Universities: Funding (Hansard, 18 July 1996)

§ The Minister of State, Department for Education and Employment (Lord Henley)
My Lords, many institutions already attract considerable private finance. I hope they will continue to find further sources of finance in the private sector, including through the private finance initiative. It has been shown to be applicable to some equipment deals as well as to large infrastructure projects. In addition, the Higher Education Funding Council for England has been asked to have particular regard to equipment needs in allocating grant to universities and colleges.

§ Baroness Lockwood
My Lords, I thank the Minister for that reply, which indicates that he appreciates to some extent that there are problems with PSI in the universities. Does he appreciate that, as a result of the November cuts, not only are universities having to reduce further the staff-student ratio, but they are also 992 having to postpone many plans for equipping teaching rooms with up-to-date, state of the art computer-based learning techniques, which to some extent could have alleviated the reduction in staff-student ratios? Is the Minister further aware that British industry is now beginning to fear for its future competitiveness as a result of some of the difficulties being faced in science departments?

§ Lord Henley
My Lords, we understand the concerns of industry and of the universities. That is why my right honourable friend the Secretary of State set up the two joint DfEE higher education sector working groups to collate evidence from the higher education sector about the impact of levels of public funding on institutions and obviously to consider the private finance initiative in the higher education sector. We shall take evidence from the higher education sector about the impact of the levels of public funding on the universities and colleges very much into account in the Government's review of their spending plans this autumn. I have to say that that will be done along with all other relevant considerations.

§ Lord Beloff
My Lords, does my noble friend the Minister agree that in the light of what he said about spending priorities, money must be distributed sensibly? Is it not a mistake to cut equipment grants, which prevent British industry from co-operating fully with British universities, forcing British industry to seek foreign universities for the base of their development when this money could be saved by stopping third-rate students going to fourth-rate universities to read fifth-rate subjects?

§ Lord Henley
My Lords, I understand my noble friend's views. I believe that we all read them in the House Magazine only this week. I disagree with the general thrust of his point. We have a great deal to be proud of in the expansion of the higher education sector, which is now being made available to about 30 per cent. of 18 year-olds. The reduction in capital of about £100 million between 1995–96 and 1996–97 is pretty small compared with the £1.6 billion of capital investment financed by the universities in recent years. As my noble friend made clear, we have to take all other considerations into account in deciding on priorities in public spending. That we shall do this autumn.

§ Lord Quirk
My Lords, notwithstanding the Minister's response, is he aware that some of us are concerned not only by the severity of the cuts but the fear that they may be applied too indiscriminately? Is it not in the national interest that the Government go out of their way to favour some of the world-class institutions that we have in this country so that they can remain world class?

§ Lord Henley
My Lords, it is a matter for the funding councils themselves to decide the priorities between the universities. I do not believe that any representatives of the higher education sector in this House would think it right that the Government should interfere in deciding those particular priorities.

§ Baroness David
My Lords, is the Minister aware of the effect that this may have on the recruitment of overseas students whose fees are already very welcome in the universities? If they are not using really up-to-date equipment and so on, does the Minister agree that that may have an effect afterwards on our trade with foreign countries as regards the influence on sales to industry abroad? Does the Minister further agree that overseas students have been very good ambassadors in the past?

§ Lord Henley
My Lords, I totally agree with the noble Baroness. It is quite right that we should encourage overseas students to come to our universities. As the noble Baroness will be aware, there has been an increase in the number of overseas students in our universities, despite the fears expressed by the party opposite when we increased the fees that such students have to pay.

§ Lord Wallace of Saltaire
My Lords, does the Minister accept that the shift from capital to current funding that the PFI implies requires a higher income stream from either private or public funds in future? Does he accept, therefore, that British universities will be required to charge their students fees if that is what the Government wish to do with their future capital funding?

§ Lord Henley
My Lords, as I believe I have made clear to the noble Lord on another occasion, it is open to the universities to charge top-up fees, should they wish, but we see no need for them so to do.

§ Baroness Park of Monmouth
My Lords, does my noble friend agree that the PFI takes a good deal of time to put in place and carries with it considerable expense in terms of legal and professional costs? Therefore, since the Treasury and the CVCP are still considering the scope for PFI in the universities, is it reasonable to delay the major capital cut until there is time for PFI to be put sensibly in place, whatever its merits?

§ Lord Henley
My Lords, I do not agree with my noble friend. We accept that PFI will take time to develop and that there is much that needs to be learnt. The funding council for England and the other funding councils are engaged in a number of pathfinder projects. This year there are approximately 12 projects worth of the order of £120 million, and there will be more next year. I am sure that the institutions themselves will look at those very carefully.

§ Lord Morris of Castle Morris
My Lords, is the noble Lord aware that in the second largest university in the United Kingdom, the University of Wales, having made inquiries I have been unable to discover a single PFI project that is either under way or completed? Does that not provide powerful evidence that the PFI alone cannot solve the current financial problems of the universities?

§ Lord Henley
My Lords, no. I believe it is evidence that the University of Wales should take advice from the appropriate funding council and consider the various pathfinder projects that it is considering. As I made clear 994 in response to an earlier question, there are 12 pathfinder projects in existence worth approximately £120 million, and there will be more next year.

§ Lord Peyton of Yeovil
My Lords, will my noble friend not be too hasty in sweeping aside the views expressed behind him both by my noble friend Lord Beloff and my noble friend Lady Park?

§ Lord Henley
My Lords, I try not to sweep aside the views of my noble friends, whose support has been very useful on a number of occasions. I hope I made clear in response to a question from the other side of the House that we would take into account all the evidence in our annual review of public expenditure. Obviously, we will take into account the views expressed by Members on both sides of the House.

§ Lord Winston
My Lords, while I am aware that I may be told not to believe everything that I read in the newspapers, in view of the recently stated concerns of Mr. Kenneth Clarke about the PFI in the health service, why should there be any greater optimism about the PFI in education which does not have the advantage of being able to generate a proper income stream?

§ Lord Henley
My Lords, we have already seen some evidence of PFI projects in universities. There is a PFI project at the University of Greenwich called BOOT, the build, own, operate and transfer project, which demonstrates the success of such schemes. I believe that it is open to the institutions and the funding councils to take forward these projects and see what they can develop.