University Funding (Hansard, 20 May 1986)

§ The Earl of Swinton
My Lords, with the leave of the House, I shall now repeat a Statement on university funding which is being made in another place by my right honourable friend the Secretary of State for Education and Science. The Statement is as follows:
"With permission, Mr Speaker, I should like to make a statement about university funding.
"The University Grants Committee is today writing to the universities to inform them of their grants for the 1986–87 academic year in the context of their planning to the end of the decade. This announcement represents the allocation between individual universities of the recurrent grant for 1986–87 that I announced on 12th November last. The committee will also inform the universities next week of the detailed outcome of the important initiative it has taken to encourage and reward excellence in university departments by selective reallocation of the funds available.
"The detailed results of this exercise will be conveyed to the universities by the UGC. In plain language, they mean the following:

—more funds for the better research departments and less for the less good;
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— a greater incentive to all universities and departments to improve both their academic standards and their management and use of resources.
"This is a landmark in university funding which the Government strongly support. I am particularly grateful to the UGC for the commitment, skill and energy they have shown in pressing forward in the interests of excellence this initiative directed towards greater effectiveness and value for money at a time when all budgets are under pressure.
"If we are to continue to improve the quality and effectiveness of our universities we must provide positive incentives to individual institutions for better management and better teaching and research. This is what the new selective arrangements for grant allocation are designed to achieve. Instead of basing future funding simply on the accumulation of decisions of the past, the UGC has started afresh and devised a method of distributing grant based on positive judgments about the needs of teaching, the quality of research in all disciplines and the rewarding of institutional enterprise. In this task the UGC and its sub-committees have been helped by advice from the research councils, the Royal Society and other bodies.
"The Government are under no illusions about the difficulties of restructuring and rationalisation involved. As some departments gain, others may have to be reduced and even closed. Universities will have to grasp every opportunity for greater efficiency and effectiveness in using the resources available to them. Decisions about future levels of funding are normally considered in the public expenditure survey. Precise amounts are for consideration then. But in these exceptional circumstances, and in order to give the universities a reasonable chance to adapt to the changes needed in the national interest, I am telling the UGC today that the Government will be ready to consider with them some further financial provision in 1987–88 and the following financial years. The Government's willingness to make such additional provision will, however, depend crucially on evidence of real progress in implementing and building upon the changes that are needed. They will include, as well as the development of the policy of selectivity and the rationalisation and where appropriate closure of small departments, better financial management and improved standards of teaching. If there is to be a new structure for academic pay, the Ministers will need to be satisfied that it will provide the necessary flexibility to enable institutions to recruit and retain staff of the required quality.
"I shall be discussing the way forward with the UGC and with the Committee of Vice-Chancellors and Principals.
"The general letter of guidance that the chairman of the UGC is sending to all universities will be placed in the Library of the House tomorrow and the grants to individual universities for 1986–87 will be published in the Official Report of tomorrow's proceedings. The chairman's letter will be followed in about a week's time by institutional annexes 147 relating to the student numbers and research funding of each unversity, which will also be placed in the Library."
My Lords, that concludes the Statement.

§ Lord McIntosh of Haringey
My Lords, the House will be grateful to the noble Earl for repeating the Statement made by his right honourable friend in another place even though the Statement is one of what can only be called studied imprecision. We on this side of the House agree with the Secretary of State that the process of re-revising the determination of the recurrent grant and the block grant by the University Grants Committee is a worthwhile process. I am sure that it is necessary for the historic, accidental basis of the calculation of recurrent grant and block grant to have been revised and overhauled.
However, the financial conditions under which the University Grants Committee is operating in its grants for the forthcoming year and in its planning targets for successive years are by no means satisfactory. I wonder whether the noble Earl can put any more flesh on the bones of the Statement which he has repeated that the Government are willing to consider with them some further financial provision in 1987–88 and in the following financial years.
Is it not the case that the purchasing power of the recurrent grant fell by 5 per cent. last year; that it is planned to fall by 2.15 per cent. In 1986–87; that it would have fallen by 2.55 per cent. in 1987–88 and would have fallen by a further 2.52 per cent. in 1988–89 if the Government had not made this offer? Will the noble Earl assure the House that the additional financial provision will be sufficient to overturn those falls in purchasing power which are forecast by the UGC in 1987–88 and in future years?
Will he assure the House that the Prime Minister's statement to the Association of University Teachers two days before the last general election that she would hold level expenditure in real terms after 1985 on higher education will now be adhered to? If it is the case that there is to be additional funding for the universities, will the noble Earl assure the House that this additional funding will not come from the public sector higher education, to which he made no reference, nor from the schools sector, which will certainly be affected by the report of Her Majesty's Inspectorate which is due tomorrow?
Is it not the case that if cuts in all educational expenditure were to be avoided and if there were to be level funding until 1988–89, this would require a figure of 3.5 billion over the next three years? Has the Secretary of State for Education and Science gained the agreement of the Treasury to that level of continued funding which is necessary not only for the universities but also for the remainder of educational expenditure? This Statement contains more holes than cheese and it would be helpful if the noble Earl could give the Statement a little more weight and put a little more financial fact behind it.

§ Lord Kilmarnock
My Lords, we on these Benches would also like to thank the noble Earl for repeating the Statement. I must say that I agree with the noble 148 Lord, Lord McIntosh, that it is extremely opaque. There are a lot of intentions expressed here and talk of a landmark but very few facts and, although the Statement uses the phrase "in plain language", nothing very plain emerges from the text. Selective allocation is referred to. May I ask on what principle that will be carried out? We remember the savage cuts at Aston and Salford. Is it the case that the university allocation of the current grant announced on 12th November of 1,342 million remains unchanged?
There is mention of more funds for better research. I quote: "better research". Who is to judge the balance between strategic, basic and applied research? Does this mean, for example, that 40 per cent. of alpha projects currently being turned down will be restored? There is reference to positive judgment on the quality of research. Who is going to take those positive judgments? Will it be the civil servants? Or will the Government heed the dire warning of the advisory body for the Research Council?
On the question of restructuring and rationalisation, there was a reference to possible closure of departments. Is it possible that there are still some whole universities at risk? Is it not the case that the UGC has said that a continuing decline in funding would lead inevitably to that conclusion? We have reference to further financial provision in 1987–88 and the following years. This is a little coy. The question I really want to ask the noble Earl is this. Does this amount to the level funding called for by the CBI and many other interests? And have the Government taken fully into account the implications of a continuing 1 per cent. cut or of a continuing 2 per cent. cut respectively as set out in Chapter 8 of the UGC's Strategy for Higher Education into the '90s?
On pay, can the Government say whether it will now be possible to award university staff something more realistic than the miserable 2½ per cent. which was proposed? Finally, we are told about all kinds of things that will be placed in the Library tomorrow, but I think that what the House will want to know in principle this afternoon is whether the Government have finally been converted to level funding which is the overwhelming demand not only of university interests but of business interests and of parents up and down the country, as they have recently demonstrated in the elections which have just taken place.

§ The Earl of Swinton
My Lords, I am very grateful for the way in which both noble Lords, Lord McIntosh of Haringey and Lord Kilmarnock, received the Statement today. I am afraid that I am not going to be very helpful because the bulk of the questions from both noble Lords were on how much will be forthcoming—which I think is probably a very natural question to ask. But I simply do not know the answer. That can only be decided at the forthcoming public expenditure survey. It will depend upon expenditure constraints and on relative priorities as well as the needs of the universities.
As I have said, the crucial factor will be evidence of progress in implementing and building upon the changes upon which the Government and the UGC are embarked. The noble Lord, Lord McIntosh of Haringey, asked me whether this was going to come out of the public sector higher education budget. My 149 right honourable friend has suggested to the NAB that in considering their advice to him later this year on PSHE they should plan on the basis of a range of funding assumptions including an increase in funding for 1987–88 in line with the Government's forecast for inflation. A decision on the amount to be available will be taken after the Government have determined the total of local authority expenditure and, within that, the amount available for education.
The noble Lord, Lord Kilmarnock, asked about pay. The Government will expect any further financial provision to be used so that the policies of selectivity, rationalisation and good management are effectively pursued. I recognise that a restructuring of academic pay could contribute to the Government's general objectives for the universities and, in particular, increase responsiveness to market forces and help the pursuit of quality. But it remains to be seen whether the universities can come forward with restructuring proposals that meet identified problems of recruitment, retention and motivation.

§ Lord Hunter of Newington
My Lords, may I ask the noble Earl one simple question? It is whether the Government and the University Grants Committee are going to ensure the grant block principle in the universities. That means that the University Grants Committee is not going to take over the detailed running of the university programme. Will he please answer that question?

§ The Earl of Swinton
No, my Lords. There is no question of the UGC taking over the running of the universities.

§ Lord Glenamara
My Lords, is the noble Earl aware that nobody in the Government has yet explained what is meant by "selectivity"? Can the noble Earl explain exactly what the Government mean by it? He referred to good and less good university departments. What will be the criteria for deciding which are the good and which are the less good? Secondly, can he tell us quite simply whether the grant for 1986–87 represents a drop in real terms? Thirdly, can he tell us which universities are going to be closed; and does he know how many university departments will be closed?

§ The Earl of Swinton
My Lords, the noble Lord asked how the research quality will be assessed. This will be done by the UGC. The UGC subject sub-committees, involving over 100 academics and others, have considered research statements from all departments, their publications, their record and their success in attracting funds from the research councils and industry. The subject sub-committees have been able to call on the advice of members of many other bodies such as the Engineering Council, medical charities and the specific subject societies. So far as the drop in real terms is concerned, it will be about 2 per cent. I am afraid I have forgotten the third question the noble Lord asked me.

§ Lord Mackie of Benshie
My Lords, would the noble Earl care to expand on his answer to the noble 150 Lord, Lord Hunter, in that he said there was no intention for the UGC to take over the running of the universities? In fact, in the Statement it says, to encourage and reward excellence in university departments by selective re-allocation. Does that mean that the UGC will supply funds to a university which must be used on a department indicated by the UGC?—because if that is the case they are taking over the running of the universities.

§ The Earl of Swinton
My Lords, I think there is a difference of words here. They will spread the money around, as they normally do. I understand they are sending money to all universities. That is the third question: there is no question at this stage of any university being closed down. I can give that categoric assertion. I do not know how many stages there may be in the future of the world, but at this stage there is no truth in that. I think this is just a question of a difference of words.

§ Lord Kilmarnock
My Lords, would the noble Earl reply to the question I asked on the subject of research? Who will take positive judgments on the quality of research and on the balance of that research as between basic and applied? Will the judgments be taken by civil servants or by paying attention to the guidance given by the advisory body? With respect to the noble Earl, he did not pick up that point.

§ The Earl of Swinton
My Lords, I am afraid I did not pick it up then but I did pick it up in answer to a later question by the noble Lord, Lord Glenamara. This will be done by the UGC and its subject sub-committee.

§ Lord Taylor of Blackburn
My Lords, is it not now a fact, after listening to the Statement, that no longer is the UGC an independent body but a branch of the Department of Education and Science?

§ The Earl of Swinton
No, my Lords.

§ Lord Wolfson
My Lords, I welcome the Government's Statement, with its forward-looking attitude. I should like to ask the noble Earl one or two points. First, would the Government be prepared to provide matching funds for very much needed investment in research in the scientific, technological and medical areas? A lot of this goes on in countries such as America and Israel, and it does create a stimulus and give universities an incentive to look for additional funds. Salford was mentioned by one noble Lord, and they have done extremely well. They are obtaining 39 per cent. of their funds from the private sector.
Secondly, significant savings are possible in energy costs, but that needs a modest investment. I say "modest" because I have actually seen one or two of these projects. Would the Government be prepared to fund such schemes on a fairly rapid pay-back?
Finally, the Statement refers to reducing waste and to achieving more efficiency in universities. With great respect, it is not the academic expertise which is needed to do that, it is a business expertise. I wonder whether consideration has been given to setting up a 151 business group or groups for central buying, for supplies and services and for buildings and equipment, where there are significant and considerable savings to be effected.

§ The Earl of Swinton
My Lords, I am very grateful to my noble friend for those suggestions. I shall certainly draw them to the attention of my right honourable friend.

§ Lord Cledwyn of Penrhos
My Lords, would it not have been far more satisfactory if this Statement had been made tomorrow, when the detailed figures of funding would have been before Members of the House? Secondly, if I may don my hat as Pro-Chancellor of the University of Wales, may I ask the noble Earl whether, in the funding, account has been taken of the special problems of the University of Wales? Although it is the second largest in size in the United Kingdom, it is nevertheless in respect of its constituent institutions sited throughout Wales, three of the colleges being in areas of fairly sparse population without industrial back-up of any kind. Would he say whether the funding figures have taken careful account of that fact?

§ The Earl of Swinton
My Lords, nobody feels more sympathetic towards the noble Lord's first question than I do! I wish it could have been tomorrow; I should then have had a little more time to do some work on it myself—but that would be purely selfish on my part. Also, we may not perhaps have quite such a busy day tomorrow: we have a long Education Bill to go through later today.
The UGC is responsible for universities throughout Great Britain, and its allocation of grant rests on general principles which do not discriminate between institutions by region. Welsh universities are judged by the same criteria as others, as indeed are the Scottish. Grants to individual universities are settled by the UGC and, by convention, successive governments have not sought to alter the UGC's allocations.

§ Lord Cledwyn of Penrhos
My Lords, is the noble Earl not aware that Wales is not a region: it is a nation? Is he not aware that the University of Wales is the only national university not only in Britain but in the rest of Europe, and that it deserves special treatment and special recognition? Is he aware that his words will be received with shock and resentment in Wales? Will he tell his right honourable friend that special treatment is required and that we shall be looking at tomorrow's figures very carefully indeed?

§ The Earl of Swinton
My Lords, not only do I apologise to the noble Lord the Leader of the Opposition but, as somebody who lived in what, in my day at any race, was a Principality (which I think is even more grand than a nation) I apologise to any Welsh Members of your Lordships' House, inside or outside of it, against whom I might have erred. Of course I shall draw those facts to the attention of my right honourable friend.

§ Lord Cledwyn of Penrhos
My Lords, would the noble Earl take account of the fact that I am speaking 152 not as Leader of the Opposition but as leader of the Welsh opposition in this instance?

A noble Lord
Where are they?

§ The Earl of Swinton
My Lords, I find the noble Lord far more terrifying when he is leading the Welsh than when he is leading his party.

§ Lord Elwyn-Jones
My Lords, will there be a further Statement tomorrow on the allocation of the grants themselves?

§ The Earl of Swinton
Not if I can help it, my Lords!

§ Lord Glenamara
My Lords, my noble friend the Leader of the Opposition (or the leader of the Welsh opposition, in his other capacity) has raised a point about rural areas. Surely the same considerations apply to areas of very high unemployment. In the North-East we have the highest unemployment in Great Britain—higher by far than Scotland or Wales, if I may say so—and in Middlesbrough, as I pointed out to your Lordships, it is now 28 per cent. It is going up to 40 per cent. because of the closure of the last shipyard. We have two universities, and it would be a tragedy to cut out any department of higher education in an area of that kind, because if such an area is ever to pull itself out of the old industrial attitudes of the past it must have higher education on its doorstep. Would the noble Earl pass that information on to his right honourable friend?

§ The Earl of Swinton
Yes, my Lords, I also know the Geordies, and I think I am right in saying that that is a region.

§ Lord Parry
My Lords, as self-appointed Chief Whip to the Welsh opposition, may I ask the noble Earl not to miss entirely the important point that was raised by the noble and learned Lord, Lord Elwyn-Jones? It would be wholly appropriate, would it not if there were a Statement some time following the publication of the figures?

§ The Earl of Swinton
My Lords, I think that is a matter for the usual channels.

§ Lord Butterworth
My Lords, may I ask the noble Earl: is it not because of the existence of all these difficult questions that we entrust the division of funds to the University Grants Committee?

§ The Earl of Swinton
Yes, indeed, my Lords.

§ Lord McIntosh of Haringey
My Lords, following this wide-ranging discussion on the Statement, will the noble Earl acknowledge that there will be widespread dismay in the universities and among those who attend them, or who are responsible for them, that not one single assurance that I sought has been given by the Government in response to the questions raised? No assurance has been given that there is not a real shortfall in 1986–87 of more than 2 per cent.; no assurance given that the extra money to be available in 1987–88 will, in fact, restore level funding; no assurance given that any money will not come from 153 the other public sector higher education; no assurance given that school education will not suffer as a result; and, above all, no assurance given that the desperate financial needs of education have been recognised not only by the Secretary of State, but also by the Treasury and by the Government as a whole. Are the Government aware that these gaps in the replies that the noble Earl has given will be noted very carefully by those responsible for our universities, and that the answer will be given at the ballot box in due course?

§ The Earl of Swinton
My Lords, that remains to be seen. The fact is that the noble Lord originally welcomed the Statement. I pointed out that there will be more money available, but said I did not know how much that would be because it is a matter that has not been decided. But there will be more money and I should have thought that everybody was grateful at this time for more money.

§ Lord Annan
My Lords, in connection with the answer to the question of the noble Lord, Lord Hunter, about the block grant, can the Minister say whether the University Grants Committee is likely to do as it has done in the past—to make a block grant for a university, but to give some indications as to how that block grant might be spent, or on what principles the grant has been given? This would meet the point which the noble Lord, Lord Hunter, raised. Can the noble Earl also say whether in giving such indications there would be any indications about the number of students that a university was expected to take? It was with alarm that some of us saw that the national advisory board was advising in the public sector that they would have to reduce the number of students if the unit of resource was not maintained. Surely this would mean Byzantine immobility in higher education. The Government surely must be entitled to say that the staff/student ratio could, in fact, in some cases worsen a little. So I wonder whether the noble Earl can say whether these considerations are in the Government's mind.

§ The Earl of Swinton
My Lords, I welcome very much what the noble Lord, Lord Annan, has asked me. It is a pity that when I was making my Statement I looked to see whether he was in his usual place and did not see him there, because I thought I might have a little support from that quarter. The answer to the first question is, yes, there will be a letter to the universities next week from the UGC. So far as student numbers are concerned, we are not committed to any one projection of student numbers. We have long made clear that projections, prepared for planning purposes will be regularly reviewed, and we hope to publish revised projections in the summer. In fact, the opportunities to enter higher education are now greater than ever before.

§ Lord Rochester
My Lords, will the noble Earl accept that those of us who have been pressing the Government to make additional financial provision for the universities, in a way which means that expenditure can be maintained on level real terms, fully accept the need for the universities, if this is done, to play their part in continuing to implement and build on changes that are needed; for example, in 154 rationalising departmental and committee structures and management procedures?

§ The Earl of Swinton
My Lords, I am very grateful. I think that that is very much in line with the thinking of the Government.