher education. That has been achieved, but it was achieved almost entirely from more students enrolling on to full-time undergraduate degree programmes—indeed, “higher education” is now synonymous with universities. Higher education is, however, much broader than the three or four-year undergraduate degree. There are thousands of technical and vocational qualifications which can be studied in a variety of higher education institutions and further education colleges, either full-time, part-time or as part of an apprenticeship.

The number of first-time undergraduate degrees awarded in the UK increased from 369,000 to 414,000 between 2010-11 and 2016-17. Over the same period, the number of other undergraduate qualifications at level 4 nearly halved—from 141,000 to 77,000. The number of vocational qualifications at level 4 was virtually unchanged at 130,000 to 134,000.

The crucial question to ask is: has this been in the best interests of students? Our evidence suggested that there is a shortage of workers with technical qualifications, but lots of graduates doing jobs in which their learning has no application. The evidence for this is set out in chapter 2 of our report, from which I will take two examples. The National Audit Office published a report on STEM skills last year, which found an acute shortage of people with vocational qualifications of levels 3 to 5, and an oversupply of people with STEM qualifications at degree level. Estimates of the proportion of graduates currently employed in non-graduate level jobs vary from 25% to 50%.

Some current graduates would undoubtedly have been better off with a technical or vocational qualification, relevant to the workplace, which would have helped them secure a more satisfying job and left them saddled with considerably less student debt. But if that is the case, why in the field of higher education has the undergraduate degree become almost the only game in town?

We put forward a number of reasons. For example, other qualifications are perceived as inferior by students and parents. This is not much helped by schools, which are incentivised to push students towards sixth form and university. In particular, an apprenticeship should be viewed by young people and society as just as valid as the academic route. The Government admitted in their response to our report that more could be done in schools to improve information on post-18 options—I pay tribute to my noble friend Lord Baker for the wonderful work he has done in encouraging vocational and technical education in our schools. Employers are increasingly requiring applicants to hold degrees regardless of the level of skill the job requires.

We believe the main reason comes down to one thing—funding, and, in particular, the funding reforms for higher education that the coalition Government enacted in 2012. Tuition fees rose from £3,000 a year to a basic level of £6,000 a year, with institutions able to charge up to £9,000 a year if they agreed to widen access. Before the reforms, the income of the universities was split roughly half and half between tuition fees and government grant, whereas now the vast majority of university income is from the higher tuition fees. Given that funding therefore follows the student, it is unsurprising that almost all the institutions are charging the maximum permissible amount, which is now £9,250. This does not look like the competitive market the Government said would result from the reforms. The reforms, together with the removal of the cap on undergraduate numbers in 2015-16, have incentivised universities to recruit as many students as possible onto the most expensive undergraduate programmes.

These incentives may explain an area where there does appear to have been competition, albeit unwelcome competition: grade inflation. The Office for Students published a report last month which showed that, in 2016-17, 105 out of 148 institutions had an unexplained increase in the number of first-class degrees they had awarded, relative to expected performance across the sector from 2010-11. In 2016-17, 26% of students received a first-class degree, up from 18% in 2012-13. To take one example—there are many of them—the University of Surrey awarded half of its English-domiciled students a first-class degree in 2016-17, up from 23% in 2010-11.

The committee was not, however, convinced that a more competitive market was the only intention behind the 2012 funding reforms. We believe the changes were motivated mainly by a desire to reduce the deficit. Tuition fees are paid through student loans. Expenditure on student loans does not count as current government spend in the national accounts, unlike the teaching grant, which does. This difference in the accounting treatment meant that George Osborne was able to perform the most extraordinary magic trick, appearing to increase spending by £3 billion in 2012-13, compared to 2011-12, while reducing the deficit by £3.8 billion at the same time as the proportion of funding from tuition fees increased.

This sleight of hand—for that is what it was—was possible despite the fact that a large proportion of student loans will not be paid back. The Institute for Fiscal Studies estimated that around half of the value of student loans issued in 2017-18—around £8 billion—would eventually be written off. These write-offs will of course show up in the deficit only in 30 years’ time, by which point the student loan book, which will have to be written off by the generation who are paying tuition fees and taking out loans, will be an astonishing £1.2 trillion in nominal terms.

The very high interest rates on student loans together with charging it now before even graduation has taken place, from the moment students enter the institution, at a current maximum of 6.3%, was part of a plan to reduce the deficit, despite its presentation by the Government, wrongly, as a progressive measure, since they argued that only high-earning graduates would repay all the interest. I am disappointed to see that, despite our report, Ministers are still saying that this system is progressive. In our report, noble Lords will find an example of a man who goes to work in the City as a lawyer compared to a man who works as a nurse. Who ends up paying more? The nurse—because the very high interest rate compounds, and the people on higher wages pay the loan down more quickly.

Under national accounting rules, the interest on student loans is counted as income as it accrues. The Office for Budget Responsibility said this accrued interest was worth £3 billion in 2017-18 and would rise to £7.5 billion by 2022-23. It said that, as much of the interest will eventually be written off rather than repaid, the national accounting methodology,

“does not reflect fiscal reality”.

That was the Office for Budget Responsibility. The full scale of this fiscal illusion was made apparent by further work it carried out, which was published after our report. It said that, when the write-offs on student loans begin to hit the national accounts in the 2040s, they will be more than offset by the interest accruing on larger loans taken out by later cohorts. It described this as a “pyramid of fiscal illusions” and said that, as long as the student loan system persisted in its current form, it would always flatter the deficit, despite the system barely breaking even in cash terms.

We recommended that, to reflect reality, the write-offs on student loans should be recognised up front. We were pleased to see that the Office for National Statistics has acted upon this recommendation. It said last month that, due to the scale of expected write-offs, student loans did not fully meet the criteria of loans as defined in European accounting rules. The classification of student loans will be changed so that the proportion expected to be written off is treated as a capital transfer rather than a loan. It intends to introduce this change from September this year. The change will also address the accrued interest illusion, as interest will not be charged on the part of the loan that was created as a capital transfer. The interest recorded as government income accrues only on the part of the loan that is expected to be repaid.

This provides a splendid opportunity, in the interests of treating students fairly, of reducing the interest rate to the 10-year gilt rate, at about 1.5%, thus reflecting the Government’s cost of borrowing. The Office for Budget Responsibility estimated that the new accounting approach would have added £12 billion to the deficit in 2018. It was quite a turnaround from the Office for National Statistics, which told us in January last year that student loans met the definition of a loan for national accounting purposes. Its change of heart appears to have been prompted by the committee’s letter to Eurostat, proposed by the noble Baroness, Lady Bowles, who understands these matters. It was Eurostat’s response to us which suggested that student loans did not fully meet the definition of a loan that appeared to stir the Office for National Statistics into action.

Funding for universities, masked by the fiscal illusion, has increased in recent years, but funding for further education has decreased. The Department for Education told us that funding for further education decreased by £1.6 billion from 2014-15 to 2017-18. Further education is, however an important route into higher education for those who do not pursue an academic route, but with low demand for some vocational courses, many colleges are unable to afford the cost of putting courses on. We said that the Government should explore restoring some teaching grant to further education colleges so that they can cover costs and stimulate demand for courses at levels 4 and 5.

With the accounting changes, there will no longer be a false choice between spending in post-school education that registers in the deficit and spending that does not. A proper debate can be had over where public money is best spent. As a starting point, we called for tuition fees to be frozen at £9,250 for the medium term. To assist with the debate on funding, we also recommended a single regulator across all higher education at levels 4 and above and a single regulator for all other post-school education at level 3 and below. The regulator for level 3 and below should have the equivalent status to the Office for Students, with sufficient resources and credibility to champion further education.

Our report is an appeal to the Government to treat students fairly by ensuring equal treatment and sustainable funding for all forms of higher education. This would help to create an even system of post-school education in this country that will support the economy by ensuring that we develop the skills we need and, most importantly, allow all our people to maximise their potential. I beg to move.

Photo of Lord Sharkey Lord Sharkey Liberal Democrat 3:52 pm, 16th January 2019

My Lords, I declare an interest as a member of council at UCL. I am also a member of the Economic Affairs Committee, which produced the report. The issues that our report addressed, which will be addressed by the Philip Augar review, are critical to the maintenance of a healthy and successful system for post-18 education. Given the limited time available, I shall expand on only a few of them, starting with part-time and continuing education.

The noble Lord, Lord Willetts, who I am very glad to see in his place, and whose contribution I very much look forward to, gave evidence to our committee. We noted that there had been a catastrophic 61% decline in the number of part-time students since 2010 and that this decline was probably an effect of the tuition fees regime. I asked the noble Lord whether it is something that we should be concerned about and, if so, what was the remedy. He replied:

“I would have to accept that is one of my biggest regrets of my time as minister … We need new mechanisms for helping adults to study part-time and I accept that the loan model has not delivered for them … a public spending package for adult learners, including helping mature students with the cost of tertiary education, be it university or not, would be a high priority”.

I thought at the time that this was an admirably clear and compelling answer. It was certainly clearer and more compelling than most of the answers we got to the question of how to promote lifelong learning. But there was general agreement that tuition fees and the equivalent level qualification rule were largely to blame. This rule means that students cannot access state support to study for a qualification equivalent to, or lower than, one they already have.

As enrolment of part-time students has collapsed, so have the institutions we need to teach these students. We have lost two-thirds of our continuing education departments in the last 10 years. To remedy this chicken-and-egg situation, more funding into FE and HE is needed—exactly as the noble Lord, Lord Willetts, said. Also needed is a reform of the ELQ rule and a proper, workable system of transferable academic credits introduced and enforced by the new regulator. If we do not resolve these issues and cannot establish a thriving and sustainable system for lifelong learning, the outlook for our productivity and competitiveness looks especially bleak.

The second area I turn to is maintenance loans. In the course of our inquiry, we invited students to talk to us about their current preoccupations—a very useful and enjoyable exercise. I think we were all surprised that the main source of anxiety was not tuition fees but the maintenance loan. In many cases the loan amounts now available are significantly less than the cost of accommodation and basic necessities. For example, the maximum loan for a student in London is £8,430. There are London halls of residence where the basic charge is more than this. In any case, the system is regressive. The IFS calculated that students from the poorest 40% of families will graduate with an average debt of £57,000. Those from the richest 30% will owe £43,000. The difference was entirely due to the maintenance loan entitlement and the accrued interest. We recommended that we reinstate the pre-2016 system of means-tested grants and loans and that the total sum available to students be increased to reflect their real cost of living and be consistent across all post-school education, regardless of method or place of study.

The final area I will briefly discuss is the tuition fee loans, which—as the noble Lord, Lord Forsyth, said—we recommended be frozen at the current level of £9,250 for the medium term. There are reports that the Government may be thinking of reducing the fee to around £6,500, but who would benefit from this fee reduction? Certainly not the least well off. A London Economics study in 2018 found that if the fee were reduced to £6,000, say, loan repayments in the bottom five deciles would be unchanged and only wealthier undergraduates would benefit. This was because many lower-earning graduates will currently pay nothing, or close to nothing, in loan repayments over their lifetimes. But the HE sector itself would suffer a drop in income of over £3 billion. This sector contains an astonishingly disproportionate number of outstanding institutions and as a whole is a critical engine of growth in the knowledge economy and in the economies of many of our towns and cities. The Treasury would have to step in.

But does there exist a way in practice to defend direct Treasury funding from other calls on the public purse? Past experience shows that it is extremely unlikely that universities would compete very successfully for highly contested public funds. They would, I am afraid, be losers—so, in particular, would lifelong learning and part-time students on whose upskilling and retraining we must increasingly rely. I urge the Minister to recognise the great danger in such a reduction in tuition fees and to focus reforms instead on the proper provision of lifelong learning, the introduction of realistic means-tested maintenance grants and loans and a reduction in the absurdly usurious interest rates the Government currently charge.

Photo of Lord Kerr of Kinlochard Lord Kerr of Kinlochard Crossbench 3:59 pm, 16th January 2019

My Lords, over Christmas I read the report with great interest and a dawning sense of familiarity. I found that I agreed with everything in it—which was a great relief since I was, and am, a member of the committee that worked on it a year ago and published it in May. There is something wrong with our procedures. It took the Government three months to produce a rather bland and cursory response, in the middle of the Summer Recess, and, here we are, eight months after the presentation of this very important report, debating it.

It is a pleasure to serve on the committee, which is led imaginatively, inclusively and impartially by the noble Lord, Lord Forsyth of Drumlean, and it was a particular pleasure today to hear his loud praise for Eurostat.

Because the report was published so long ago, the Minister can now of course say that events have moved on—and that is partly true. The ONS change to the definition in the national accounts is highly welcome. I hope the Minister will tell us today that the Government are going to pay attention to the report on interest rates and to concede that it is not fair to students to charge 6.5% on money that the Government borrow in the markets at 1.5%.

I was chairman of Imperial for a time and I know a bit about universities. The bits of the report that I found most interesting were those dealing not with universities but with other parts of the higher education sector. The need to recreate parity of esteem between universities and further education institutions is really important. I am not going to say any more about that because the noble Lord, Lord Baker, will speak after me, and he is a world expert. However, I think that the linked issue of unfair and inefficient funding arrangements, and the rather savage budget cuts in further education, have produced very low morale in further education colleges. I hope that the Minister will respond more sympathetically on that point, which is clearly made in the report, than did his August paper.

My third point is that I became convinced that the case for reinstating the system of means-tested maintenance loans and grants, abolished in 2016, is absolutely overwhelming. If you are interested in helping people from a disadvantaged background, that is even more important than changing the interest rate on student loans. I need say no more about that because the noble Lord, Lord Sharkey, already has.

The final point that struck me was on apprenticeships. I was already aware that several large firms with well-developed apprenticeship schemes of their own were ignoring the government scheme. They are just paying the levy and treating it as a tax, and not bothering with the rigmarole of acquiring vouchers exchangeable for courses provided by recognised providers meeting nationally determined standards. The system was, and still is, seen by some of our biggest industrial companies as just too complex and bureaucratic: the game is not worth the candle. I think the whole committee was shocked to find out how slow and cumbersome was the process of agreeing the standards for such courses.

Apprentice numbers have gone down since 2015, when the target of 3 million by 2020 was set, and that target was pretty meaningless because it was framed in terms of apprenticeships started rather than completed—40% are not completed. It also does not distinguish between one-year and three-year apprenticeships. We concluded, therefore, that it encouraged the rebadging of training that should not be described as apprenticeships, such as MBAs at business schools—and here I apologise to my distinguished noble friend Lord Burns. For all these reasons, we were convinced that the target should be abolished immediately. In the Government’s response—which was, as I said, a bit bland and cursory—that recommendation was completely ignored. There is nothing in the response in answer to the central recommendation that the target which is driving the apprenticeship scheme at the moment—and driving it in a number of wrong directions—should be abolished immediately. I hope that the Minister will provide some answer today.

The threats to universities posed by Brexit and immigration policy are well known, and our universities are world-leading and vibrant. But the state of the rest of the higher education sector—the poor relations—is much less well known. We need to crack the productivity problem, improve workforce skills and invest much more, absolutely and relatively, in the rest of the sector—in further education, in flexible, part-time, mid-career and technical education, and in real apprenticeships—and return to maintenance support for those from less wealthy backgrounds. To create or restore parity of esteem requires not just words but action.

Photo of Lord Baker of Dorking Lord Baker of Dorking Conservative 4:05 pm, 16th January 2019

My Lords, I congratulate my old friend, the noble Lord, Lord Forsyth, and the other members of the committee on the excellence of the report. As my life is largely taken over by technical education these days, I have read many such reports and this is one of the highest quality that I have seen in recent years. It leads me to believe that this House ought to have a Select Committee on education, dealing with schools, universities, FE colleges, apprenticeships and the skills gap.

I am glad that the committee visited one of my UTCs—at Aston in Birmingham, one of the first—which train youngsters from 14 to 18. We are very proud that it has the best destination data of any school in the country. We deal with some difficult youngsters at 14—30% to 40% are challenging—but we have virtually no NEETs. Thirty per cent become apprentices, compared to 7% of a normal school, and 47% go to university, three-quarters of whom do STEM subjects. This is just what the country needs.

Another charity of which I am chairman produced three reports last year on the skills gap: the first on engineering, where the gap is over 100,000; the second on digital, where it is also over 100,000; and the third on the creative industries, which also has a gap of over 100,000. Now we are dealing with agriculture and horticulture, which will be the same. The skills gap is so large that the Government no longer publish figures on it, but it will be a major problem post Brexit.

I particularly support three of the report’s recommendations. First, the Government should explore restoring teaching funding for further education colleges so that they can cover costs and stimulate courses at levels 4 and 5. The cut in further education since 2010 has been scandalous—a cut of far, far too much, which has to be restored. Level 4 is just above A-level, or diploma, and level 5 is foundation degrees. That is where the skills gap is and more money must be given to FE colleges for that.

The second recommendation I support concerns flexible learning. Higher and further education institutions should work closely together and with employers. It is important to get employers involved with this. Some universities do and some do not. Sheffield Hallam is particularly good and employability is at the centre of its drive. It is looking all the time for possible jobs for its students and works closely with employers. At our colleges, employers not only have control of the board but have to produce projects for the students to work on and provide apprentices. So we need employers working with higher education institutions.

The other recommendation I strongly support is that the Government should have a clear plan for degree apprentices within its broader HE policy. This is critical. Universities are beginning to toy with degree apprentices—I put it no higher than that. They are experimenting; it is new for them and they do not quite know how it works, but it is essential.

I agree with all the comments made by my noble friend about there being too much academic humanities education in our country today, where we have graduate unemployment and graduate underemployment. We have to improve technical education throughout the school system. It is depressing to realise that every attempt to improve technical education in our country since the great reform Act of 1870 have all failed. I hope UTCs will buck the trend.

On degree apprentices, I have come across a university in Stuttgart, Baden-Württemberg, which has only degree apprentices. Consider that for a moment. The students do not apply to go to that university; they are placed there by their companies, which pay them a salary to study there. In my view, this is a revolution, and I am going to visit Stuttgart to see how it works. The scheme is quite large—I think it has 3,000 students and covers engineering, quantity surveying and law. I am going to see whether it would be possible to create such an institution in our country. It would be a rather sophisticated form of a polytechnic if I could get it off the ground, and it is a very interesting idea.

Today, more and more youngsters will want to take technical education and technical degrees because that is where the jobs are. Two youngsters in our village both got first-class degrees—one in English from Oxford and the other in philosophy from York—and they are doing part-time, rather low-paid jobs. This is not what our education system should be producing. We should produce youngsters who are needed by the economy and could earn very high salaries. We should not forget that to be a higher apprentice at 18, you must have one A-level—not a mass of them—usually in maths or physics, and a BTEC extended diploma. Companies will then pay you £20,000 a year to study in further education. The Navy is so short of people that it pays 18 year-old students £32,500, and we provide many of those students for the Navy. This reflects the greatest need, and this is where we have to change radically our country’s education policy. I congratulate the committee on stimulating this debate.

Photo of Lord Layard Lord Layard Labour 4:10 pm, 16th January 2019

My Lords, I thank our great leader for the way in which he led us to produce what is, I think, a landmark report. For me, its most landmark feature concerns non-graduate vocational education, so I want to talk about our three main proposals in that area.

As we all know, Britain is good at higher education and bad at non-graduate vocational education, and this has big economic effects. Our graduates earn salaries similar to those of graduates in other countries, but our non-graduates earn very much less than our competitors. In my view, that is the main explanation for the greater wage inequality and lower productivity in our country. It is our Achilles heel, and the reason we are so bad at it is the way we fund it. The way we fund non-graduate vocational education is disgraceful and discriminatory, and it is worth comparing it with what happens to somebody who goes down the academic route. If you go down that route, you can be sure of a place at every stage. If you make yourself qualified, someone will take you in, and they are able to do that because they are automatically funded for your education. There is no cap on the number of people who can go down the academic route.

By contrast, if you want to go down the technical route, you face capping at every stage. If an FE college wants to run a course, it goes to the Education and Skills Funding Agency and is often told that the money is not available. That is partly because the agency’s budget is limited—we have heard how savagely it has been cut. Therefore, in my view, the number one recommendation which I commend to the House is that the funding of further education should be uncapped. If it were, we could liberate further education in the same way as we have liberated the universities. The overarching aim has to be to bring all non-graduates up to the vocational equivalent of at least A-level, otherwise known as level 3. That should be the central purpose of the liberation of further education.

That brings me to my second point, which concerns apprenticeships. Most non-graduates want to gain their qualifications on a part-time basis, earning at the same time as learning. This has always been one of the main avenues of social mobility in our country. I find it extraordinary that when people lament the decline of social mobility, they do not point at the correct reason for it, or certainly one of the key reasons. The top challenge for apprenticeship policy is to expand the number of apprenticeships up to level 3. Degree apprenticeships are of course a great idea, but it is even more important that we have apprenticeships at lower levels for as many people as possible so that there is a seamless path all the way up the part-time route, similar to the one that exists along the full-time route. Just to ram home the point: I had the privilege of working for the Robbins committee when I was young and the Robbins principle was that everyone qualified to proceed to the next stage should be able to do so. That is what we have done with the academic route but we have never done it with the vocational route; we should be doing so.

To build a system where this is possible will require a lot of leadership. We are talking about a massive change in the way we do things. At present, this sector has little clout and gets pushed around at will. It needs an organisation to champion it. That is why our committee proposed a council that would champion the sector. For the council to have clout it has to be a channel for the money: it should be a funding council for further education and for those apprenticeships not funded through the levy. It also needs to be responsible for generating enough apprenticeships for non-graduates to provide the seamless route that I am talking about.

The elite of our country is challenged as never before in recent times. It is charged with ignoring the needs of ordinary people. There is no area in which this neglect by the elite has been as shocking as in our approach to the post-school education of half our population—those who do not go into higher education. I hope the Minister can tell us how the Government plan to address the three proposals that I have mentioned: first, an uncapped system of further education; secondly, a seamless system of apprenticeship with special emphasis on the lower levels; and thirdly, a funding council for further education and apprenticeship.

Can the Minister assure us that these topics will not be at the bottom of the list but will be priorities in the Government’s review? They are so important to the national interest. Can he assure us that this sector will not, yet again, get the short end of the stick?

Photo of Lord Burns Lord Burns Chair, Lord Speaker's committee on the size of the House 4:17 pm, 16th January 2019

My Lords, I join others in thanking the noble Lord, Lord Forsyth, for his skilled chairmanship of the Economic Affairs Committee, in particular through this fascinating inquiry.

Many of us will make points about improvements that could be made, but we should at the same time recognise the welcome aspects of the system that has evolved over the last 20 years and not lose sight of them. One aspect is that we have increasing numbers of young people in higher education, including students from less well-off backgrounds. We should also recognise the system of income-contingent loan repayments, combined with the write-off after 30 years; although it produces some anomalies, as mentioned by the noble Lord, Lord Forsyth, it is still the case that, over an important range of earnings, those who earn the most quite rightly pay the most.

Another feature of the new system is that the cap on the number of students able to attend particular courses in particular universities has been lifted; that is another important step forward and something I would not like to lose. We have also seen that, with greater certainty in future incomes, universities have been able to borrow and invest in their critical infrastructure; this is another important aspect, compared to the uncertainties that existed in previous systems.

However, we are here today to emphasise some of the weaknesses of the system and what might be done about them. Without doubt, the biggest of these—as mentioned by the noble Lord, Lord Forsyth, and concentrated on in the report—has been the concentration on three-year undergraduate degree courses and the extent to which they have coincided with a decline in other types of qualification, including those which are cheaper, shorter and more tailored to the skill shortages of today. We have also seen a sharp fall in the number of part-time and mature students gaining degrees, which is a great sadness. As the noble Lord, Lord Forsyth, mentioned, although there is some progressivity in the student fees arrangements, there are also some anomalies. The decision to turn maintenance grants into loans has left those from less well-off backgrounds with a higher level of debt, and the very high interest rates charged on outstanding loans fall more lightly on those with higher incomes, who pay off their loan more quickly. That is a considerable anomaly.

Basically, the attempt to introduce competition and market incentives into this sector, while having some good results, has produced a number of unintended consequences. The fee cap has meant that almost all courses are priced at the maximum; competition has been almost entirely in terms of numbers of students rather than price or the quality of teaching; there is concern about too little attention being given to entry qualifications; and of course there is the point that has been mentioned about the considerable inflation in the class of degrees awarded. All these are things that we should be looking for ways to correct.

At the centre of many people’s concerns is the feeling that for many students the returns from studying for a degree might not be what they had hoped, while at the same time the non-degree part of higher education is being financially starved. The committee’s report presents a set of proposals. We have already heard about a number of them today and I shall mention two or three. First, if we are to increase the attractiveness of alternatives to the standard three-year degree, we have to incentivise both the institutions offering them and the potential students. As the noble Lord, Lord Sharkey, outlined, the proposals that we have presented are to provide more funding for other post-school options; to have a single system of funding, including loan funding and maintenance support for all full and part-time courses; and to have a single regulator.

My second point is that there is clearly a case for ironing out some of the problems with the funding system that are causing the most unhappiness for students. We spent a long time having meetings with students and talking about their experience. Without a doubt, the two issues that came up time and again were the level of interest rates on student loans and the need for those to be as recognisable as other interest rates, and switching maintenance loans back to maintenance grants so that poorer students did not end up with the largest debt.

My third point is that we should make a change in the transparency of what is happening with the loans that will not be repaid, and how this appears to both government and students. The noble Lord, Lord Forsyth, explained about the ONS decision to change the arrangements for how the write-off fees are recorded in the national accounts, and that change should lead to a more transparent treatment of loans in the public accounts. The expected write-off of student loans will now appear sooner, and we believe that over time this is going to lead to better decision-making in how resources are allocated.

However, I would personally like to see an attempt to apply a similar treatment to the amounts that are owed to students. Students who are likely to be on lower incomes after graduation now have a much more informed view of the income-contingent loans system than they did at the outset but they are still saddled for years with the existence of a large and growing outstanding debt, even if it is to be written off after 30 years. There is no doubt that this is extremely disheartening for many. Just as we want the Government to recognise the likelihood of debt write-off on an ongoing basis rather than waiting for 30 years, my own suggestion is that we should be looking for an arrangement that writes off part of this debt for the student on an ongoing basis as it becomes clear that it is not going to be repaid. That is not straightforward but I am sure there are ways that it could be done. It would make the whole process more transparent from the point of view of the student and the Government, and it would considerably reduce the levels of anxiety among many students.

Photo of Lord Willetts Lord Willetts Conservative 4:24 pm, 16th January 2019

My Lords, it is a privilege to participate in this model of rational, illuminating debate. It has already been a particular pleasure to appreciate the strong agreement between the noble Lords, Lord Kerr and Lord Forsyth. I draw noble Lords’ attention to my entries in the Members’ register of interests, particularly that I am a visiting professor at King’s College London, I am a member of the board of UKRI, I advise the edtech company 2U and I am chancellor of the University of Leicester.

This is a very useful report, and it is already prompting lively debate. I very much agree with many of its proposals. I think 16 to 18 year-olds are the group that have had the roughest deal in the last few years. FE colleges are struggling under very heavy financial pressures. The means-tested maintenance grant was a valuable part of the system and it is a pity that it has gone; as a result of that, a low-income student will now leave university with more debt than an affluent student, which is not a defensible position. I also accept that we need to do more for part-time students. There is a lot here that I agree with.

However, there are some ambiguities at the heart of this report, beginning with the following statement in the summary on the very first page:

“one form of higher education has become dominant: the growth in higher education during the 21st century has been almost entirely as a result of ever-increasing numbers of young people going to university to study for full-time undergraduate degrees”.

That statement could have two different interpretations. One interpretation, which I would put on it and endorse, is that going to university should enable people to have a range of types of education; they should not be focused solely on honours degrees; it should be possible to study a level 4 or 5 qualification at university. That is why foundation degrees were introduced by the party opposite and why it is still possible to study HNCs and HNDs at university. That is one interpretation of the sentence. The other interpretation is that university is only for full-time, honours degree courses and other types of higher education have to happen in institutions other than universities. As we are blessed with the presence of so many members of the committee that produced this report, I hope that tension will be addressed during this debate. I believe that universities have a range of distinct missions and we should welcome this.

If I may say so, there is a similar ambiguity in references to technical skills. I am a great admirer of the work of the noble Lord, Lord Baker; these skills are incredibly valuable and this is clearly one of the weaknesses of our education system. This is a result of the grotesque decision that so many young people have to take when they specialise at the age of 16—wisely, this does not happen in the Scottish system. As a result of this, far too many young people give up maths at the age of 16, even though this is of such fundamental value, almost regardless of what they do in the modern world. Sometimes technical skills are talked about as if you could not possibly have a technical education at a university. That again ignores the very valuable role carried out by many of our universities, often the less prestigious ones. If you go to the University of Teesside or the University of Sunderland, you will find they deliver automotive engineering courses absolutely aimed at the requirements of the Honda and Nissan factories nearby. You will find exactly the same at the University of Coventry and Oxford Brookes, linked to Jaguar Land Rover and the Formula 1 motor-racing industry. Those young people are getting a technical education in automotive engineering at a university.

What is the problem with that? Is it that we like what is happening, but we do not think it should be called a university education? It would be called a university education in America. In Germany, the technical high schools which deliver this type of education are in the process of gaining university titles. Treating those institutions as though they do not merit the title of university would be a mistake. It is far better to recognise that technical education happens in many places —a good thing, too. Of course, those universities often take students from more disadvantaged backgrounds. We are very fortunate to have the Minister with us, as he has responsibilities across the DfE. I invite him to endorse the principle of a pupil premium in school education—that schools which take on students from more disadvantaged backgrounds require more funding—and to accept that it would be a very odd result if we tried to apply exactly the opposite principle in higher-education funding, saying that the less prestigious universities, which tend to take the more disadvantaged students, should be further punished by having less funding for their education. The pupil premium should be a coherent principle that applies across education.

Sadly, I will not be able to touch on the funding issue, apart from to say that my other frustration with the report is that paragraph 276 states:

“There should be no change to the repayment threshold, the repayment rate or the term of the loans”.

My view is that, in the technical language, the RAB charge is too high. I fully understand why the debate has opened up about the accounting treatment of the repayment of loans, because such a low rate of repayment is now forecast. It is perfectly possible to use this model and to apply the basic principle that the typical graduate should repay in full. Therefore, I was disappointed, especially looking at the hard-faced Treasury men who served on it, that the committee did not investigate options such as extending the repayment period and lowering the repayment threshold—in other words, bringing down the RAB charge, expecting more repayments.

I end with a political comment, thinking back to my time in elective politics. We have ended up with a system that has a very high interest rate and a very high repayment threshold. That is a terrible combination. Far too many graduates see their debt growing every year because of the interest rate. This is an example of the problems caused by the “policy-making by speech” crisis. In the run-up to the Prime Minister’s party conference speech there was a decision whether to change the interest rate or the threshold. The decision was made to raise the threshold. We should have a low-interest-rate—I completely agree with the committee on this—and low-threshold model where we expect graduates to pay back and not to face the pain of seeing their repayment obligations grow year after year.

Photo of Baroness Smith of Newnham Baroness Smith of Newnham Liberal Democrat 4:31 pm, 16th January 2019

My Lords, like other Members of your Lordships’ House I am delighted to speak in this debate. I think I am the first person to speak who was not either on the committee or recommended in advance by the noble Lord, Lord Forsyth, for what I was going to say—which means I have free rein. I will talk about treating students fairly, but I have not been told what my five minutes are meant to include.

Needless to say, like other Peers, I need to declare two interests—and a third that others might consider whether they too could have declared. My first interest is that I am employed by the University of Cambridge. My second, related interest is that in that capacity I run a part-time master’s programme, linked with our Institute of Continuing Education that is intended to be about lifelong learning. While international relations might not sound technical or vocational, those of us who studied PPE thought that it was vocational at the time. Certainly we have some clear and active part-time activity in Cambridge that I will talk about.

The third thing I thought I should mention as an interest is that I am somebody who went through an undergraduate degree at Oxford where my fees were all paid—not by me–and I had a means-tested grant, so that at the end of my first year I could fund my 21st birthday party with the money I had saved from the grant. There was no need to borrow money. I came through an undergraduate degree with no debt—and I suspect that that will be true of the vast majority of Members of your Lordships’ House.

One of the issues about treating students fairly that the noble Lord, Lord Forsyth, touched on in his opening remarks is essentially one of intergenerational fairness: what is happening with the current generation? What will happen with future generations? How will we fund higher education? That needs to be looked at again, because the current arrangements came about as a result of George “gilet jaune” Osborne, in his high-vis jacket, putting forward a set of policies that seemed to work in the short term. While the sleight of hand was slightly mocked by the noble Lord, Lord Forsyth, I thought that, if I were a Minister, I am not sure that I would be pleased or worried to have him on the same Benches, because you are not necessarily guaranteed an easy ride.

This report is not about having an easy ride. Two of the most exciting things about the report are, first, that it is not a report about Brexit, and, secondly, that it is willing to say that there are things wrong with higher education and further education, and that some institutions should be abolished. How often has any Government set up an institution or an organisation and at some subsequent point said “We can abolish it”? Normally we just add another institution and another institution—so this is a remarkably refreshing report, and one that highlights a set of key interests. Like other noble Lords, I stress the importance of ensuring parity of esteem between vocational and technical education and undergraduate degrees.

The report notes that in the 1960s, only 5% of people went to university, and now it is 50%. That has a set of merits; one thing that has been missing from the debate so far is the purpose of education for its own sake. We have talked very much—maybe appropriately for an Economic Affairs Committee debate—about the economic side. But education does have a value in and of itself, and for some people, going to university has an intrinsic value that you cannot monetise. But does it have that intrinsic value for 50% of the population at 17 or 18, when they are filling out their UCAS forms? I suggest that it does not. I think that the value of higher and further education is about lifelong training. It is not about what you might do as a rite of passage at 17, 18 or 19. One of the downsides of the commitment to send half the population to university at 18 is that people are not being trained in the skills that are needed.

One of the issues—I am afraid that I am going to mention Brexit—is why we have so many EU migrants working in the United Kingdom. In part, it is because they have the skills and the technical training that the British education system has not provided. Whether we leave the European Union on 29 March or not, we need to rectify that. It is essential that this country has the required skills base.

There is also a question about the value of a degree. When I went to university, there was a premium. You were likely to earn more if you had been to university. That premium no longer exists in the same way, so the economic arguments that were put forward when we introduced tuition fees—and when they were raised—no longer apply.

The final thing I will say is about the importance of maintenance grants. Ideally, I would go further than this report recommends and suggest that means-tested grants be introduced without the loan component. That might not be financially affordable, but there is something perverse about the idea that if you are middle-class and your parents are wealthy, the better able your parents are to pay your university fees and ensure that you can live comfortably and pay your rent, the more likely you are to leave university with no debt, while those who may have the greatest aspiration, the greatest desire and who would benefit most from the transformational aspects of university life do not have the same opportunities because they are having to borrow money to subsist. That needs to change.

Photo of Baroness Finlay of Llandaff Baroness Finlay of Llandaff Deputy Chairman of Committees, Deputy Speaker (Lords) 4:38 pm, 16th January 2019

My Lords, I am delighted to speak in this debate and welcome this report, which is easy to read and which the whole university sector should look at in the light of each university’s strategy. I declare my interests: I hold an honorary chair at Cardiff University, where I have run postgraduate master’s training. Because I am in medicine, all my educational experience has been in vocational training. However, I am now also chair of governors at Cardiff Metropolitan University, which is one of those small universities people may feel is a bit lower down the scale. I would question that, because it has made us think about our role as a university in the economy of south-east Wales. I also have the advantage of being on the European Advisory Group to the Welsh Assembly Government. We are therefore able to link closely the economic needs of south-east Wales with what we provide educationally.

I want to focus on that perspective in the short time that I have, and particularly on the things we have been doing to try to turn this around. We are well aware that in south-east Wales we have a large number of people who dropped out of school early, went into jobs, had families—they may now be single parents—and much later on have decided that they want to learn. They know what they have missed out on and want to go back to university, but they need to do so part-time and with flexible hours. They also need flexibility so that they can still care for their children. We are already strongly aware of the need for part-time courses and have looked at further education, where we want to take our numbers from 25 up to 500. That may be ambitious but we are aware that the need is there. We would also rather like to see parity of esteem at every level, including that our students go through and that their degrees are viewed as being as valuable as anybody else’s.

From the European perspective, though, we in Wales are well aware that the report in 2017 from Universities Wales demonstrated the strength that was being brought by having 22,000 students from 140 countries all over the world. Since 2016, we have seen a huge drop in these numbers.

This report is called Treating Students Fairly, so I went to our student president, Ieuan Gardiner, who pointed out two things to me. His points are really worth making. One is that students are expected to live on remarkably low incomes. Student finance expects a student to work at least part-time—16 hours per week—to make their loan a liveable sum. How is that linked to full-time studying? Students who are poor are shackled by having to go to work to earn more money. They therefore have less study time and are often tired because the jobs they can do are nights, evenings, weekends and so on, which is very difficult. The degree they may come out with will be lower through no fault of their own but simply their poverty.

Another problem is that if means-tested grants are based on parents’ income, they must account for situations where a student is no longer in contact with their parents—I am afraid that that applies to quite a lot of students, particularly those from so-called disadvantaged backgrounds who may come from chaotic families or have escaped from abusive situations—or where the parent has died. The information asked for is bound to be in-depth and they will be unable to access it, so that needs to be allowed for. Another concern is that if you are claiming benefits, you get better “perks” than a student, with free dental care and so on. Those things have to be addressed.

Ieuan’s second point related to careers. If we are to have students going through and graduating, they need to learn about life after university while they are at school so that they make good choices for life, not just for the next stage in their career. I thought that point was extremely valid.

I will spend my concluding moments on a couple of things that we are doing. Our university won an award for its knowledge transfer partnership, after working with a window-cleaning system, which your Lordships may think is a bit strange. However, we have developed, perfected and tested innovative, waterless cleaning processes appropriate for the external surface of an aircraft. The problem with wet aircraft is that the water can freeze and so on. Using our Perceptual Experience Laboratory at Cardiff Metropolitan, we have been able to work with Window Cleaning Warehouse to the benefit of everybody: it now has large aircraft contracts.

We also recognise the shortage of technologies and are developing a school of technologies, with new programmes in computer security—an enormously growing area—data science, robotics and artificial intelligence. We are linking that with our school of art and design because computer-generated graphics in the film industry and advertising are the development of the future. This has to be multi-profession. It has to think about people working in completely different ways to pursue technology, and allow the career chances of our students to be completely different for the future. We must learn from places such as France and Germany, where they have écoles techniques and Technische Hochschulen, which have university status—very high status, actually—and value, and are training people for jobs for the future. That is what we are trying to do, and I hope we might do credit to this report.

Photo of Baroness Jenkin of Kennington Baroness Jenkin of Kennington Conservative 4:45 pm, 16th January 2019

My Lords, I am grateful to my noble friend Lord Forsyth and the Economic Affairs Committee for this valuable report, which should be a massive wake-up call to all those who care about our future workforce. As a member of the Select Committee investigating intergenerational fairness and provision, I have to say that the evidence my noble friend gave to that committee on the back of this report was among the most powerful and compelling that we heard, and the recommendations of our report will have been influenced by it. The report focuses on strengthening alternatives to higher education and making student finance more effective. As the report says:

“A monoculture has developed around the primacy of the undergraduate degree which has crowded out other options which are perceived as inferior. This situation is not helped by the paucity of information available to young people; the incentivisation of schools to send pupils down the academic route; and employers requiring degrees for jobs which do not really need them”.

Today I should like to bring to your Lordships’ attention a topic that is not referred to in the report, but is important to its objective of addressing skills shortages: youth full-time social action, or FTSA, as it is known. FTSA is undertaken by full-time volunteers aged 18 to 25 who devote up to 35 hours a week for six to 12 months to improve the lives of vulnerable people. Over recent years I have met a number of the organisations involved in this work. City Year UK volunteers, for example, tackle educational inequality in schools in poorer communities through one-to-one tuition and in-classroom support, ensuring that no pupil falls behind due to their socioeconomic background. Full-time volunteers with Depaul UK support homeless people, while those with Volunteering Matters support the health and social care sector. No one is suggesting that full-time social action be considered an alternative to higher education. Indeed, FTSA should be seen as an option that develops key skills in young people regardless of the route they take post-school, boosting their work-readiness and employability.

Despite hours of voluntary service to their communities, young full-time volunteers in the UK are classed as NEETs—not in education, employment or training—and receive no support from the Government. Contrast this with those in the USA, France and Germany who participate in government-backed national programmes, such as AmeriCorps in the United States and Service Civique in France, which offer a range of areas to be involved in, including education, environmental action and disaster relief. In return, they receive rewards such as reduced tuition fees and debt forgiveness. It is clear why there are only around 1,000 full-time volunteers in the UK compared with tens of thousands involved in FTSA programmes abroad. With greater support for the young people participating in FTSA in the UK and the establishment of an equivalent national programme, we would make good progress against the report’s ambition of addressing skills shortages. The report highlights how many young people coming from both university and technical routes lack key workplace skills such as teamworking, communication and time management.

FTSA places young people in positions of responsibility where they can rapidly develop such skills. For this reason, 93% of City Year UK volunteers are employed or in education within three months of completing the programme, and 95% of alumni said they had developed skills that will help them secure future employment, particularly leadership and communication. Some 80% of Service Civique participants reported that they had acquired professional skills useful to their futures, and as a result of skills built during their programme, AmeriCorps alumni have been found to have a substantially higher likelihood of finding a job than those who did not participate.

While the Economic Affairs Committee—and the noble Lord, Lord Forsyth, in particular—highlighted the increasing amount of money lost in the student finance system through loans that will never be paid back, FTSA schemes such as those I have mentioned today result in a return on public investment. Analysis by Pro Bono Economics demonstrates that the net benefit to the UK economy of 10,000 full-time volunteers would be up to £119 million per year, showing that the Government stand to benefit from investing in a programme of youth full-time social action.

Despite FTSA’s positive effects on young people’s skills development, and the Government’s independent review of FTSA recommending the establishment of a government-backed pilot scheme, we are yet to see decisive action. FTSA builds the work- readiness of young people and should feature in any discussion of careers guidance and skills development. This will not happen, however, if we continue to overlook the evidence. What plans do the Government have to raise awareness among young people of FTSA opportunities so that they can have the opportunity to supplement their post-school qualifications with the development of crucial workplace skills?

Photo of Lord Bilimoria Lord Bilimoria Crossbench 4:50 pm, 16th January 2019

My Lords, I congratulate the noble Lord, Lord Forsyth, and his Economic Affairs Committee on their excellent report, Treating Students Fairly: The Economics of Post-School Education. On Brexit, the noble Lord and I are at opposite ends of the spectrum, but in the 12 years that I have been here, on almost every other issue, we have been on the same page.

The report states right up front:

“Successive governments, over many decades, have pursued and encouraged the expansion of higher education. These efforts have succeeded: in the 1960s, five per cent of young people went into higher education; today, around half of young people do … By contrast, the number of students graduating with other higher education qualifications … have declined in recent years … with an 88 per cent reduction in enrolments at the Open University over that period for qualifications at Levels 4 and 5. There has also been a … decline in the number of qualifications awarded to adults at Level 3”.

So there is a problem here. On the other hand, the report continues:

The UK does however produce more workers with undergraduate degrees than similar countries”.

The report states that the reforms to financing for university funding that happened after 2010 election,

“failed in their aim to create an effective market amongst universities”.

I remember this clearly. When tuition fees were tripled in one go, from £3,000 to £9,000, the Government of the day said, “This will create a market and people will then be able to choose which degrees they want to do and which degrees are worth more”. What did they do at the same time? People did not notice it, but they withdrew teaching funding hugely. I was chancellor of Thames Valley University—or the University of West London—at the time. What did universities do? They had no option but to charge the maximum £9,000 to cover the lack in funding for tuition.

Loans have been a huge issue. The report looks into them in great detail, saying that the total student loan book will be worth £1.2 trillion in nominal terms. That is a huge figure. The report talks about reforms. Is it worth having student loans but then saying that in the long run they will not be repaid? The report’s analysis is very good. It then talks about maintenance support for students being inconsistent across different areas.

The report states that,

“the Institute for Fiscal Studies suggests that students from the poorest 40 per cent of families will graduate with an average debt of £57,000; their peers from the richest 30 per cent of families will owe £43,000. This £14,000 difference is entirely due to maintenance loan entitlement and the accrued interest”.

Other speakers have referred to the unfairness of this system, which continues after graduation. The report states:

“Data published by the Department for Education show that students entitled to free school meals have lower average earnings after graduation; five years after graduation those eligible for free school meals earned 13 per cent less than those not entitled”.

This does not seem fair. The University of Cambridge, where I am chair of the Cambridge Judge Business School and an honorary fellow of my college, Sidney Sussex, said that,

“no interest should accrue until graduation, with a sliding interest rate dependent on earnings afterwards that was capped at CPI plus one per cent”.

It pointed out that this would not cost the Government much in the long run, in light of the proportion of student loan lending that is written off under the present system. Does the Minister agree?

I am chancellor of the University of Birmingham, which again agrees with a lot in this report. We are concerned about the fact, which most people do not realise, that many students are significantly concerned about meeting their living costs while studying. For some students these problems are of far greater concern than the tuition fees. The Government’s switch from maintenance grants to loans had a more significant impact on those from more disadvantaged backgrounds, who need to take out higher loans for living costs, as I have just pointed out, and so have higher lifetime loan repayments. It just does not seem fair or right. The university is also concerned that the switch has deterred poorer local students from applying to study at the university in the first place. Does the Minister agree? The University of Birmingham would support the reinstatement of government maintenance grants, funded by new money, targeted to those students who need them the most. It is essential that this should not be at the cost of reducing funding for universities in other ways. Any reduction in income for universities would have an impact on the student experience. Universities would have to reduce investment in teaching or other educational activities that support high levels of employment.

My other point concerns this distinction between universities and further education. At the University of West London, I remember we used to have the saying “Further to higher”. At the University of Birmingham, we partner with University College Birmingham in delivering courses. We partner with industry—that should also be taken into account. The University of Cambridge is also worried and says that it already subsidises, on average, more than half the cost associated with the education of each home undergraduate. It is worried about any cuts and says that if there are cuts to domestic students, it may be forced to increase the number of international students. That is also a concern. If Britain leaves the European Union and focuses on delivering its industrial strategy, supporting growth and innovation productivity, it is essential that the UK’s unique asset of world- leading, university-based research is not threatened—for example, by disruptive changes to university funding. Research is also something that not many have spoken about.

Before I conclude, I want to mention two other points in the report. Spending on 16 to 19 education has been badly hit. Total expenditure has fallen by 17.5% between 2010 and 2017. What are we doing? This is a key stage, which we should be funding.

Turning to adult education, the report says that,

“adult education funding has seen significant reductions”.

Related to this decline, older students are more likely to study part-time. I mentioned that the effect on part- time education has been drastic. The number of part-time students aged over 30 has fallen by 41%. There is a growing consensus, nationally and internationally, that with the advance of machine learning, AI and robotics, post-school education will become of increasing importance to societies and economies. There will be an increasing need for lifelong learning, extending beyond school and, for those who go to university, beyond their university degree as well. Continuing education contributes positively to well-being and health, which, as well as being an intrinsic good, has positive consequences for the economy through the health of the population and the workforce. Some 60% of those entering primary school in 2018 will ultimately work in jobs and functions that do not currently exist. By 2030 there will be a talent deficit. Half the subject knowledge acquired by first-year undergraduates is out of date by the time they graduate.

Then there is the challenge of Brexit. Learning and improved life chances should not stop when you reach your 20s. This was recognised in 1919 in a report on adult education, and I am proud to be a member of the Centenary Commission on adult education, which has just been launched and had its first meeting. Dame Helen Ghosh, the master of Balliol College, is head of the commission and we will report later this year. I urge the Economic Affairs Committee to take heed of our report, because this needs to be at the heart of our endeavours to improve the prosperity of our country and the well-being of our people.

Photo of Baroness Goldie Baroness Goldie Lord in Waiting (HM Household) (Whip), Baroness in Waiting (HM Household) (Whip)

My Lords, we were doing pretty well, time-wise, but can we just keep an eye on the clock? We are beginning to slip a bit behind the estimated schedule.

Photo of Baroness Harding of Winscombe Baroness Harding of Winscombe Conservative 4:59 pm, 16th January 2019

My Lords, as a member of the Economic Affairs Committee, I congratulate our excellent chairman, my noble friend Lord Forsyth. I reassure the noble Baroness, Lady Smith, that none of us has been told what to say. I may be a relatively new Member of your Lordships’ House and a very new Member of the Economic Affairs Committee, but I do not think it is the committee’s style to take direction.

This is the first Select Committee inquiry I have served on, and I do not profess to have any specialist knowledge or experience, other than as a student long ago. Therefore, I have approached this from the perspective of a businesswoman. As a businesswoman, I started the inquiry—perhaps naively—with two assumptions. The first was that our education system was gearing up for the changes that everyone in the world of work can see are coming, even if none of us knows the timing or can predict accurately what they will mean, as the noble Lord, Lord Bilimoria, has just set out. There will be huge changes in job mix as the digital revolution gathers pace, and all of us will live longer and healthier lives, having multiple careers in our—we hope—upwards of 100 years. Therefore, there will be for everyone a need for lifelong learning. Two-thirds of the 2030 workforce has already left full-time employment—that is taken from Matthew Taylor’s review into the world of work. We know that the jobs available will be very different, and that people will have multiple careers in their lifetime.

My second assumption was that the critical issues would be those which I saw being debated in this House, in the other place and in the media—namely, the student loan financing arrangements for those studying at universities. It was quite a shock to me as a new committee member to discover quite quickly that neither of my two assumptions was true. Skills shortages are generally not about graduates. We are lacking technical skills, as we heard earlier. We have graduates doing non-graduate jobs, and our education system is totally geared up to training 18 year-olds for three years in full-time degree courses, rather than preparing for the world of lifelong learning.

The decline in part-time education is massive and terrifying, with 200,000 fewer part-time students than in 2010, an 88% reduction in enrolments at the Open University over that same period for qualifications at Levels 4 and 5, fewer adults doing Level 3 qualifications and a huge imbalance in funding into further education and flexible education versus full-time university education. All of this is at a time when we should be gearing up lifelong learning, and developing the technical skills that it is clear the digital revolution will require of us as a society. It is hard not to conclude that this is a slow-running train crash, where, politically, we are debating the wrong issue and the system is geared up to solve the wrong problem.

As a number of speakers have already recognised, our committee is clearly not the first group of people to have noticed this over the course of maybe 100 years. There are today various initiatives attempting to address this: T-levels, the apprenticeship levy and maintenance grants for part-time students that will kick in during the coming year. I am sure my noble friend the Minister will point to all of these things, as the Government have in their response to the report.

Unfortunately, as our committee report sets out, these well-intentioned actions are not actually working. We heard some very troubling evidence during our inquiry about the lack of funding and the extraordinarily complex oversight and different funding models for FE. We were dismayed to hear that, since the introduction of the apprenticeship levy, many employers have been rebadging existing training schemes as apprenticeships in order to reclaim their levy contributions. One employer openly admitted it to the committee at a round-table event.

We also heard that employers were using the levy to send employees on MBAs—I have an interest here, as I have an MBA. When we challenged the civil servant in charge of the National Apprenticeship Service about this, she replied that she was an apprentice herself—she was doing a chartered management apprenticeship. This seems a long way from what I think we all believe to be the spirit of apprenticeships.

Hearing the advice on timing, I will not repeat the specific recommendations that other speakers have listed. There are a number of things that we believe can be done now to make it easier for adults to study for further qualifications. Specifically, we need a proper, credit-based system that enables people to dip into and out of training and develop their education career through their whole life. That would make it easier to study later in life. We also need the right fee structure and support structure for part-time adult learners, and we need to equalise the routes for part-time as well as full-time learning.

However, there is something bigger. As the noble Lord, Lord Kerr, said, we need to establish a parity of esteem between part-time, flexible, lifelong learning and full-time learning in a university, doing a first degree when you leave school. It is possible to do that. Over the course of the last 15 years, we have meaningfully shifted the dial in people’s expectations about university education. I urge the Government and the Minister to set out how the Government will champion the shift. It is partly about funding, partly about different incentives, but also about our attitude in society. We want all mothers—I say this as a mother who went to her 13 year-old daughter’s careers fair last night—to aspire either to a further technical education route or a university education. I do not want what I saw at the London school my daughter attends: a whole room full of stands for different universities and one rather sad stand about apprenticeships by the coffee machine. We need to reinstate that balance and parity of esteem, and if we can do that, the future will be exciting. We should learn from how we shifted the dial on perceptions of university education and apply that to further education as well.

Photo of Baroness Bowles of Berkhamsted Baroness Bowles of Berkhamsted Liberal Democrat 5:06 pm, 16th January 2019

My Lords, this was an amazing inquiry to be part of. In particular, it was amazing to visit the students and apprentices, and I came away thinking, “I want to go round again”. But as we all know, we are not necessarily providing the right kind of people. As a shortcut, I will identify with everything the noble Baroness, Lady Harding, just said. At the end she also provided the answer to the first question from the noble Lord, Lord Willetts, about what we meant in the introduction. We were not saying that universities were a bad thing but that the concentration on the honours degree has sucked away from everything else.

I will, alas, return to the nerdy issue of the national accounting treatment of student loans, and will perhaps fill in a little more of the character around the issue. The UK’s design of student loans is unusual, in particular because it is designed so that a part of it will definitely be written off. It is therefore not all a loan. Payments are made only above a certain threshold, which I think is now £25,000, but the intention is that in order for some redistribution to happen, the more you earn, the higher the interest rate charged. It starts at the lower end at RPI, but by the time you earn £41,000, it is RPI plus 3%, which seems to be quite a sting, getting over 6%. In chapter 8 of the report we explain how the redistribution does not work in practice and how it tends to hit those most who do not quite manage to pay off the loan and get stuck with it for the full 30 years, whereas higher earners get it paid off quicker and do not pay the interest for quite so long.

Because of that fact of getting stuck with a loan for 30 years, we did not think that an extension to its term would help anybody. That comes to the heart of the second point raised by the noble Lord, Lord Willetts. Those same people who are already hit the most would be the ones hit for another five years or so, so we tackled this a different way round and said that you should not start accruing the interest while you are still an undergraduate. To add it on over those three years on the full amount is a big hit right at the beginning, which then rolls up over those years. The other egg in our basket was to reduce the loan rate.

The state of student loans, the loan book and how much is likely to be repaid is published by the DfE. The calculations are complicated, but are not a secret and the analysts who look at national systems of accounts know about them. However, the amount that is not expected to be repaid does not appear in the national deficit calculation until it is written off, and that has a flattering effect. That is what I call IFRS—the accounting standard for countries. Anyone who knows me will know that for me to say that is not complimentary.

Dr Andrew McGettigan, an expert on higher education policy, questioned whether it was reasonable for the transaction to be treated entirely as a loan, because it is not, and therefore whether we should do something about the accounting with regard to the expectation of what is and is not going to be repaid. In its evidence to us, the ONS said that it had no choice, that:

“ESA [20]10 is an international standard […] there are some snakes and ladders in the system”— a good description of IFRS—and that you,

“must follow them and you cannot pick and choose when you do and when you do not”.

Unfortunately, this was a bit of a red rag to a bull because, as has been hinted, I know a little bit about ESA 2010, because I was chair of the committee that took the legislation through the Parliament—in fact, I was also the rapporteur. We looked at all the wizard wheezes that the 28 countries got up to, because what appears in the deficit is very important for eurozone countries. They can go into nasty procedures that do not affect us. We had a great interest in that, and I knew that we had paid attention to what happens when the amount that will not be repaid is on the never-never and is never going to be repaid. So I kind of knew what Eurostat might say, which is on page 109. It was that the accounting treatment switches when more than 50% will not be repaid.

To cut a long story short, the ONS, under the pressure that we put on it, changed the treatment so that it is not now a loan treatment; it is partly spending, partly loan. Otherwise, we might have the absurd situation where as we hover around 50%, we swap between accounting treatments. I do not think that yo-yo would be a good idea. That is what the ONS has done.

The effect of it being included in the deficit is that it is under the Chancellor’s nose and will get looked at. It will be looked at for what it does and what it is worth, not for its accounting treatment, and one should therefore look more favourably on the other recommendations of the report. We have got that one, let us get all the rest.

Photo of Lord Kerslake Lord Kerslake Crossbench 5:12 pm, 16th January 2019

My Lords, it is hard at the moment to drag one’s thoughts away from the Brexit drama that is going on around us. Nevertheless, I am pleased that space has been found for what I think is a timely debate on an important report. I declare my interests as chair of the board of governors of Sheffield Hallam University—I thank the noble Lord, Lord Baker, for his positive comments—and chair of the Civic University Commission.

This House produces many reports, some of which have little or no impact and some of which have a significant effect on a debate. This report most definitely falls into the latter category—not least because of the issues it has raised about how student loans have been treated in the public accounts. I strongly agree with the analysis in the report of this and other issues, such as further education, but I do not share the scepticism about the value of expanding university education.

We have now had the report from the Office for National Statistics, which vindicates the concerns raised by the committee and, as we have heard, proposes a new accounting treatment to properly reflect the estimated unpaid debt. The principle seems absolutely right, although we will have a lot of debate about what the actual numbers should be.

In some ways, the damage from the current distorted treatment has already been done. I am pretty sure the changes introduced by the Government for short-term political reasons in 2017—as we heard from the noble Lord, Lord Willetts—would have been different had the alternative accounting treatment been in place. The cost of raising the threshold for repayment was way downstream, whereas the income from raising interest rates was immediate. The effect was to make an already unfair system even more unfair. Well-off students could repay quickly with lower interest costs. Students whose income stayed below the £25,000 threshold paid back nothing. Those in the middle got the worst of all worlds. The committee was absolutely right to draw attention to this gross unfairness. We either need to try to make the model work as originally intended—there is a question mark over that—with perhaps some direct public funding for specific purposes, such as higher-cost degrees, or to look again at whether the loan-based model is right. What we have now is both unfair and unsustainable.

The timeliness of today’s discussion comes from the fact that the Augar review of higher and further education funding is due to report shortly. We do not know with certainty what it will say. However, if the rumours reported in newspapers are correct, I fear we are about to make another basic error. A view seems to be forming that HE and universities have got too big and FE and colleges too small. For me, this is a completely specious trade-off. The enormous cut in FE funding, which we have heard a lot about this afternoon—second only to the cuts in local government —was a consequence not of resources being transferred from FE to universities but of decisions made in the austerity period. The savings made in higher education from shifting the burden to student loans arguably mitigated some of the potential impact of cuts.

Universities have grown because more young people want to go to them. There may not be a market in the level of fees but there certainly is in the numbers of students. It therefore follows that we should tackle the genuinely huge problem of further education on its own terms and not think that it is about robbing one part of the system to support the other. Lots of students of all ages make a decision and, as others have said, they need to have the choices in front of them on a level playing field. A cut in university fees from £9,000 to £7,500—not even the £6,500 we heard from the noble Lord, Lord Sharkey—would have an enormous effect on universities, unless it is replaced. We know it would be regressive in its effects. In the case of Sheffield Hallam University, there would be a 21% drop in our income. That would be a huge and damaging change. The Augar panel has some very able people on it, not least Philip Augar himself, and I hope the rumours prove incorrect.

Finally, the Civic University Commission is an independent group looking at the role of universities in supporting their local places. For me, this is a vital and increasingly important role. It is relevant to this debate because what should happen at local level is collaboration between universities, places and further education to develop a provision based on the local needs of that area. That goes back to the original civic purpose for which universities were created. We launch our report on 13 February and I hope fellow Peers will be able to join us. One of the key issues we raised was the calamitous fall in adult education, something we have covered well today. This is not an inevitable decline but a direct consequence of government policy. If you go to Scotland or Singapore, you will see that they have maintained the investment in adult and part-time education. It can be tackled, and in our interim report we set out some practical steps to do this.

I genuinely hope that one of the outcomes of the very good report we are debating today, and indeed of the Augar review, is that we reverse this terrible trend that we have seen in recent years.

Photo of The Earl of Dundee The Earl of Dundee Conservative 5:20 pm, 16th January 2019

My Lords, I join others in welcoming the timely introduction of this debate, and I congratulate my noble friend Lord Forsyth of Drumlean.

I will briefly address a few prescriptions of the Economic Affairs Committee report: the need for greater encouragement of post-school options other than full-time university courses; the case within employment for building up apprenticeships in a steady and proportionate way; the need to improve financial support for students from poorer families; and—aside from the report, yet central to our theme—the imperative of adjusting present arrangements in the United Kingdom for international students.

On bridging the divide between full-time university courses and other options, the Government will tell us that this year, for the first time, maintenance loans are available to part-time university students; and that under their current review, they want to come up with new ways to promote flexible and part-time routes of study for all age groups. Laudable though these intentions be, it has to be cautioned that, without adopting certain recommendations before us, any government package runs the risk of not amounting to very much. For example, to enhance flexible learning—to which my noble friend Lady Harding of Winscombe drew our attention—the report is in favour of a credit-based, modular system allowing people to choose their own pace. Thereby, as instanced, credits attained by those studying a level 4 qualification would thus contribute towards, as well as lower the cost of, a full degree. Does my noble friend the Minister agree that such interventions would significantly reduce the current level of unfairness between the two separate post-school education groups?

Then there is the associated objective of a more even provision of loan and grant funding across higher education. The Government claim that they will decrease funding differences, assist transparency and remove barriers to choice, but will their plans really go any further than simply tinkering at the edges? That apart, to what extent is my noble friend prepared to adopt the proposed expedients of this report, already mentioned by my noble friend Lord Forsyth, such as a single regulator for all level 4 and above higher education and a single regulator for other post-school education of level 3 and below? The purpose of that would be a better distribution of funding to all forms of post-school learning, regardless of where and how it takes place.

On apprenticeships, the Government comment in their response to this report that,

“for too long apprentices have not received the quality of training we would expect”.

That is true, yet unfortunately it is also an understatement. For over a generation, and under both Labour and Conservative Administrations, our record of engagement —to which my noble friend Lord Baker referred—has consistently lagged behind that of other national competitors, to the deprivation of young people and to the detriment of our economy. Therefore, to catch up now, if that is our resolve, all the more so must we beware of soothing, half-hearted or even quick-fix offerings; and instead grasp the nettle along the lines of this report.

Ironically, one of the report’s concerns is that we may now, too much and too rashly, be approaching the opposite extreme. As the noble Lord, Lord Kerr, reminded us, the Government’s target of 3 million apprenticeships rushes into putting quantity above quality. The report warns also against a fresh level of incompetence likely to be caused by lack of clarity over the delivery and quality of apprenticeships. Does the Minister accept these strictures? In addition, does he concur that the Government must, as the noble Baroness, Lady Smith of Newnham, suggested, have the courage to follow the report’s advice that institutions should, where necessary, be abolished—in this case, the Institute of Apprenticeships, with level 2 and level 3 participants to be supervised by a new further education regulator and those at level 4 by the Office for Students?

The report advocates reforms to student loans and a widening of maintenance support, including, as stressed by the noble Lords, Lord Sharkey and Lord Kerr, reinstatement of pre-2016 means testing for loans and grants. Maintenance grants replacing maintenance loans causes poorer students to graduate with the largest debt, as the noble Lords, Lord Burns and Lord Bilimoria, have already pointed out. Does my noble friend, therefore, acknowledge that to switch back would be both fairer and more realistic—not least taking into account the extent of loans outlay being written off—given that most students do not fully settle their liabilities over the 30-year period?

It goes without saying that international students who stay in the United Kingdom benefit our economy considerably. However, in recent years, we have failed to sustain numbers against our national competitors, even in non-English-speaking countries that nevertheless and increasingly offer good courses in English. Does my noble friend believe that we should no longer classify international students as migrants and that to do so is as misguided as it is paradoxical in three main respects: first, they are not migrants; secondly, being so called often puts them off from applying to come in the first place; and thirdly, any political party eager to earn points for reduced immigration thereby adds to its own burden irrationally and unnecessarily?

For the United Kingdom and elsewhere, clearly there is an urgency for less inconsistent and greatly improved education opportunities and standards. Key to success is equitable treatment between national and international students, the steady building up of apprenticeships and, as guided by this useful report, robust adaptations of organisation and delivery.

Photo of Baroness Deech Baroness Deech Crossbench 5:26 pm, 16th January 2019

My Lords, how refreshing it is to have a report that takes a holistic view of higher education funding. From Lord Robbins onwards, we have had a series of reviews of university funding taking an overly market approach. In this report, astonishingly produced in under a year, we have a new attitude. It has pipped the Augar review to the post and is a perfect example of the good work that can be done by the committees of this House.

We have reached saturation point in undergraduate degrees and in international students. We are not treating the latter as well as we should; and when we have too many, they do not get the British university atmosphere that they came here to enjoy. If we rely too heavily on international students for income, our universities become vulnerable to a change in the taste for foreign study or restrictions placed on studying abroad by our main suppliers, such as China. More international students will eventually impact adversely on home undergraduate numbers through housing and teaching pressure.

Student loans are not working. Half will never be paid back. It was predictable from the start of the new system that many people would never earn enough to repay them. Indeed, it indicates to women that government policy makes it sensible to find a husband while at college and never work, or take the lowest-paying part-time jobs to avoid reaching the threshold for repayment. Outstanding student debt will reach £1 trillion by 2035, it has been said. The Student Loans Company has found that 78,700 former students who owe money have left the country owing an average of £15,000 each. A quarter are EU students, who will continue to be eligible for loans if they have started a course before we leave the EU. It will be no bad thing for them to be treated as being as financially responsible as other international students, who outnumber them year by year.

Tuition fees have to stay as they are. They have replaced government funding. A cut, as has been suggested, in fees for one student by, say, £1,000 a year, may result in a loss of millions by universities; the first economy they might make would be the valuable outreach and student support funds that have done so much to attract disadvantaged students and keep them on course.

As for the Corbyn election gimmick of abolishing fees, that would simply place university funding entirely in the hands of the Government. Government budgeting would soon mean universities or courses closing, numbers reducing and a reversal of all that has been achieved by way of social mobility in the past few years. Flexibility, as recommended in the report, is a good thing, but credit transfer is by no means the panacea. We have to recognise that there are differences in the quality of universities that make straight transfer inappropriate, and that not all subjects are taught in transferable chunks.

One area that is urgent and where all interested parties have called for reform is the restoration of maintenance grants, not loans. Students are apparently more worried about their living costs than about their tuition fees. Social mobility and diversity are not promoted by financial or other necessity, leading to studying at the local university and living at home. How easy it must be, yet disadvantageous, to live in one town, study there, marry there, work there and never get to meet youngsters from the rest of the country at the university of your choice. Upward social mobility is associated with moving to a large city and leaving one’s region of birth. In Wales, there is now a £1,000 per annum maintenance grant for all students and means-tested grants for living costs. If Wales can do it, will the Government consider doing the same for England?

I also put in a plea for special treatment for nursing and medical students, of whom we have too few. Given the shortage, I ask for their fees to be written off after a time in the profession and/or for them to receive a full maintenance grant. Will the Government take that step?

Recent reviewers have seen higher education merely in terms of economic or private benefit, and it is time we stopped doing that. The evidence shows that higher levels of education are linked to a range of positive social, well-being and cultural benefits for the individual, their families and society. The 2013 study by the Department for Business, Innovation and Skills waxed lyrical on this. I do not have time to quote it but it is worth a read.

Recognition of the wider benefits of higher education will place the debate about fees in a proper frame- work. This report achieves just that and I congratulate the committee.

Photo of Lord Tugendhat Lord Tugendhat Conservative 5:31 pm, 16th January 2019

My Lords, not only was my noble friend Lord Forsyth an admirable chairman of our committee but he also introduced the report in his opening speech in such a way as to cover all the salient points. Since then, other members of the committee have emphasised different points, with the result that if I gave the speech I had prepared, I would simply repeat what other people have said. Therefore, rather than do that, I will just pick out a couple of nuggets that I think have not received as much attention as some of the other points in the report.

Before doing so, however, I pay tribute to the contributions of those who were not members of the committee and who have greatly enriched the debate. Nearly all of them have spoken on the basis of considerable practical experience. In particular, I pay tribute to my noble friend Lord Baker. Whereas we have been reporting on problems, he spends much of his life seeking to resolve them. It is very fortunate that in this House we have people who are still engaged in practical work of that kind.

I should also like to take up the point raised by my noble friend Lord Willetts when he talked about the diverse missions of different universities. Certainly, I agree with what he said about that and I suspect that all the members of the committee agree with him as well. I do not see a disconnect between what we have written in the report and what he said.

I also agree very much with the noble Lord, Lord Burns, about the success of the university sector. I have had some personal experience of it. At different times, I have been chairman of the development committee of my Cambridge college; I have been on the council of Imperial College with the noble Lord, Lord Kerr; and, for many years, I was chancellor of the University of Bath. So I know very well how successful British universities have been and I pay tribute to that. None the less, looking at the university sector at the moment, it is difficult to escape comparisons with the financial sector in the run-up to 2008; there is the same feeling of a runaway train. The evidence is clear; there is the high proportion of graduates leaving university who are unable to get graduate-level jobs and the extraordinary grade inflation to which attention has been drawn. I was at university a very long time ago but, in those days, first-class degrees were in low single figures. I remember when my noble friend Lord Howell got a first in economics in a department headed by Professor Kaldor; it was something that everybody commented on and has led me to admire him ever since.

Then of course we have universities offering places to those with quite inadequate qualifications, a point on which the universities’ union recently commented. In addition there is, on the one hand, a mad scramble for income, reflected in what I have just said, and, on the other, the phenomenon of universities getting ever deeper into debt. There was an estimate in the Times recently that the total debt of the sector is over £10 billion. One small, unnamed institution has already had to be bailed out; I hope it will not turn out to be the Northern Rock of universities. These are worrying aspects, which perhaps did not attract as much attention in the debate as other points.

The shortage of people with sub-degree craft and technical qualifications on the one hand and the superabundance of people with honours degrees on the other, while a matter of economic consequence, is not only that. It leads to disappointed expectations, frustrations and unemployment among young people. This in turn gives rise to a variety of social problems; we should see the mismatch in that context, as well as in respect of the economic waste.

Finally—this also bears on the point I have just made—I should like to emphasise the need, to which we drew attention in the report, for young people to receive good advice on whether they go into one form of higher education or another, which courses they should follow and which institutions they should try to get into. This is a terribly difficult problem, for which schools do not adequately provide at the moment and where there is, perhaps, an opportunity for outside help. I hope our report will have drawn attention to some of the issues that schools need to take into account in advising those going on to the next stage of their lives.

Photo of Baroness Garden of Frognal Baroness Garden of Frognal Deputy Chairman of Committees, Deputy Speaker (Lords) 5:38 pm, 16th January 2019

My Lords, as those winding up, the noble Lord, Lord Watson, and I may be entitled to speak for up to 10 minutes but I shall attempt not to trespass for too long on your Lordships’ time. I add my thanks to the noble Lord, Lord Forsyth, and his committee for producing such a thought-provoking and authoritative report. Reading it, I felt nostalgic for the ill-fated Liberal Democrat policy of no fees in the 2010 election—perhaps I should not remind noble Lords—which we had fully costed. I mused on how this report would have read if we had followed that policy. I cannot help feeling that it would not have been any more depressing than the picture before us here. We would have saved a deal of money on the Student Loans Company, administration and tracking down non-payers, and of course we would have avoided the £1.2 trillion of debt that will face Governments in years to come. I am glad that my noble friends Lord Sharkey and Lady Bowles talked about fees and funding, so I will not go further on that. And we are where we are; it is no use hankering for what might have been.

The timing of the Government’s response has meant that it has kicked into touch many of the questions pending on the Augar review. I am sure we will all be watching with even more interest the findings of that review, which is due to report in early 2019. Perhaps the Minister can give us a timescale for the report. Universities UK considers the review to be an important opportunity to ensure that all post-18 routes are properly supported and accessible, particularly to those from disadvantaged backgrounds, and that our post-18 system is effective at meeting current and future skills needs.

We see from the report that skill shortages, as the noble Lord, Lord Baker, has set out, are particularly acute in the gas, electricity and water industries, construction and manufacturing. To that I think we could add hospitality, agriculture and indeed STEM teaching posts; we are woefully short of STEM teachers. Access to any higher or further education should be fair, accessible and progressive, should support national and local productivity and economic growth by providing a sufficient supply of higher-level skills, should be stable and sustainable, with the cost shared between taxpayers and graduates—I will come back to that later—should be funded to cover both living and tuition costs, and should be easy to understand and transparent. Those are all eminently sensible conditions.

The noble Lord, Lord Bilimoria, spoke about funding inconsistencies. We also heard about funding from the noble Baronesses, Lady Deech and Lady Harding. Like my noble friend Lady Smith, I paid no fees for my Oxford degree, although curiously we did have to pay if we wanted a certificate so I still do not have one of those.

Photo of Baroness Garden of Frognal Baroness Garden of Frognal Deputy Chairman of Committees, Deputy Speaker (Lords)

The noble Lord can say that; obviously I could not possibly comment, not being Scottish.

There is so much in this report to applaud and support. The noble Lord, Lord Tugendhat, referred to the runaway train of universities. I shall turn to further education, of which we have already heard much. I note that the National Union of Students has declared that the FE sector has become starved of requisite funding, and it strongly supports the recommendation that the Government explore restoring teaching funding for further education colleges so that they can cover costs and stimulate demand for courses at Levels 4 and 5. I agree with the noble Lord, Lord Layard, in his remarks on FE. I was hosting an FE event at lunchtime with scores of staff and learners, including those from specialist colleges. It was a stark reminder of the breadth of provision that colleges serve and the dedication of the staff.

What about vocational skills—which we now have to call “technical”, although craft skills are vitally important too? They have nothing like the support and status that they deserve. I was taken with the quotation:

“There’s an oversupply of history graduates and an undersupply of geeks”.

Let’s hear it for the geeks of this world. I was also glad that the noble Baroness, Lady Jenkin, brought up social skills and volunteering and organisations such as City Year, which are such an important part of education.

We certainly share the concerns over part-time and adult education, which have been raised all around the House and which, as the report highlights, have seen a drastic and enormously damaging decline. I should declare an interest as having worked for City & Guilds for 20 years, and I am a vice-president of the institute. I have also recently had the honour of being awarded a fellowship by Birkbeck. Birkbeck is one of the great pioneers of part-time, adult degree-level education. Like the Open University, it has been transformative for so many people who may have missed going to university from school or who simply wished to continue learning.

Surely continuing to learn after school should be something that any Government should support and encourage, yet we have seen drastic reductions; the noble Baroness, Lady Harding, quoted a figure of 200,000 fewer part-time students in higher education in 2016 than in 2010. Both Birkbeck and the OU are facing difficulties and adult learners are facing a loss of opportunity. We have heard from my noble friend Lord Sharkey about the loss of continuing education departments in universities, and the noble Lord, Lord Burns, talked about the decline in part-time education. This surely has to be a bad thing for our country.

The noble Lord, Lord Willetts, who has been so influential in this area, spoke about all the areas that he knows well. My noble friend Lord Sharkey quoted his evidence, and I shall quote from it further. He said:

“The evidence is that the loans for part-time students have not worked. There has been low take-up and people have been put off. We need new mechanisms for helping adults to study part-time”.

We do indeed. There is plenty of evidence that adults are going to be risk-averse when taking out loans.

Part-time distance learning has flexibility at its core. It supports those in work to earn and learn, gives life-changing study choices to people of all ages and backgrounds and is a key driver of social mobility. The Government must recognise that part-time study in higher education is an essential part of the educational landscape and critical to adult reskilling. We know that there are not enough young people coming into the workforce to fill the alarming skills gap and as we lose EU workers, who feel increasingly unwelcome in the current climate, the shortages will become more acute and reskilling adults will become ever more essential. Yet what are the Government doing to encourage this? Precious little.

Fee loans should be made available to enable adults to achieve a second Level 4, 5 or 6 when that second qualification is part of a career plan. There should be greater availability of fee and maintenance grants, as we heard from various sides, to ensure that those who have less resource are not prevented from accessing education. We cannot afford to exclude those who may have the skills and aptitude to learn, but not the funds. The noble Baroness, Lady Finlay, spoke vividly about the difficulties of those with few means, as did the noble Lord, Lord Kerslake, who spoke of the unfairness of the system.

We welcome the widening maintenance provision for 16 to 18 year-old learners, especially where their preferred provision does not exist in their locality. If T-levels are to be made available to adult learners, which was the original policy intention, then appropriate maintenance provision should be available to support them on the programme. I have to say we have some real concerns about T-levels, particularly in rural areas where access to the compulsory work experience may not be available.

We have long advocated a return to the individual learning account, which would create a learner-led, post-18 funding system. Both these and the subsequent individual training accounts have been withdrawn, yet there is great merit in a system which incorporates commitment from learner, government and employer to ensure that people can progress. Maladministration meant that ILAs went wrong when introduced, but the system is sound and should be further explored. Do the Government have any intention of looking again at ILAs? They should create a learner-led, post-18 funding system that invests in all adults equally and puts learners and future learners in the driving seat through an equal lifetime entitlement.

The noble Lords, Lord Kerr and Lord Forsyth, and the noble Earl, Lord Dundee, all talked about apprenticeships. These should be viewed by young people as just as valid an option as the academic route of sixth form and university. For this to happen, we need a change to school ratings, where the pressure on GCSEs and A-levels is intense. As long as schools are measured—and, indeed, funded—on academic criteria alone, they will inevitably strive to achieve in those areas, to the detriment of work-based achievement. A recent IPPR report shows evidence that the amendment introduced by the noble Lord, Lord Baker, to the Technical and Further Education Act 2017 is not being respected by schools; fewer than two-fifths find time to allow colleges, UTCs or alternative providers to explain to teenagers the varied options which might suit their skills and interests better than university.

Schools Ministers must take long, hard looks at the incentives which encourage schools to meet not the needs of students but the needs of largely university-educated Ministers and officials, who have little understanding or respect for academic alternatives. I urged those with FE backgrounds to go into politics and the Civil Service so that we can attempt to redress that balance. In coalition Government, I tried to persuade Michael Gove that schools should be encouraged to celebrate their apprenticeship leavers as much as their university entrants, but he could not be persuaded. In his ministerial team, I was also struck that I was the only person around the table who had ever been a teacher and who had any first-hand experience of vocational and further educational colleges. We need a change in government and we need the Government to end the anomalies in funding between FE and HE.

If this report can address the generations-old inequality of standing between academic and vocational education, it would be of immense advantage to individuals, the workforce and the country. In these uncertain Brexit days, we cannot afford to ignore measures to generate skills and knowledge that are vital for the UK.

I once again thank the noble Lord, Lord Forsyth, and the committee for such a valuable report and I look forward to the Minister’s reply, although I am sadly conscious that his remarks are likely to refer us to the review.

Photo of Lord Watson of Invergowrie Lord Watson of Invergowrie Shadow Spokesperson (Education) 5:49 pm, 16th January 2019

My Lords, this debate has done justice to the quality of the Economic Affairs Committee and its many recommendations. I commend it and the chairmanship of the noble Lord, Lord Forsyth, as well as his introduction to the debate.

The committee identified the nub of the issue: growth in higher education over the past two decades has been in stark contrast to the number of students graduating with qualifications at levels 4 and 5. Rates of teenage literacy in England are lower than those of other OECD nations. Indeed, it is the only nation in the OECD in which rates of literacy for 16 to 24 year- olds are lower than those of people aged 55 and over. We know of the need for an advanced skills economy. If people lack basic reading skills, they will have great difficulty gaining the work skills that the economy so badly needs. The National Audit Office has highlighted a lack of STEM skills as a particular issue. The OECD characterises this as a cultural problem in the UK, with little having changed over the past four decades.

The Government make much of their investment in people’s skills, yet public spending on education as a share of GDP has fallen and is projected to continue falling to below 4% in 2020. Government spending on education is heavily front-loaded. Education spending per student reaches a peak at the age of 15 and falls until a young person reaches 18, at which point it increases again for those who take a full-time university course. Today’s young people will work until well after the age of 65, but they will generally complete their education by their early 20s and rarely return. That is why lifelong learning will be at the heart of the national education service that Labour will deliver in government: young people have rising aspirations, but the education system seems to judge large numbers of them to have failed at the ages of 16 and 18. Forty per cent of young people do not reach level 3 by the age of 19, and 15% have not even achieved level 2.

Part-time higher education will, as many noble Lords said, be a determining factor in confronting those issues, as well as the other major economic challenge that the UK faces of low productivity. Yet, as the committee’s report stresses, part-time higher education is in crisis, with a continuing fall in part-time and mature students largely the result of the huge increase in tuition fees since 2012, as highlighted by the committee. With Labour’s pledge to end tuition fees, that barrier will no longer face those who want to combine work with adding to their skills. I am afraid I must disagree with the noble Baroness, Lady Deech, on that point, but I welcome her support for another of our policies: the restoration of maintenance grants.

It is important that the committee’s recommendations, and any government decisions in response, avoid unintended consequences on the provision and uptake of part-time study in England, and the support that it gives to students at any age and from any background. For instance, if Philip Augar and his panel really are assessing a minimum grade required to access loans, as reported recently in the Sunday Times, it would have potentially severe implications for the Open University, which has no minimum entry requirements.

Flexible and affordable lifelong learning, such as part-time distance learning, is essential for those whose skills development needs to fit around a busy working and family life. Part-time distance learning also tackles directly one of the biggest problems facing regional economies: the skills drainage of those who must leave their communities to study. As the Open University says in its briefing to noble Lords for the debate, there are no geographical higher education “cold spots” for part-time distance learning.

To tackle one of the barriers to study—halting the decline of part-time and flexible learning—the committee recommends the establishment of a credit-based system, whereby people can learn in a more modular way and at their own pace, which I think was just advocated by the noble Baroness, Lady Garden. We support that and want to see such a system, which would provide support for study costs to those who may be unable initially to commit to studying towards a full qualification.

The committee was scathing in its assessment of the current delivery and quality of apprenticeships. That is a concern that we certainly share, although we believe that calling for the abolition of the Institute for Apprenticeships is somewhat premature. There have been long-standing concerns that vocational and technical routes are seen as somehow second-rate. Taking an apprenticeship should be a choice valued as highly as any other pathway. The Government say in their response to the committee’s report that they agree with that. Yet, as the noble Lord, Lord Forsyth, said, they continue to incentivise head teachers to retain as many of their pupils post-16 for reasons of funding, rather than ensure that young people are guided towards the route most suited to them—and, crucially, most suited to the future needs of the economy. The Government’s careers strategy should be working towards that, but it has been frustrated by some head teachers who continue to make it difficult for employers and further education colleges to gain meaningful access to their pupils. The noble Viscount might like to say how the Government will ensure that problem is dealt with.

We also agree with the committee that the Government should abandon their target of 3 million apprenticeship starts by 2020. Even the Institute for Apprenticeships now admits the target will not be hit and the focus surely has to shift from quantity to quality. We should better align apprenticeships with the needs of employers and the labour market, not just as it is today, but as it is projected to develop. The latest CBI education and skills survey stated that 73% of employers anticipate needing more employees with management and leadership skills in the next three to five years. Degree apprenticeships, which the noble Lord, Lord Baker, welcomed, have a role here. Applied learning is an increasing trend and a recent Chartered Management Institute survey shows that increasing numbers of parents—who, of course, are the key influencer in young people’s education choices—now favour a degree apprenticeship with a major employer over a traditional university degree.

I acknowledge the concerns of the noble Baroness, Lady Harding, on management apprenticeships. I have my own doubts, but yesterday I attended an event in Parliament on chartered management degree apprenticeships. The committee states in its report that some employers are “gaming” the system by investing in management apprenticeships, or that management apprenticeships are just rebadged MBAs. I am sure that will be true in some instances, but it would be unwise to generalise. Most management apprenticeships are learned at level 3, and the latest statistics show that level 6 apprenticeships—the chartered manager degree apprenticeship—are providing a route into management and leadership positions for people who might otherwise be excluded. Of those who started apprenticeships in 2017, over half are women, over a third were under 25 and two in five came from more disadvantaged areas. I simply say that there is more to that story than has hitherto been given attention.

The contrast was highlighted yesterday between a 21 year-old who completes a degree at university but has little or no work experience, has up to £50,000 in debt and can only rent their home, and a 23-year-old degree apprentice who finishes with an equivalent degree, but with five years’ work experience, no debt and savings towards a deposit on a first home of their own. Degree apprenticeships make learners think more like employees and employees more like learners. It is a system of earning and learning that could be expanded to the advantage of thousands of school-leavers.

Two months ago, the Government announced an expansion of accelerated degrees—a welcome step towards creating more choice and flexibility in higher education—but will it be matched with the funding to make it attractive enough to young people, as well as those with families and regular jobs? In their response to the committee’s report, the Government say that the Office for Students will provide £2 million to support development of accelerated degrees in the current academic year, but they say nothing about thereafter. There will need to be that amount and more on a continuing basis to ensure that these types of degree become more widely known and accepted; otherwise there is a danger that we could see the main beneficiaries being youngish people already in secure jobs and possibly even with a first degree, which surely cannot be what the Government intend. I hope that the noble Viscount will set out their position on this point.

The Government also say in their response, in this case on flexible learning:

“FE colleges can play a vital role for their … communities”.

That must have caused head-shaking by many in the sector, because further education colleges already do that to good effect, although it is despite rather than because of government policy. As acknowledged by the noble Lord, Lord Willetts, further education is the only part of the education budget to have had continued cuts since 2010. Over that period, funding for students aged 16 to 18 has been cut by 8% in real terms and over the last 10 years colleges have had to deal with average funding cuts of around 30%, so it should not come as a surprise to learn that the numbers of part-time higher education students at colleges, who are typically over 25, have declined by more than 10,000 over the last four years.

The committee rather timidly suggests that the Government should merely,

“explore restoring some teaching funding”, for FE colleges to,

“stimulate demand for courses at Levels 4 and 5”.

The Government surely need to go much further than that if the imbalance in higher education is to be meaningfully addressed, yet even that modest recommendation is dodged by the Government in their response to the committee, with the suggestion that it will be considered as part of the review of post-18 education and funding. That has been a convenient bolthole in the Government’s responses. By my calculation, that was one of 14 such deflections to the review panel in the Government’s 14-page response.

Much is resting on the shoulders of the Augar review panel when it reports next month. We can only hope that it will largely reflect the committee’s recommendations in its own. The noble Viscount might prove me wrong, but I suspect that is not a hope that the Government will share.

Photo of Viscount Younger of Leckie Viscount Younger of Leckie Lord in Waiting (HM Household) (Whip) 5:59 pm, 16th January 2019

My Lords, I am pleased to respond to this debate on treating students fairly, the second report from the Economic Affairs Committee chaired by my noble friend Lord Forsyth of Drumlean. I echo the appreciation expressed by this House for the work of the members of the committee in producing the report. The breadth of its scope is impressive and the process for collecting evidence was a substantial undertaking. I thought that this would be an excellent debate and I have not been disappointed, with some constructive and thoughtful speeches, not least from my noble friend Lady Jenkin on FTSA and the importance of social action.

The Government welcome the report and agree that for too long young people have not had a genuine choice in what and where they wish to study. I am sure that your Lordships will agree that we want a country where everyone, no matter where they are born or grow up, has the opportunity to fulfil their potential. It is essential for there to be clear pathways for young people into and through both further and higher education, and then on into employment—different but equal routes to rewarding careers.

Parity of esteem has been mentioned by many noble Lords in this debate, including the noble Lord, Lord Kerr, the noble Baroness, Lady Smith, and the noble Baroness, Lady Finlay. Let me say at the outset that it is what the Government are saying, too, and what we are working on. To achieve this, all school leavers need access to high-quality careers advice if they are to make the most of their skills and know about the full range of opportunities available. My noble friend Lady Harding is right about the need to champion this and bring parents on board. The committee is right that for too long there has been too much focus on the traditional university route. That is now changing—I make the point again.

Let me start with the basics. Our Careers Strategy, published in 2017, sets out a long-term plan to build a world-class careers system. This emphasises the responsibility of schools and colleges to provide their students with a full picture of their options. Under a law introduced by this Government last year, known as the Baker clause, head teachers must allow technical education and apprenticeship providers—that is, employers—into their schools to talk to pupils about their offer. I am concerned by the remarks made by the noble Baroness, Lady Garden; I will follow up on what she has said, check on the figures she has produced, write to her and place a letter in the Library.

Like many in the Chamber, I echo the remarks made by my noble friend Lord Baker about the idea, the development and the progress of UTCs. He has been resolving problems in education, as my noble friend Lord Tugendhat said.

To improve high-quality technical options that offer credible alternatives to traditional academic qualifications, this Government are introducing T-levels. Their creation represents the biggest reform of post-16 education since A-levels were introduced 70 years ago. In addition, we have maintained our commitment to delivering high-quality apprenticeships. Apprenticeships provide a work-based alternative to academic study, ensuring that people have the skills and training needed to enter the job market and progress in their careers. I will say more on this subject later.

Compared to other countries, there is also a large gap in the number of people who study higher-level technical skills—the area of study between A-levels or T-levels and a degree. Only 7% of learners aged 18 to 65 are studying for these higher technical qualifications. This compares with 20% in France and Germany, and 35% in Canada. That is why the Secretary of State announced last month that we will establish a system of employer-led national standards for higher technical education. These will be based on existing apprenticeship standards, and will be available from 2022.

Eloquent speeches were made by my noble friend Lady Harding and the noble Lord, Lord Bilimoria, on the question of the digital revolution, based—I imagine—on their long experience of business, which I appreciate. A few speeches touched on the importance of lifelong learning, and we have had two recent valuable debates on this subject. The noble Baroness, Lady Garden, touched on this as well. We recognise that the labour market is continually changing, with the demand for skills. Technological progress and automation will help drive that change.

The National Retraining Scheme will aim to drive adult learning and retraining, and will be a big part of the department’s response to technological progress; £100 million has been committed to start the rollout of this particular scheme.

In the area of higher education, the Government are committed to developing and delivering policies to ensure that all students, regardless of their background, can make more informed choices about their higher education. Informed choice is a fundamental part of the new regulatory landscape and is crucial for ensuring that prospective students make decisions that are right for them. We are working to improve the information that is available and to ensure that students have better access to it. Before Christmas, the Government awarded contracts to two tech companies as part of the higher education open data competition, to develop digital tools that present graduate outcomes data in an accessible and engaging way.

The Office for Students will play a key role in improving and supporting informed choice, through a student information strategy and through a new online student information resource tool that will replace Unistats by September 2019.

Let me now give an update on our major review of post-18 education and funding, which relates directly to the committee’s recommendations on student finance. A number of noble Lords, including the noble Lords, Lord Bilimoria and Lord Kerslake, asked questions in this critical area. Partly as a reminder, the review is considering a number of important questions, specifically,

“how we ensure that tertiary education is accessible to everyone, from every background; how our funding system provides value for money, for both students and taxpayers; how we incentivise choice and competition right across the post-18 sector and how we deliver the skills that we need as a country”.

The independent panel of experts supporting the review has undertaken an extensive programme of stakeholder engagement and evidence gathering, to which the Economic Affairs Committee’s report is a valuable contribution. We remain open-minded in our approach and do not want to pre-empt the outcome of the panel’s work at this stage. The noble Baroness, Lady Garden, may have guessed that I would come to that particular conclusion.

However, I do have more to say, and I now turn to the comments made by the noble Lord, Lord Sharkey, on maintenance loans. We increased support for full-time students’ living costs by 3.2% in 2018-19, with a further 2.8% in 2019-20 for students living away from home and studying outside London. This is the highest on record.

While some of the report’s specific recommendations on issues such as maintenance support will be subject to the outcome of this review, this should not detract from the progress made in other areas, including higher technical education and apprenticeships. As set out in their terms of reference, the independent panel will report in early 2019, before the Government conclude the overall review. The Government intend to move swiftly to improve the post-18 system once the review has concluded. Implementation timetables will depend on the review’s recommendations and any legislative and operational requirements. The Secretary of State has given his commitment to write to the committee once the review has been completed.

Turning to a point raised by my noble friend Lord Baker, who stated that further education for college funding had been cut far too much since 2010, and also in response to issues raised by the noble Lord, Lord Layard, we have protected the base rate of funding for 16 to 19 year-olds until 2020, to make sure that every young person has access to the education they deserve. T-levels will attract an additional £500 million of funding per annum when they are fully rolled out.

The noble Lord, Lord Layard, raised a few other issues on apprenticeships. We have increased opportunities in technical and professional education by doubling—in cash terms—the funding available for apprenticeships in 2019-20, when compared with actual levels of spend in 2010-11. Apprenticeships are supported by the Institute for Apprenticeships, which I will talk more about later. Employers are developing new, industry-recognised standards at levels 2 to 7. Traineeships provide work experience, work preparation training and English and maths for those who are not ready for work or who are on an apprenticeship; 62% progress to apprenticeships, employment or further training.

I will conclude in this area by making some rounded comments in response to the noble Lords, Lord Sharkey and Lord Kerr, and my noble friends Lord Willetts and Lady Harding, who all commented on student finance, maintenance loans and interest rates. We have had a great number of valuable and insightful comments on student finance, for which I am grateful; they were timely and welcome. As I have outlined, the review of post-18 education is carefully considering these issues. It is essential we get this right for future generations. And I will ensure that today’s feedback is passed on to the independent panel. The Secretary of State has already agreed to write to the Economic Affairs Committee once the review concludes.

I want to move on to higher education and touch on the market. I was pleased that the noble Lord, Lord Burns, pointed out some favourable trends in higher education, in addition to his constructive points this afternoon, because higher education has undergone a period of sustained expansion. Nearly one in two of 18 to 30 year-olds in this country will now go to university. As he said, the system of fees and loans has allowed us to remove number controls and open up opportunities for students. Eighteen year-olds from disadvantaged backgrounds are 52% more likely to enter full-time higher education now than in 2009.

My noble friend Lord Willetts is absolutely right to say that universities offer a range of distinct missions. The diversity of our higher education sector is one of its biggest assets—from the small and specialist to the research-intensive and degrees taught in further education colleges. I noted the point made by the noble Baroness, Lady Finlay, who gave her own example. This diversity is essential to social mobility and our world-leading reputation, and one key thing is essential to it: assuring a high-quality offer and experience for students. That is exactly why we created the Office for Students, which has an explicit role to uphold quality and the value of degrees over time. I am sure that my noble friend Lord Willetts had this in mind when he did so much to pave the way for greater diversity in universities, with greater choice on offer.

In this context, the Higher Education and Research Act 2017 introduced reforms to increase competition between providers and promote greater choice for students. The Act laid the foundations for a new regulator for the higher education sector: the Office for Students. The OfS is focused on ensuring that any student with the ability to benefit from higher education is supported in doing so, that they have a positive experience and that they receive worthwhile outcomes. Value for money is of particular importance to the OfS. One of its duties under the Act is to have regard to the need to promote value for money in the provision of higher education by English providers.

My noble friend Lord Forsyth and the noble Lord, Lord Burns, raised an important issue: what the Government are doing about grade inflation. I know that I handled an Oral Question on that not so long ago. Our reforms must make sure that students’ hard-won qualifications continue to hold their value. The OfS has been asked to deal firmly with any institution found to be inflating grades unreasonably.

My noble friend Lord Willetts asked about having a pupil premium at universities. I agree that the idea of a pupil premium is interesting but we are already making great headway with social mobility. In 2018-19, universities and colleges plan to spend more than £860 million on measures to improve access and success for students from disadvantaged backgrounds. This is up significantly from £404 million in 2009. As he knows, the OfS also has a statutory duty to promote equality of opportunity for disadvantaged and underrepresented groups. I will certainly take this idea back to the department.

I thank the committee for bringing to the attention of the ONS, and the Treasury Select Committee, the need to re-examine the treatment of student loans in the public finances. The noble Lord, Lord Kerr of Kinlochard, my noble friend Lord Forsyth and the noble Baroness, Lady Bowles of Berkhamsted— who, by the way, is clearly something of an expert in this area—spoke on this point. In response to the recommendation, the ONS has decided that, due to the income-contingent nature of student loan repayments, the current treatment does not reflect the economic substance of the assets. My noble friend Lord Forsyth and the noble Baroness, Lady Bowles, eloquently spelt out the details of this. As she said, it has therefore been decided to split the loans into a genuine lending portion—the loan asset—and a spending portion, which is the amount we expect not to recover. If you like, it is lend versus spend.

The ONS has decided that the best way to reflect student loans within the national accounts and public sector finances is to treat part of these loans as financial assets and part as government expenditure. The ONS cited the committee’s report as one of the reasons for carrying out its own review. The Government will consider the ONS report and work with it to establish a methodology for implementing any necessary changes to be included in the new guidance. I thank the committee again for its contribution in this area.

The committee also emphasised the importance of flexible learning as a means by which people access and achieve higher education qualifications. We recognise that a diverse offer improves the choices available to potential students. My noble friends Lady Harding and Lord Dundee made points about the credit system, which has been designed to boost flexibility, particularly in adult part-time study. She also made insightful comments on flexible learning, in particular the importance of credit transfer and the role of the Open University. We have already given the Office for Students the power to promote student transfer and in 2017-18 and 2018-19, the Government have provided £29.5 million each year to support part-time study at the Open University.

My noble friend Lord Willetts and the noble Lord, Lord Sharkey, spoke about part-time students. The Government recognise the importance of studying part-time and the benefits that can bring to individuals, employers and the wider economy. We have already made a number of changes to support part-time and mature learners. This academic year, for the first time ever, part-time students can access full-time equivalent maintenance loans. This issue crops up in the Lords on many occasions and we firmly take note of its importance; this is very much a work in progress.

Let us return to apprenticeships, as I promised. In 2015, the Government set an ambitious goal of achieving 3 million apprenticeship starts by 2020. This is still our ambition but we remain steadfast in our view that we will not sacrifice quality for quantity. We want to see 3 million quality apprenticeships; we have already seen 1.5 million starts to date, providing more opportunities for people of all ages and backgrounds. The committee pointed to Ofsted’s findings on insufficient off-the-job training and apprentices not being able to apply their learning at work. In the previous academic year, there was a nine percentage-point increase in the providers that Ofsted found to be good or outstanding for apprenticeships. We agree with the committee that apprenticeships should have parity of esteem with other routes, as I touched on earlier. To ensure this, we have introduced 390 new industry-designed apprenticeship standards to replace the old frameworks that employers told us were not equipping apprentices to do the job. By August 2020, all new starts will be on these new standards, meaning that employers and apprentices can be assured about the quality of training they are getting.

My noble friend Lord Baker spoke about degree apprenticeships and having more degree apprentices because that is where the jobs are. There were 10,880 starts at levels 6 and 7 in 2017-18, over six times as many as in 2016-17. In addition, over 70 new high-quality apprenticeship standards are now available at level 6+. UCAS and the National Apprenticeship Service have developed a higher and degree apprenticeship vacancy finder to consolidate many of these opportunities in one place. In November, we published thousands of vacancies from various employers starting in 2019.

We established the Institute for Apprenticeships to ensure quality throughout the apprenticeship system. Given some of the comments made, I felt it would be wise to spend some time on this. Its responsibilities include: developing and maintaining quality criteria for the approval of apprenticeship standards and assessment plans; and supporting the development of standards and assessment plans by employer groups, and reviewing and approving them. The institute has supported the delivery of new standards. We have seen strong uptake by employers, with 44% of all starts on standards in 2017-18. It has established route panels of industry leaders to ensure that each apprenticeship it approves meets industry requirements and provides apprentices with full occupational competence on completion. It has also started to build its capacity in readiness to expand its remit to T-levels in 2019.

The IfA is supporting the construction sector to develop apprenticeship standards at all levels, from bricklayer at level 2 to architect at level 7. Contrary to comments made by some, including my noble friend Lord Dundee, the institute is a new and developing organisation that plays a vital role in creating quality apprenticeships that meet industry needs. We do not agree that it should be abolished. It should be given time to continue its focus on improving the quality of our apprenticeship and technical education offer to young people. I was glad that there was some support for this from the noble Lord, Lord Watson. Employers have been positive about the institute. For example, GlaxoSmithKline has commented that working with the institute has been very positive and that relationship managers have given excellent support along the way.

The noble Lord, Lord Kerr of Kinlochard, spoke about the slow speed of progressing standards. I accept that some while ago there were some problems in that area, but the institute’s Faster and Better programme has already resulted in a significant improvement in the time taken to approve standards.

The noble Baroness, Lady Smith of Newnham, spoke about EU migrants in the UK filling the UK skills gap. While I am aware of the need to continue welcoming EU and non-EU migrants to the UK to fill the skills gap, this is why there needs to be no limit on the number of international students who can come to the UK to study. This is a matter of long-standing government policy, as she will have heard me say previously in this Chamber.

The noble Lord, Lord Bilimoria, asked about the financial sustainability of higher education providers in the context of Brexit, and the possibility of providers needing to accept more international students. We are working closely with the Office for Students, which monitors and assesses the financial sustainability of English higher education providers, and will monitor the impact of Brexit-related changes on providers and the sector. The Government recognise the important contribution of international students, both financially and culturally, which is why there is no limit on the number who can come to the UK to study. I sound like a long-playing record, but I wish to say that again.

The noble Baroness, Lady Deech, asked whether the Government will provide relief on tuition fees for medical and nursing students, which is a fair point. The number of medical places in England is increasing by 1,500 from 2018 to 2019. This represents the largest ever expansion of medical training in one year. The Government provide significant investment in the education of medical students, because we recognise the importance of this workforce in the NHS. The post-18 review will consider how students and graduates contribute to the costs of their studies—including the level, terms and duration of their contributions—while maintaining the link that those who benefit from post-18 education contribute to its costs.

I am aware that time is running on and certainly wish to write to my noble friend Lady Jenkin on FTSA. Having mentioned it earlier, I owe her a proper reply to her point. My noble friends Lord Baker and Lord Forsyth raised a question about the recommendation to restore funding to further education colleges for levels 4 and 5. Last year we launched a review of classroom-based technical education at levels 4 and 5, which aims to address the intermediate and higher skills needs of the economy by ensuring that learners have high-quality, accessible and attractive study choices at levels 4 and 5.

To conclude, when future generations and historians look back, it is my sincere hope that they will recognise that this as a pivotal moment when our country took bold steps to provide credible routes for technical education, while maintaining our place as home to the some of the world’s finest universities. This is an endeavour at the heart of our nation’s future prosperity and success. Once again, I offer my deep gratitude to my noble friend Lord Forsyth and the committee for bringing their wealth of experience to this area.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Chair, Economic Affairs Committee, Chair, Finance Bill Sub-Committee 6:23 pm, 16th January 2019

My Lords, shortly after the committee had concluded its report, the Prime Minister asked me to go to No. 10 to discuss it. In the waiting room the words that she spoke on the steps of No. 10 after she was elected, about a country that works for everyone, are framed on the wall. I said to her that this report goes absolutely with what she wanted to achieve, and she said that that was indeed the case. What an opportunity for any Secretary of State for Education who takes the trouble to read this debate: there is all this unanimity across the Chamber on what needs to be done, and the report sets it out. I am most grateful to my noble friend Lord Younger for his very courteous and constructive response.

I understand about the Augar review and the inability to respond, but Members will be aware that the Augar review is simply advisory. The decisions will be taken by the Department for Education, and any Secretary of State for Education has a huge opportunity—I very much look forward to seeing the response to the Augar review—in wasting not a minute more in making the changes necessary. For every month and year that goes by, another cohort loses out on opportunities to which we all agree it is entitled.

I thank everyone who has spoken in the debate—time has gone on so I shall not refer to anyone—and made a contribution. I thank my committee, and my noble friend Lady Harding for pointing out that I do not tell the committee what to do. It is a joy to chair this committee; it is always a joy to be surrounded by people who are better informed and brighter than you. This report was unanimous on a controversial area. The way forward is clear: I hope the Government will see the signposts and take that way.

Motion agreed.