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
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.