I beg to move amendment No. 247, in

clause 22, page 8, line 35, leave out 'loans or other payments'.

With this it will be convenient to discuss amendment No. 257, in

clause 22, page 8, line 35, leave out 'loans or other payments' and insert 'or loans'.

It is a pleasure to serve under your chairmanship again, Mr. Hood.

We now come to a key clause, and I trust that we shall discuss some of the principles behind it in the clause stand part debate. Clause 22 provides for the Secretary of State's powers of intervention. For the first time, he will have the power to direct the universities' affairs and to set out rules that will govern how they seek out their future students, and that debate will follow shortly. The amendments, however, are designed to probe the Secretary of State's powers to impose financial penalties on institutions that do not comply with the plans set out in the Bill, as well as the exact nature and scope of those penalties.

The clause refers to the Secretary of State's power

''to impose a condition requiring that body''—

a funding body—

''to impose a condition under section 23 in relation to any grants, loans or other payments made by that body under section 65 of the 1992 Act''.

The amendment is intended to establish what the Government mean by

''grants, loans or other payments''.

That might sound like a superficial issue, but it relates to an important part of the higher education system. It also raises concerns about many of the things that the Government have done in recent years and about the way in which they have channelled funding to higher education institutions.

I hope that we can probe the scope of the Secretary of State's powers to make financial interventions and the principle behind his power to penalise—using teaching grants and other means—institutions that do not comply with his requirements, with all the implications that that has for universities.

The Government may tell me that I am wrong, but I am working on the assumption that the Bill is about teaching grants, university teaching, undergraduates fees for teaching and all the regulatory paraphernalia that goes with that. When the clause mentions grants, therefore, my assumption is that we are talking about teaching grants.

That raises a variety of other issues in respect of the words ''loans or other payments'', and we must address those issues. We must understand the scope of the power that the Secretary of State is taking on his shoulders and the impact that he may have on individual institutions, should the measures be used in the most draconian way.

Is it in my hon. Friend's mind—it is certainly worrying me—that the Secretary of State could withdraw institutions' powers or override a decision to make a payment in connection with, for example, the research assessment exercise or, conceivably, from the research council?

My hon. Friend anticipates me. I very much share that concern. Whatever the Secretary of State's intentions, the clause certainly appears to allow for that possibility. We must understand the nature of most higher education institutions in this country. One thing that surprised me when I took the shadow portfolio and started to talk to universities, in detail and at greater depth than I had talked to them before, was to discover just how small a proportion of their overall income is made up from the teaching grant that they receive from HEFCE or the Welsh equivalent. In most cases, it is substantially under 50 per cent. It is certainly under 50 per cent. among our more prominent universities.

The real question is whether the Government, through the simple words of the clause, are taking a power to act far beyond the immediate scope of teaching students on undergraduate courses and beyond their determination to provide wider access to those courses, and are giving themselves powers over a much greater range of things that HE institutions do.

One of the greatest absurdities in all this is the introduction of the ability to levy financial penalties. As NATFHE, in one of the documents that it sent to

members of the Committee in the run-up to the debate, pointed out:

''All English HEIs already submit widening participation plans to the HE Funding Council for England, and report back on how the money has been spent.''

The Secretary of State is therefore taking powers to withhold loans and other payments when the basic process that the Government want to be implemented already exists.

I have three concerns about loans and about other payments in particular. In recent years, the Government have taken it on themselves to ring-fence funding to a variety of organisations by offering initiatives and specific pots of money that have to be bid for and that are not simply part of the block funding that those organisations receive. Higher education is no exception. All universities have sought to raise some of the funding that they receive from the Government and the higher education funding councils by bidding for particular pots of money. Clearly, that has had a significant impact, albeit in a convoluted and bureaucratic way, on the running of those institutions.

My first concern is about those ring-fenced funds. The Government currently provide additional funding through various different channels for the future and additional requirements on HE institutions to receive payments that are channelled on to third-party organisations. That is statutory. One example is the establishment of the Higher Education Academy. As the Committee knows, the Government's intention is that the academy will play a major part in enhancing the role of teaching and learning in universities and colleges. It is designed to support curriculum development and to facilitate the professional development of staff, and it will take on some of the functions performed by the Institute for Learning and Teaching in Higher Education and the Learning and Teaching Support Network.

The academy is being set up by the Government, but participation by HE institutions in the form of a financial subscription to this new body is compulsory. The Government's response to concerns about the compulsory nature of the payment was revealing, because it throws up other issues relating to the funding that those HE institutions receive. The suggestion is that membership will be compulsory, and that that is a condition of the grant that HE institutions receive from Government. It is therefore clear that HE institutions are receiving money that they have to pass on to another body. What do the simple words ''other payments'' mean? Where an institution receives funding from a higher education funding council to support its compulsory membership of a third-party body, if that institution does not comply with the Government fund, does it lose the funding that enables it to be part of that body but still have a compulsory requirement to be part of that body? Does the money therefore have to come from another pot and from other resources available to that institution? Does that other payment give the Government the power to force that institution still to subscribe but not to receive the funding to do so?

I have listened very carefully to my hon. Friend's point about action against individual institutions. Under this clause the Government can set a condition telling the Higher Education Funding Council in effect what to do. The Government have made it evident they intend to use that power to set conditions relating to the access plans that are to be agreed. Has my hon. Friend considered that, in the same way that the Government stand behind the HEFC on the conditions of grants, the Secretary of State is also standing behind the director of fair access to higher education in drawing up the plans? The director has to act under the guidance of the Secretary of State, so the Government are at both ends of the chain.

My hon. Friend is right—the Government are of course the puppet masters in all this. The access regulator is undoubtedly a creature of the Secretary of State, to whom all the powers enacted in this Bill ultimately go back. Ironically, this issue of ring-fenced funding may very well have a direct effect upon universities when it comes to the widening access payments. The payments made by the Government through the HEFC to universities in recent years could potentially come under the ''other payments'' category in this section of the Bill.

The structure of these widening access payments has already caused enormous problems to many institutions. When they were introduced in medical schools a couple of years ago, those schools were informed in February or March that about 2 per cent. of their teaching budget was being top-sliced, and would be put into a ring-fenced fund for widening access payments. In order to gain access to any of that money they had to have a clear strategy in place for widening social participation. You will be aware, Mr. Hood, that, in the university calendar, by February or March plans for the following September and October's intake are already pretty well advanced and offers have already been made, so it is extremely difficult to change what one is doing within a single year. So setting up that ring-fenced fund in the first place caused financial problems to those institutions, and caused them some degree of administrative chaos. Now there is the possibility that funding through that such a channel might be withheld, as part of the Government's requirements to penalise them for not having an approved plan in place.

I am following my hon. Friend's argument and his concerns. Would he not agree that, as prospectuses are normally issued by this time of year, indeed slightly ahead of the occasion to which he referred, there is also the possibility of some legal challenge to the institution from the students? That might apply not only in the historic circumstances that he has already described, but also where an institution had made an offer in good faith but then found itself unable to discharge that offer, as the money had been taken away from it in circumstances that were themselves in dispute. Could we not in fact be moving towards—with great respect to my hon.

Friend the Member for Hertsmere (Mr. Clappison)—a lawyers' paradise?

My hon. Friend is right; that is always a danger. He makes a valid point: the removal of loan funding and other payments has the potential to force a university into breach of contract. It might be in default of an offer, as my hon. Friend mentions, but it might equally be in default of a construction contract or, as I mentioned, of a commitment to pay on a subscription to a third party body such as the Higher Education Academy. A partially established project could be left uncompleted, having reached a certain point before the funding disappears. The centres for excellence in learning and teaching set up by the HEFC and the Government would be a very good example of that up. Let me describe to the Committee the process that the Government has set out for the funding of those projects. The Minister said in a written answer:

''the bidding process for centres for excellence in learning and teaching has been designed by the Higher Education Funding Council for England to keep additional cost to a minimum while ensuring a rigorous selection process. At stage1, institutions will be able to draw on existing practice and readily available information.''—[Official Report, 2 February 2004; Vol. 417, c. 1021W.]

They will have incurred bidding costs earlier and embarked on the establishment of centres, but at stage 2,

''institutions will be provided with additional funding as a contribution to their costs.''

That additional funding clearly comes under the context of another payment.

A higher education institution invited to establish a new centre will secure ring-fenced funding for the initial investment in a bidding process. It will also commit staff time to the process. However, if, when it reaches a later stage, a dispute breaks out, for entirely unrelated reasons, between the university and the access regulator over the nature of its plan, it seems that that ''other payment'' may be withheld. The money that was expected for the continuation of the project would disappear. Not only would that cause difficulties on the campus, but it would bring problems with external contractors, consultants and others brought in to help with the project.

My hon. Friend is developing an important argument. Would he reflect on two other possible developments? First, what is the attractiveness or otherwise of investments or joint undertakings to private sector organisations such as banks and investment houses if they know that out of a clear blue sky, the university's financial situation may change? Secondly, what might be the implications for international co-operation and research, when deals often have to be put in place many years in advance? Again, the possibility of that sort of fine being imposed could have serious consequences.

The question of international co-operation is extremely important, but it is not simply about international partnerships but partnership within the higher education sector. It has been a theme of the Government in recent years to encourage greater partnership between various institutions in

order to share complementary expertise in science, technology or the arts and enhance the quality of their work. Inevitably, both parties in the partnership would be making a commitment of more than time; it would also involve joint funding.

If that funding falls under the research umbrella—I shall return to the subject in a moment—there is a clear danger that payments may be withheld under the other payments section as a result of a major dispute between the access regulator and the institution. That institution would no longer be able to fulfil its obligations under the partnership—whether with an international body or another national institution in higher education.

Given that there is a common interest across the Committee in stimulating endowments and other external funds, it is possible that a benefactor might be minded to give money to an institution and wants a particular condition fulfilled, such as a contribution from the institution. If the contribution from the institution was voided because it was collared by the funding council on account of an alleged breach of the conditions, the desirable objective—the accession of an endowment or other contribution to the higher education sector—would fall. Would that not be undesirable, too?

Absolutely. I agree with my hon. Friend. In relation to that point, it is unlikely that the Government would mandate the Higher Education Funding Council to withhold the whole of a university's teaching grant simply because of a dispute over the content of a plan. It is much more likely to say, ''Right, we are not going to give you our share of the investment project.'' If one is caught speeding, one does not have one's lifetime earnings withdrawn. It is much more likely that a selective financial penalty will be imposed—perhaps a single ''other payment'' might be withdrawn by the funding body on the instruction of the Secretary of State. That would have precisely the effect that my hon. Friend suggests. A flagship project, funded part by endowment and part by business, would come under pressure if the state contribution was withdrawn.

I am trying to follow the hon. Gentleman's argument. [Interruption.] I do not mean it disrespectfully. He always makes a good argument. Section 26(3) of the Teaching and Higher Education Act 1998 covers the same ground as the measures that we are considering now. If I follow the hon. Gentleman correctly, he is really objecting, as I am, to the imposition by OFFA of plans for universities, not to the plans themselves. It is reasonable that there should be plans in return for resources. Is that not the kernel of his argument and should not the amendment, therefore, stand? We should concentrate on trying to remove OFFA—that would resolve the issues that he raises.

I would be only too delighted to settle for the removal of OFFA. However, in the context of our fear that the Government have, in their wisdom, ensured that they have a better than average chance of winning votes in Committee, it is also

important to focus on details that might lead to an institution having imposed upon it an inappropriate financial penalty that bears no direct relation to the activity that is in dispute. That is my main concern about the clause.

I am genuinely trying to be supportive, but it would be useful to know whether, since the introduction of the measure in 1998—in fact, elements of it go back to 1994 and 1992—the hon. Gentleman is aware of any case in which a university has lost teaching grant as a result of an intervention by the Secretary of State to say that the university is not delivering what it should be doing.

No I am not. However, the point about the Bill is that it introduces an additional dimension that has not previously existed—

Which is OFFA.

Which is OFFA. To date, the imposition of a fine or the withholding of a payment or a loan might have related to a failure of governance within a university, or perhaps to a failure to maintain proper academic standards—effectively a neutral regulatory issue, as opposed to one of political interference, which this measure represents. Now, a power that has been appropriate to put pressure on the governing body of a university to deal with its governance issue has become a political football. That is why I have profound concerns about the ability of the Secretary of State—

No doubt my hon. Friend is aware that under the draft conditions of grant, which the Minister has helpfully supplied, there is a specific power to fine universities if they do not comply with what OFFA requires them to do.

All the more reason for concern—the concern that the fine might be imposed in funding areas that are unrelated to teaching, but which could have a devastating effect on the institution.

It is worth re-amplifying the point. Let me give the Committee two examples of the funding mix that exists between teaching and research. It varies enormously from institution to institution. In some, research constitutes a small proportion of the overall funding—Brunel university, for example, had a total income in 2001–02 of £88.7 million, of which £21.6 million was higher education course fees and £5.6 million was for research. By comparison, Imperial college had income of £381 million, £40 million in teaching income and £56.3 million in research income. Many of our universities receive a greater proportion of their income for the support of postgraduate and research work than they do for undergraduate teaching.

If it is the case that in this part of the Bill the grants referred to are teaching grants—the Minister nodded when I said that I understood that to be the case—in law, ''other payments'' could include research grant. There is a worry there, particularly given the problematic situation faced by some universities. It does not necessarily affect the top 25, but some of those that have been less successful in the research assessment exercise—for example, those with four-star

departments—are struggling with the issue of future funding. A fight between the undergraduate teaching part of the university, the admissions part and the regulator could lead to penalties being imposed.

On a point of order, Mr. Hood. It is obvious to colleagues in the Committee that an effort is being made to delay discussion of important issues of concern to people outside. You are being extremely generous, as we would expect, in allowing references to speeding, endowments, international education, research and admissions policy, but I wonder whether the hon. Member for Epsom and Ewell would care to sit down so that we can all speak on the important topics before us.

I thank the hon. Gentleman for trying to give me guidance, but let me give him a bit of guidance: if he leaves decisions about what is in order to me, we will get on very well.

I am very grateful for your guidance, Mr. Hood. I thought that the Government would be happy with the progress that we have made, given that we are almost halfway through the clauses after only two days.

This is an important issue, and I understand the hon. Gentleman's concerns. However, I am trying to relate the clause to the profoundly worrying issue of withholding other payments. I understand the Government's political motivation for wanting to be able to penalise universities that do not do their bidding on undergraduate teaching. However, it would be a matter of profound concern if the reference to other payments enabled the Government to penalise research activities.

Will my hon. Friend reflect on the fact that if we look carefully at amendment No. 247, to which he has stuck rigorously in his remarks, we find that it would delete the words ''loans or other payments'' in subsection (1)? That subsection refers to grants made

''under section 65 of the 1992 Act''.

Section 65 of the Act states:

''The activities eligible for funding under this section are . . . the provision of education and the undertaking of research''.

In other words, it is extremely difficult to see how my hon. Friend can be anything other than entirely right.

I am grateful for that helpful clarification, which amplifies the issue. I hope that the Minister can provide some reassurance in that regard.

As I said at the outset, this is a probing amendment, but I hope that the Minister will take a serious point away from our discussion. I hope that he will accept that the penalties that are levied on universities for not meeting the access regulator's requirements should apply simply and solely to teaching grants. Confusing the different channels of funding would be detrimental and destabilising, particularly when many universities are uncertain about the future funding of their research departments, as the Minister knows.

As I said on Tuesday, the Minister has been actively engaged in discussions about the financial implications of restricting funding to four-star departments. I would not like the clause, which refers to other payments and could, therefore, theoretically permit levies to be taken out of research funds, to have an adverse impact on departments or on confidence about their financial position. That would fly in the face of all the pressure from distinguished national institutions, which want greater stability in the research sector. The Minister will be aware of the representations that he received from the Royal Academy of Engineering about the removal of HEFCE funding from departments. He has also received representations from the Association of University Teachers about the removal of funding from departments.

Many of our middle-ranking universities are concerned about the future of research, and it would be entirely detrimental to add to that concern by including the words ''loans or other payments'' in clause 22. That would attack the very heart of the activities that universities undertake in addition to undergraduate teaching, which we have spent most of this debate discussing. It would be entirely detrimental to give the Secretary of State the power to do that and—whether or not this is what he intends—to enshrine that power in legislation.

I hope that the Minister will take away from the discussion the sense that there is a serious point. If he is going to set up a system of fines, it should apply solely and purely to the activities of universities related to undergraduate teaching. To leave the wording open so that it hits at other areas of their revenues and grants would be detrimental and something that should not take place or be written into the Bill.

I reassure the hon. Member for Nottingham, North that, in view of the comprehensive analysis by my hon. Friend the Member for Epsom and Ewell, I do not intend to repeat those arguments and will be comparatively brief in my remarks. I shall divide them into two parts and deal first with the general points. Those are mere embellishments to my hon. Friend's argument and I shall not need to make them at length.

My first concern is the question of adequate notice. I have referred in particular to the prospectus issued to students, which may be voided by a decision of the funding body to fine a university. The Minister will be aware that by both correspondence and parliamentary question I have raised concerns on the matter expressed to me by university registrars. They are already issuing prospectuses for potential entrance to university in the year 2005–06. It will not have escaped his attention that that is not a year in which tuition fees under this arrangement will be charged. Nevertheless, some will defer entry—that point is subject to a later amendment—and the chance of any material disinformation to students' or lawyers' arguments that this is taking place will accelerate. All I am saying to the Minister is that it is terribly important that institutions should be clear how the system operates and they should, in effect, be able to comply with it if Parliament eventually decides to legislate along these lines.

My second point, which underlay everything that my hon. Friend said, was his concern that any sanctions by withholding of grants, loans or other payments should be proportionate to—and I might add, relevant to—to the alleged offence. [Interruption.]

Order. Will the gentleman who has just sat down move to the other side of the Room? He is sitting in the Committee. I think that he will find that the chairs are more comfortable on that side anyway.

There are times when I feel like going and sitting there myself.

It is important that we should focus on such issues. Whatever happens, it is a principle both of law and of good government that any penalty should be proportionate to the offence and should be connected to it. We could reasonably imagine that a higher education institution guilty of a breach on a small matter might find that the offence escalated to represent a considerable embarrassment, particularly if activities other than teaching activities were swept into the net.

I accept—and I may have more work to do on this over the next few days—that the Minister helpfully gave us an indication of the conditions that he has in mind. That is useful to have. I acknowledge straight away, before we have an argument about it, that there is some attempt to impose proportionality. My only possible reservation is the reference to the sanctions that HEFCE can impose when it is clear that an institution intends not to comply with the provisions.

On sanctions, Universities UK has alleged that the Conservative policy would reduce the number of university students by 410,000 over future years. If universities were not reducing fast enough to reach the Conservative target, what sanctions would a putative Conservative Government want to introduce?

I have to say to the hon. Member for Nottingham, North that I do not accept the arguments of Universities UK on the alleged sanctions nor do I accept the relevance of his remarks to the clause under discussion.

It is important that Ministers should look at this provision from the point of view that it is legally watertight. Under these provisions, we are asking HEFCE to form a view as to the intentions of the institution. If the institution were to put on a piece of paper, ''We won't do it, you know'', then perhaps there might be a case. I have a suspicion, knowing the academic mind, that the issue would be addressed in a rather more subtle way.

Among concerns of a general nature—I am trying to be even-handed in this—is the danger for Ministers that a university might seek to evade these provisions and be a little too quick for Ministers and their lawyers. For example, by setting up a subsidiary or an agency arrangement, whereby the institution could carry on the offence, it might be able to say in legal terms that the subsidiary is nothing to do with the

institution that HEFCE is dealing with and it could thereby seek to evade the effects of the legislation. Perhaps the Minister might want to say a word or two about that.

The other import of my remarks is much more technical. The Committee knows that I have proposed modestly enough, as is appropriate for somebody fulfilling a Back-Bench function on this Bill, a smaller amendment than my hon. Friend the Member for Epsom and Ewell. I have left out the question of not grants and loans, but merely of other payments. I do that for a simple reason. I cannot understand what kind of payment might be paid to an institution by a funding council other than a grant or a loan. The Minister is nodding and I do not know whether I have spotted something. Having encouraged him, I may have to disabuse him a little later.

It seems to me perfectly reasonable to make a grant and it is not inherently unreasonable or absurd to attach a condition to that grant. As has been said, that is the basis of how the system has operated since 1992. Long before in the history of university funding that is how public moneys have been paid to universities.

It is not impossible to make a loan, and if one makes a loan it is perfectly possible to set conditions, about the fulfilment, the interest that might or might not be charged, repayment and so forth. Beyond that, I scratched my head and thought to myself, ''What other thing could be another kind of payment?'' My litigatory nostrils twitched and I thought, ''Are they trying to slip something in here?''

I came up with a solution and may have added to the Minister's problems, because one of the things that might come from a funding body might be a payment in kind. It is not likely to happen directly, but a funding council might say, ''You take over our building.'' I am not suggesting or canvassing anything, but I know that the location of HEFCE is next to the university of the west of England. Let us suppose an agreement was made that HEFCE would chip in a building or a contract, or send some spare resources to help out with a contract or, perhaps more realistically, second in a manager. Would that be payment in kind and would it therefore be an ''other payment''? What is going on here?

As well as the general points of principle, on which I strongly reiterate the arguments that my hon. Friend the Member for Epsom and Ewell made—I have given some glosses on my concerns about those—I am unhappy about the wording. I am not a lawyer, but the argument about what another payment might be is a lawyerly argument. Perhaps it would be sensible if the Minister could tell us a bit more about what is in his mind, so that we can be reassured that even if his intentions are fulfilled, he has at least explained them.

The hon. Member for Epsom and Ewell said that we might think that the amendment was superficial. It is not superficial, but although he raised the right questions, he did so for entirely the wrong reasons. It was not until the hon. Member for Daventry (Mr. Boswell) stood up that I

realised how disjointed the Opposition were. The clause is not about the imposition of conditions, but about the Secretary of State's power to impose those conditions. The amendment says that ''loans or other payments'' should be deleted, but then along comes the hon. Gentleman with the cavalry to say, ''Oh no, put loans back in and leave out 'other payments'.'' There is a good reason for what we have done and I am glad that the hon. Gentleman raised the matter.

The thrust of the proposals suggests that applying conditions to the money that HEFCE and the Teacher Training Agency give is something new that has not happened before. However, the hon. Member for Daventry pointed out that that has always happened. We apply conditions. If the university says, ''We want this money to create places for another 1,000 students,'' and then pockets the money but does not provide those 1,000 places, we must have a form of punishment and retribution. Some of the other conditions relate to financial and reporting arrangements, which are perfectly proper if we bear in mind that, as all Opposition Members know, universities are autonomous bodies. The only control that we have over them is through the allocation of public funds—taxpayers money—to which we apply conditions, as we always have done.

Will the Minister give way?

I will not take any interventions—just let me explain. We are talking about how we apply the conditions to the fee. Hon. Members in all parts of the Committee take different views about the fee: some want to abolish it, while others want a fixed fee. There is a fee at the moment, but wherever the level of the fee is decided by Parliament—I hope that there are variable fees between £0 and £3,000—we must ensure that universities do not charge students £10,000, £7,000 or £15,000.

The hon. Member for Epsom and Ewell seemed to suggest throughout his contribution that it is a terrible thing to impose such conditions, but it is not. The conditions must be watertight. Given the amount of suspicion around, if we had omitted some wording from previous Acts, members of the Committee would have criticised us and said, ''There's something going on here. This is a route for Imperial college to charge £15,000.''

What do we do then? Whose words do we use? Why, who was the Minister with responsibility for higher education in 1992? [Hon. Members: ''Good question.''] According to ''Dod's'', the hon. Member for Daventry was Minister with responsibility for higher education then.

I should intervene and spare the Minister any further punishment. He will find that I became Minister with responsibility for higher education on 11 December 1992. I am genuinely surprised that he did not check the record on that matter, because he is normally assiduous. I played no part in the consideration of the legislation to which he referred—not me, guv. [Interruption.] The hon. Member for Harrogate and Knaresborough wishes to assist, but before he does so, I should say, for the avoidance of any doubt, that any observations that the

Minister wishes to make about the 1994 Act can be laid firmly at my door.

Will my hon. Friend give way?

Order. The Minister will respond to the intervention.

Johnsons need their Boswells. ''Dods'' did not say which year. It might have been 1992. There again, I catch the hon. Member for Daventry, as he rightly said, by the 1994 Act, which contained precisely the same wording.

I can tell him who the Minister was in 1992, and what he said about top-up fees:

''We have made it clear that we do not think that institutions need to introduce top-up fees. Moreover, we regard it as undesirable that they should because such fees might deter students from less well-off backgrounds.''

For the record, that was the right hon. Member for Newport, East (Alan Howarth). His words may not come back to haunt him, but he has had a slight change of view about top-up fees since then.

Order. I do not think that that intervention was relevant to the amendment.

Neither do I, Mr. Hood. It was very entertaining, but was totally irrelevant to what we are discussing.

The hon. Gentleman made a point about research. I probably misled him with a nod, because in our debates on Tuesday, I thought that he was talking about research councils, which are entirely excluded from this. The draft conditions that we laid before the Committee on Tuesday, as hon. Members will know if they have had a chance to read them, give a feel for what such a letter will look like. It will include the research grant, as it always has, because the research grant is a block grant from HEFCE.

Many of the hon. Gentleman's points are very relevant to other debates that we will have, especially on the next clause. The key issue in this debate relates to the power that we give to the Secretary of State to apply conditions. We repeated the exact words mentioned in the Education Act 1994—

''Grants, loans and other payments''

—because of the suspicion, which I mentioned, that we were inserting a lacuna to get round it. This is a very valid amendment, as I said, because it pushes us to explain what the other payments could be. If we cover all the money that HEFCE distributes through its block grants, which it may then give to universities through other means, there is no loophole through which a university might slip or which a Government might use, through HEFCE, to get round this fee cap. That is why I asked officials what ''other payments'' means. We all know what ''grant'' means.

The hon. Member for Daventry did not talk about loans, but he will know that they are taken from HEFCE, especially when universities merge or where they set up collaborative arrangements and need money up front.

Central to the debate are ''other payments'', which, I am advised are for

''specified services delivered against a contract, a service level agreement or memorandum of understanding.''

Because the amendment is perfectly relevant, I asked whether it might be sensible to remove this other payment mechanism if it is there simply because it has been there since 1992 but nothing has actually happened under it. A very good example of that is Anglia polytechnic. Payments made to it for the national disability team—a group that the hon. Gentleman will know about, which provides guidance and advice to all institutions on the practical implications of disability legislation—are received through a specified service contract. Similarly, the joint information systems committee plans a plagiarism advisory service that will provide advice for institutions, academic staff and students.

So there are examples of other payments that are not grants or loans. I know that the amendment is probing, but it would be foolish to reject it.

The Minister has just referred to very specific items of service. I will need to reflect on his words, but he has worried me more than reassured me. The inference of what he said is that if there were an alleged offence in relation to top-up fees and the teaching grant, it would be possible to override a contract for a particular bit of service, for example, to provide the national disability team or the plagiarism unit. That worries me considerably, because it is not at all relevant to the dispute between the institution and the funding body. Our concern is fundamentally that if there are fund-related offences, they should be ring-fenced and should relate to money for that purpose. They should not stray across the wider area of the institutions' finances.

Order. I appeal to hon. Members to make their interventions as interventions and not speeches.

Although I have huge respect for the hon. Member for Daventry, that really is not the point. The point is not whether there is concern about the fine that might be applied or the amount of money clawed back. That is for other debates. The concern of the Committee must be whether there is a loophole here that would allow universities to breach the decision on fees, which the House will eventually make, but to suffer no consequences. Is there the stream of money that could provide such a loophole?

Will the Minister give way?

I will not give way again because I think that we have done justice to the debate. I believe that if we leave out ''other payments'', it would be a serious mistake. For no good reason, it would be inconsistent with decisions made in Parliament in 1992, 1994 and 1998. The hon. Member for Epsom and Ewell made some valid points—valid in the context of other discussions. Ring-fenced funding is a concern for me. That is why, in response to the Better Regulation Review Group's findings on higher education, we recently smashed four of what the group

calls jam jars. However, this debate is not about ring-fenced funding. Ring-fenced funding comes with the HEFCE grant and it is covered by the clause. If we delete ''other payments'' or ''loans'', we run a serious risk of not doing our job properly in scrutinising the Bill and of allowing a major loophole.

I am afraid that the Minister has distinctly un-probed the amendment. Halfway through his speech, I was nodding with interest. He misled me with his nod at the start when I referred to teaching grants, I accept that. However, that causes me concern, as I still believe strongly that financial penalties over undergraduate teaching should not relate to the broader issue of research by a university. We have separate funding streams for those, and that should be reflected.

My concern is doubled by the Minister's talk about loans and other payments. He described two particular circumstances. He talked about potential collaborative arrangements for loans, where a loan was provided effectively to find the appropriate upfront seed-corn funding to keep those collaborative arrangements going, and he referred to funding immediately after a merger. Surely, in those situations a dispute would arise between the institution and the access regulator over how good a plan was.

My understanding is that, essentially, we will end up in such a situation. It will not be a situation where a university says, ''We will not produce a plan.'' I do not think for a moment that any university will actually do that. The question will arise when the institution and the access regulator dispute over whether a plan meets the national guidelines imposed on the access regulator by the Secretary of State. Those are politically imposed national guidelines. In other words, if a university has an indirect row with the Government over national policy on widening access, the Government are taking on the power to intervene in the financial structure around a merger between two institutions or around a collaborative arrangement between one institution and another. They could levy a financial penalty that could cause those arrangements to collapse or to fall in to significant contractual problems. I cannot understand the logic of that.

The Minister's point was that the measures were previously enacted in other Acts. With respect to the Minister, that is not the point. Governments have not done this before. The Government are taking on the ability to instruct universities—through an intermediary in the form of the access regulator—about the framework that the universities must adopt to widen participation. It is not about whether a university is fulfilling the terms of its contract. It is not about whether a university says that it will take on an extra 1,000 students, so that we fund it for that 1,000 and in fact it decides not to take them on and uses the money for something else. That is a clear breach of contract with the funding council over a tangible matter, and one where the power of intervention is entirely logical and sensible.

What makes this particular measure different is that it is a political measure, not a practical and contractual one. For the Government to intervene in matters not related to undergraduate teaching, over collaborative

arrangements established with other institutions and over mergers between institutions, and to remove funding, seed-corn funding and working capital provided by HEFCE at a moment's notice, would be entirely wrong.

That is bad enough, but my hon. Friend the Member for Daventry extracted a comment from the Minister about ''other payments''. The Minister gave the example of Anglia polytechnic university and the national disability team, a service that it provides to all universities and for which it receives funding. Does the Minister suggest that if that university and the access regulator have a big row over the access plan, HEFCE should remove all funding for the national disability team? What a preposterous idea. I cannot understand why the Minister should think that sensible. I may disagree with the Minister over the question of grants, but I find that bizarre and illogical. I hope that he will consider the matter again. I seek his assurance that he will consider it before Report and make changes if necessary. If not, I shall press the amendment to a Division.

I certainly will not consider it again. The hon. Gentleman persists in deliberately misunderstanding the clause. It is not about attaching conditions; it is about the power of the Secretary of State to apply conditions. It is not the first time that political conditions have been applied. If it is decided to expand the number of medical students—that is predominantly a political decision—HEFCE will apply that as a condition to the grant, and the Secretary of State will apply that to HEFCE as a condition of the grant.

The hon. Gentleman says that that may occur during disputes between the university and the regulator. We shall see later that it is not disputes that will be covered by that provision, but breaches of the agreement reached with the regulator. It is for Parliament to decide what conditions should be attached to the use of taxpayers' money.

The hon. Member for Harrogate and Knaresborough asked how many times conditions had been breached. Nil is the answer; conditions have never been breached—apart from the example that I gave of universities sometimes, but not deliberately, asking for funding for 1,000 extra places but filling only 700. In such cases, the money will be clawed back by HEFCE.

It is a sensible clause. It should not be necessary for the Committee to decide whether I should consider removing the words ''other payments''. I am not saying that we will bring the full power of the law down on poor old Daventry's project. I am giving the definition of ''other payments'' requested by the hon. Member for Daventry. It is a definition of how money could go to universities; the money would not be paid by grant or loan. The words ''other payments'' need to remain in the Bill so that we do not leave a loophole. That surely is our job in Committee.

The Minister talks about loopholes. By the use of the word ''grant'', the Minister would clearly have the ability to impose a swingeing financial

penalty on the higher education institution as big as he could possibly wish for when dealing with a breach of plan.

I accept what the Minister says about the will of Parliament. We might not like it, and we will certainly challenge him over penalising research as opposed to teaching grants. However, another question is the appropriate penalty to be levied under the will of Parliament. The Minister suggests that in the case of a breach or dispute, or whatever else may cause the situation, a penalty will be levied as a result of instructions given by the Secretary of State.

The Minister described a set of other payments that, to my mind, are utterly illogical. I cannot see why allowing us to take account of the kind of circumstances that he described in relation to Anglia polytechnic university would create a loophole. It is like saying, ''We can fine you in court and take your house as well.'' The Minister has plenty of powers, and the clause refers specifically to the condition under section 23. I do not want to be unhelpful to the Minister, but surely he would accept that it would be odd to leave the Secretary of State with the power to remove the funding for this kind of project. He admitted that he raised the question with officials. Will he give an undertaking to the Committee that he will at least reconsider the amendment, whether it applies to this clause or a later one? What he must not do is leave an utterly blanket power on the statute book—a dangerous thing—where the imposition of the penalty, in the form that he describes, would be utterly inappropriate.

Does the hon. Gentleman not see, from what the Minister said—and this is England only, by the way; Wales will reach its own solution in later clauses—that the only way that the university can either break the access guidelines or impose a top-up fee higher than £3,000 is by becoming a private university, by opting de facto out of the HEFCE system? That is the sort of power that we need in the Bill. Does he accept that that is the only option that a higher education institute would have, and is he concerned that some institutions may even go down that route?

My understanding of the kind of situation that could arise, if I understand the Minister correctly, is that if, for example, a fee for a course was set at £2,000 against a plan agreed with the access regulator, and if a breach took place so that the plan was not fulfilled in the way that had been agreed, a dispute would follow. Ultimately, the funding body could impose a penalty according to conditions set out by the Secretary of State in this clause. That penalty could include—hypothetically if that institution happened to be Anglia polytechnic university—the removal of funding for a service that supports disabled students at every higher education institution in the country. That is an extreme example.

Can the hon. Gentleman accept that the issue is that if we, or any future Government, wanted to circumvent the cap that the Bill puts on fees, we could simply channel the majority of funding through a system that is not covered by this clause? In other words, we are not saying that we would use it for

Anglia polytechnic university; we are saying that if we vote to remove other payments, a future Government could—to get round the problem and allow universities who get public money to charge whatever fees they like—simply re-channel the money through something other than a grant or a loan. Does the hon. Gentleman accept that? If he has his way, he is—incredibly—talking about pushing this to a Division. If not, let us carry on and debate some other amendments.

Chris Grayling rose—

May I help the hon. Gentleman? We are obviously going to debate this until 5 o'clock. The Minister is being a little disingenuous, because if the clause were removed from the Bill, section 26 of the 1998 Act would remain in place, and the Secretary of State would have exactly the same powers to do whatever he wanted on flat-rate fees. The clause is of real value to the Secretary of State only in relation to clause 23 and the other clauses relating to the plans. If this clause is rejected, there would be no point to the others. I hope that the Minister will accept that.

Order. I suspect that if we are not careful we shall end up going round in circles. Does the hon. Gentleman want his amendment to be put to a vote?

I shall not force the amendment to a vote if the Minister can give us a nod and say at least that he will ask his officials to ensure that a loophole that would work the other way round does not exist. Having heard his comments, I think that he has genuinely recognised a potential area of concern.

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 16

Question accordingly negatived.

I beg to move amendment No. 266, in

clause 22, page 8, line 38, at end insert—

'(1A) The Secretary of State shall lay before each House of Parliament a report in respect of each financial year setting out details of the occasions on which he has exercised his power to impose conditions under this section.'.

As the Committee knows from the helpful explanations given by my hon. Friend the Member for Epsom and Ewell and by the Minister, under the clause the Secretary of State has the power to set conditions on the funding to the funding agencies

relating to fee levels, and the admission arrangements of individual institutions. As I indicated earlier, the Minister has helpfully supplied us with draft regulations to study, and has given a partial explanation, in response to the previous debate, of the principles behind them. I believe that we shall debate those important matters on stand part, so I shall not trespass on them at this stage.

By way of a preview, the Minister rightly told us that the purpose of the conditions was to prevent institutions from breaching the upper cap. However, it is also part and parcel of those conditions that in order to be able to charge a higher variable fee, institutions will have to abide by the provisions of the plan—no plan, no higher fee. That is an important principle and we want to debate it, and we do not doubt that the Minister will want to tell us more about it.

The amendment concerns the way in which the conditions have been imposed and further conditions might be imposed later. In clause 23, we shall come to the conditions that the funding bodies are to impose on the universities and higher education institutions. At this stage, we are debating the conditions that Ministers might impose on the Higher Education Funding Council in relation to its funding of individual institutions. The clause ensures that the Secretary of State has the power to impose conditions on the funding bodies, yet he is the figure standing behind them. That is the point: he is the figure at the top of the chain of command. He sets conditions on HEFCE and it then sets conditions on individual universities. Therefore—this is the spirit behind the amendment—it is important that we should know how the Secretary of State exercises his power of command over HEFCE.

The Minister has already adverted to the fact that the powers for Ministers to set conditions to the Higher Education Funding Council have existed for some time. He mentioned their going back to 1992, and that is the date of the earliest provisions mentioned in clause 22. I can do no better than go back to 1992, because I am one of those sad people who sometimes read Acts and previous debates. When those conditions were originally imposed, people expressed concerns not only about the conditions being imposed, but about those that might be required in the future. Of course, we are discussing a very important, extra condition that Ministers will be able to impose on HEFCE. That is why it is so important that we require Ministers to report on exactly what they are doing.

In 1992, the issue of concern—and this illustrates the purpose of the amendment—was the imposition of top-up fees by individual institutions. The then Opposition took the then Government to task about imposing those conditions. I hasten to add that that was not because the Opposition objected to any of the conditions being imposed by the Government, but because the Government did not take advantage of the opportunity to rule out top-up fees. During the Committee stage of the Further and Higher Education Act 1992, the then Opposition Spokesman, who is now the Secretary of State for

Work and Pensions, captured the spirit of my amendment very well when he said:

''That is the danger of the slippery slope: what was unthinkable a few years previously becomes actively considered and is then implemented . . . We believe that it would be disastrous for higher education and opportunity in this country were institutions to take such action. That is why it makes good sense, particularly as the matter is being actively canvassed inside institutions, to block the opportunity for charging top-up fees.''

He went on to say:

''It is incumbent on a Government who are genuinely committed to the expansion of higher education and the widest possible access to an expanded system of higher education to stop the possibility of the imposition of top-up fees . . . Students in general are facing a mounting burden of debt as a consequence of the student loan scheme and the cuts in the value of their grants.''

He then added:

''We shall stop the possible introduction of top-up fees''—[Official Report, Standing Committee F, 26 February 1992; c. 374.]

Order. There are quotations and there are quotations, and I think that the hon. Gentleman has stretched this one.

I knew that I was stretching it almost to breaking point, Mr. Hood, but your intervention was very timely as it brought me to the end of that quotation. However, I cannot leave the story there without quoting further from what the Minister said. To be fair to the Government, they did fulfil the 1992 Labour pledge that when they returned to power, they would legislate to prevent the imposition of top-up fees. The Government did that in their Teaching and Higher Education Act 1998. No doubt, the Minister is well aware of that. They were as good as their word, and based their last manifesto on that. We were told that they had legislated to prevent top-up fees.

I return to the amendment, as that saga illustrates precisely how a situation can start with one set of draft conditions being presented, but then all sorts of other areas are gone into.

Has my hon. Friend had the opportunity to study F. M. Cornford's lapidary book, ''Microcosmographia Academica''? Therein he will find deployed the principles of the thin end of the wedge, unripe time, and many other good, possible academic arguments.

Order. Before the hon. Gentleman goes down that road, I do not see any wedges in the amendment.

In any event, my time has always been unripe.

We need to know more from the Minister about how the power might be exercised in future. It is all well and good to have those conditions now, but will they be in place for all time? Even if the Government currently intend to impose only those conditions on HEFCE and individual institutions, is there anything to stop them from taking it further in future? If plans drawn up by the director for fair access made further requirements of universities, would conditions follow?

Although I said that the Minister would accept that the Government are saying to institutions, ''No plan, no fee,'' I am conscious that we must ask who is

drawing up the plan. It is not some independent adjudicator or operator, but someone who must act under the Government's guidance. The Government are therefore standing at both ends of the chain of command. They are in charge of funding and, through the guidance that they can issue to the director for fair access, they are in charge of plans. That makes it all the more important that we know what is going on, and makes a strong case for Ministers being transparent and giving us a full and complete account of how they intend to use the power. I hope that the Minister will welcome the amendment as an opportunity to keep us all abreast of how the Government propose to use the conditions.

I rise briefly in support of the thrust of my hon. Friend's amendment. It seems particularly important, in the light of what the Minister told us earlier, that there should be a regular reporting mechanism on the use of the powers. He spoke with eloquence and passion on the need to be able to reassure both sides of the Committee—I do not think he would feel that I was misrepresenting him in any way by saying that he sought specifically to reassure his own side—that neither the present nor any future Secretary of State would have any loophole, to use his phrase, whereby by choosing not to use or not having certain powers would make it possible for the said Secretary of State to give a nod and a wink to a university to impose top-up fees of more than £3,000, £10,000 or £15,000.

Alan Johnson indicated assent.

The Minister nods to confirm that that is the point he was making. The reason why it is useful for us to have a debate about amendment No. 266 is that clause 22 as it presently stands does not require the Secretary of State to do anything. It does not specify that he must impose penalties should any higher education institution breach the upper limit on top-up fees. It does not say that, in those circumstances, the Secretary of State shall or must; it merely states that he shall have powers in that field. It is left entirely to the discretion of a Secretary of State whether he chooses to impose penalties.

I am afraid that the very argument the Minister used against our earlier amendment seems powerfully to reinforce the case for the amendment tabled by my hon. Friend the Member for Hertsmere. If the Minister is saying that the Secretary of State should have his or her hands bound, they are not bound by the Bill as it stands. The addition of amendment No. 266, which would at least require the Secretary of State—whomever he or she might be in the future—to come to Parliament to explain whether they have used the powers and if not, why not. In certain circumstances, it would fetter the discretion of the Secretary of State to do what the Minister raised as a possible prospect about which it was important to reassure people; that is, turning a blind eye to a university choosing to breach the upper top-up fee limit.

The Bill does not provide that reassurance because it gives the Secretary of State a full range of powers, but also a full range of discretion about whether to use them at all, in part or entirely. That does not give us

the reassurance that we would like. I place on the record my personal appreciation, and, I suspect, that of members on both sides of the Committee, of the fact that the Minister chose to provide so much draft material in advance. It has been extremely helpful and constructive. He did not need to do so, but it has been welcome.

Amendment No. 266 would require a reporting mechanism by the Secretary of State. However, it seems curious to some of us that although the condition of grant to HEFCE material that he produced, which refers specifically to both clauses 22 and 23—and therefore would, I hope, be regarded as within order to be referred to at this point, Mr. Hood—sets out a specific matters referring only to the academic year 2006–07, there is no figure. The £3,000 figure does not appear. It seems odd: either one would expect to have an in-principle set of regulations that do not refer to a specific year and therefore to a specific figure, or one would expect to have something detailed that refers to a specific year and figure. To have something that, at the moment, is limited to a single 12-month period, but which does not refer to a particular maximum figure seems curious.

I am interested in the point that my hon. Friend has just made. It will occur to him that there is typically an annual debate on the student support package. It would be convenient and sensible to coincide and conduct a single debate on the matter, including any cases where the Secretary of State had reported to Parliament that he had so exercised his discretion in relation to student matters.

I entirely agree with my hon. Friend, who has made a typically constructive intervention. He must speak for himself, but the Opposition do not suggest that this reporting document would need to be extensive. It could well be incorporated with other things. If, as the Minister pointed out, these powers have never been used, it could simply be a nil return each year.

I have been following what the hon. Gentleman has been saying with interest. I have considerable sympathy with the general point that he makes. Is he convinced that the amendment tabled by the hon. Member for Hertsmere does what he wants it to do? It refers specifically to a report to Parliament setting out details of the occasions on which the Secretary of State has exercised his power. Yet the point that the hon. Gentleman made earlier was that the Secretary of State was in some ways ignoring the breaking of these regulations and guidelines by higher education institutions. Although the amendment goes in the right direction, it is probably too narrowly drawn.

I am grateful to the hon. Gentleman, but even as it stands the amendment would provide elucidation. If a higher education institution chose to levy a top-up fee that was above £3,000, or above £3,000 adjusted for inflation, I imagine that it would be the subject of considerable media comment. If the Secretary of State were then required to provide a return on what sanctions he had brought in and if that

were a nil return, it would be an additional, albeit minor, pressure on him. It would encourage him to think that he could not possibly produce a nil return because it would look extraordinary.

Perhaps the Secretary of State would be like the Secretary of State for Defence and would not read his press cuttings. It would look like he was not on top of his subject. The amendment would provide extra pressure requiring him to act in the way that the Minister says that he hopes and expects he would.

Perhaps it will cut short the proceedings if I say that I have never laid claim to great technical wizardry. I could not hold a candle on technical matters to the Under-Secretary of State for Wales, who has so amply demonstrated his technical ability today. I would be more than happy if the Minister would agree to take away the amendment to look at it with a view to widening it and improving its scope.

That is a characteristically generous and big-hearted offer from my hon. Friend, and I hope that the Minister will take it in the spirit in which it was made. I conclude by making it clear that there is an issue here. The Minister has been absolutely emphatic this afternoon that he thinks that the Secretary of State's hands should be tied. Given that the Secretary of State's hands are not tied by the provisions of the Bill, this does not amount to a powerful pair of handcuffs. It amounts perhaps to a small thin piece of string around those hands. It might be progress, and if that is what the Minister wants, why not help us by accepting the amendment?

I will detain the Committee just for a few minutes to put on record the fact that the Liberal Democrats support the amendment. It seems to be entirely sensible that a report should be made to Parliament about the use of these powers if they go through. Of course, we hope that it will never get to that. We hope that further changes will be made to the Bill, or that it will fall at Third Reading and that all this will be irrelevant. If it is relevant and if the powers are used, Parliament should know how they have been used. This is obviously a controversial question. The whole idea of giving the Secretary of State these new powers is controversial, so the matter should be brought before Parliament if the powers are ever used.

The issue is particularly important in the light of the further concession that the Secretary of State made clear he was prepared to grant to the Labour rebels on Second Reading when it became clear that a review was expected of the whole working of the Bill after about three years if it ever comes into force. If the Bill is enacted and the review goes ahead, it will be important to know how the powers have been used to see what effect the Bill has had on the numbers of people from less traditional backgrounds going to university and so on. It is a good amendment. I would like to see it accepted, but in the hope that it would eventually become irrelevant.

I am going to get a little bit technical here. The hon. Member for Hertsmere, who is a lawyer, said that he had never laid claim to great

technical wizardry. The problem with his amendment is that it does not address sanctions or penalties, but the

''power to impose conditions under this section.''

It would require the Secretary of State to provide an annual report setting out

''the occasions on which he has exercised his power to impose conditions under this section.''

The draft letter—this must be the first time that we have issued a draft fully two years in advance—is an example of what the letter will look like in 2006–07. The hon. Member for Westmorland and Lonsdale is right that it does not include the figure of £3,000. That is because, subject to debate in the House, that figure will be included in regulation. However, it shows that the Secretary of State has carried out in 2006–07—as he has this year and will next year but the letter relates solely to this clause and fees—his power to impose conditions under this section. He does it twice a year: once with HEFCE and once with the Teacher Training Agency. The letters are placed, as the hon. Member for Daventry knows because he has done it, in the Libraries of both Houses. The hon. Gentleman is asking us to do something that already happens, so the amendment is unnecessary.

However I suspect that what hon. Members are getting at are the circumstances in which penalties are imposed and universities have breached the condition. As the hon. Member for Newbury (Mr. Rendel) said, there will be a review after three years that will focus on those matters. However, the hon. Member for Daventry made a valid point, and I assure him that we have asked the office for fair access to provide us with an annual report, which is part of the regulations to be debated, and HEFCE also provides an annual report. Those reports should go to both Houses and contain a full background to every occasion on which there has been a need to impose a sanction. I am sure that that would help Members of both Houses. With that assurance, I hope that the amendment will be withdrawn.

This has been a short but useful debate and has brought a response from the Minister that I will need to examine in more detail, as I am sure he will understand, because he referred to a number of issues. I am grateful for the support from members of the Committee of all parties for the amendment. I hope that the Minister will understand the spirit in which the amendment was tabled, which was one of having as much information as possible to shed light on the operations of those bodies. With that in mind, and in order to make progress, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment No. 258, in

clause 22, page 8, line 41, leave out 'or'.

With this it will be convenient to discuss the following amendments: No. 259, in

clause 22, page 8, line 42, at end insert

'or

(c) any other higher education funding body designated by the Secretary of State.'.

No. 245, in

clause 22, page 9, line 2, leave out from '(1)' to end of line 3.

No. 246, in

clause 22, page 9, line 3, at end insert

'but does not include a College of Further Education'.

These amendments need not detain the Committee for too long. In introducing them I will pick up on a remark made by the Minister, which I think was meant to be complimentary, describing me as part of the cavalry. That was awfully pukka because my role in the Committee is to act as a slight disclaimer to my Front Benchers. I regard myself more as special forces, operating from the mountains of the Back Benches and definitely not in uniform. It is in that spirit that I tabled amendment No. 258.

The amendment is a genuine attempt to help Ministers at least to elucidate their policies and possibly to achieve a greater degree of flexibility. I hope that the Minister will not say—I am sure he will not—that the amendment in some way rows back from our overall opposition to his policies, which we confirm. However, if we are going to have this bitter pill, let it at least be properly sugared and presented.

The specific impact of my two amendments, which assiduous readers will have realised are on the same point, would be to include in the definition of a ''funding body'',

''any other higher education funding body designated by the Secretary of State.''

My amendments concern the supply of the money, whereas my hon. Friend's amendments are in relation to the recipients of the money. The Minister and everyone on the Committee will know that there are only two funding bodies: the HEFC, set up under the 1992 Act, and the Teacher Training Agency, set up during my time discharging the Minister's office.

My amendment would give Ministers the flexibility to set up another agency, if they were so inclined and for some reason it was not appropriate or sensible to produce primary legislation to do so. Without re-entering the Welsh debate, in cases where an institution was co-funded, it might be convenient for Ministers to be able to include another agency in the framework, or even in certain cases to devolve the powers of the TTA or the HEFC to some third party. At this stage of the evening we had better not get into the outsourcing argument, but it might just be sensible to have a little flexibility. That is the spirit in which the amendment is tendered to the Minister, and I would be grateful for his response to it.

Before I sit down, may I say a word or two about my hon. Friend the Member for Westmorland and Lonsdale's amendments? These probing amendments are at the recipient end, and relate to the relevant institutions. The Minister will forgive me if I am a little less well briefed than my Front-Bench colleagues on this matter, but it would certainly help me to sleep well tonight if he could tell me the relevance of institutions that are not designated under the 1992 Act as ''higher education institutions'' which nevertheless carry out elements of higher education—including, for example, FE colleges which deliver higher education, a matter

we discussed in a different context on Tuesday. Does this clause secure any handle on their activities, including their access activities, in respect of higher education, for example foundation degrees?

My second question is somewhat different. There are still institutions firmly within the private sector, but which have students whose funding comes partly from the public sector. I am thinking historically of the Royal Agricultural College, which eventually went back into the public sector and is HEFC funded. However, there are other specialist institutions, such as, traditionally, colleges of chiropody, although I am not as up to date as I should be on this. They do not receive HEFC money, but some of the students receive

student support because it is felt to be desirable to give them some matching support. I am not clear whether Ministers are seeking to impose conditions on those private sector institutions—of course all universities are private, but these are not even within the HEFC funded sector—on the grounds that some students' money is publicly funded. That needs considering at some stage in the Bill and I would be grateful if, after my hon. Friend the Member for Westmorland and Lonsdale has spoken on his amendments, the Minister might be able to respond.

Debate adjourned.—[Derek Twigg.]

Adjourned accordingly at six minutes to Five o'clock till Tuesday 24 February at ten minutes past Nine o'clock.