The Universities

HL Deb 08 December 1999 vol 607 cc1284-360

3.24 p.m.

Lord Jenkins of Hillhead

rose to call attention to the state of British universities; and to move for Papers.

The noble Lord said: My Lords, as I have spoken only once in your Lordships' House during the past two years, I feel I can almost claim the privilege of a maiden speaker. During those two years the composition of the House has changed greatly, both inside and out. One or two noble Lords may recollect that as Leader of the Liberal Democrats I spoke quite often. But when I ceased to hold that position I thought it right, for a time at least, to allow my noble friend Lord Rodgers of Quarry Bank to get on with it; and, if I may say so, he has got on with it very well indeed.

I also declare the interest that I have been Chancellor of Oxford since I succeeded the Earl of Stockton nearly 13 years ago. Oxford is therefore inevitably the university I know best. I regret to say it is now 61 years since I first went there as an undergraduate. Before coming to this House I was also a member, in a geographical sense, of two universities, now become three, in the City of Glasgow, and I do not intend this debate to be an exclusive Oxford, or even Oxbridge, benefit day.

This country is lucky enough to possess two old universities which have maintained their position in the world league much better than have the ancient foundations on the continent of Europe. Some feel that as resources are squeezed here and rise across the Atlantic, the medium-term prospect of any British university holding such membership may be in danger. I must not exaggerate. We do not see an immediate abyss at our feet. Our membership of this league is not put in doubt by any other member. Indeed, one of the happiest recent occasions at Oxford was about a year ago when we gave honorary degrees to the presidents of Harvard and Yale, both of whom—probably for the first time in history—were Oxonians. And, as their wives were both Oxonians too, we were able on that occasion to bridge the sex divide as well as the Atlantic Ocean.

The transatlantic gap in resources is constantly growing. There may come a time when the elastic snaps and anybody at university, whether Cambridge, Oxford or anywhere else, will find it difficult to compete with the six or eight foremost American universities. That would be both a severe self-inflicted wound for Britain and a damaging blow to the intellectual balance of the whole western world. It would not be healthy if no cisatlantic university could hold a candle to the great schools of New England, Pennsylvania, Chicago and California.

That implies no Oxbridge-centric view of the British university scene I have long felt that the two-peak English pattern, with everywhere else on the lower slopes—that was certainly the case in the years between the two wars and to some extent up to the 1960s and even the 1970s—was less desirable than the American one, where there were great peaks, certainly, but also more variety of excellence. To a considerable extent the British pattern has moved in that direction.

No one will contest the claims of Imperial and LSE, in their particular fields, to be major, international institutions. Then there are the post-Robbins universities, some of which—Warwick, York and Bath, strikingly so—have made remarkable breakthroughs in the past 30 years. There are also the top performers in what used to be called the "red brick" category, most eminently Nottingham and Bristol. I hasten to say that my examples are illustrative rather than exclusive; but the specific is always more interesting than the general.

Some of those research-intensive universities have come together in the Russell group, which I am sorry to say is not named after my noble friend Lord Russell, richly though he deserves it. They first came together in that architecturally exuberant Bloomsbury building—nearly as exuberant as my noble friend—the Russell Hotel. These universities are a powerful phalanx and are crucial to the country's academic performance.

Seven years ago, the previous government decided to confer the title of university upon approximately 50 former polytechnics. If this Government had done it, it would have been denounced, possibly rightly, from the Opposition Benches as the ultimate in gesture politics: the elevation of style over substance. I am not sure whether it was right or wrong. At any rate, it has been done and cannot be undone. But what was certainly wrong was any thought that handing out titles and new degree-giving ceremonies was a compensation for the shrinking resources per student which went alongside the change.

In my view, what would be even more damaging would be to think that, having pushed the number of universities up to over 100, you must then allow them to advance only in one equal and even line, without spearheads and without concentration of resources on areas where major frontiers of knowledge breakthroughs are possible. Such a battle strategy would be a certain recipe for military disaster; it would also, I believe, be a recipe for academic failure. Within quite a short time the elastic would snap and Britain would then have no serious candidate for the world league. I make no apology for expressing these discriminatory sentiments. Universities are about excellence; about encouraging individual creativity; and about respect for learning; and a determination to advance human knowledge.

What are the issues that most disturb those with a close knowledge of transatlantic comparisons? First, there is the sheer discrepancy of resources—a discrepancy which is growing greater almost every day. Harvard, which is, admittedly, top of the tree, but with four or five powerful and elevated branches just below, has accumulated endowments that amounted to 13 billion dollars in 1998; probably now, with the state of the US stock market, at least 15 billion dollars. In addition, in a typical year, it receives accretions of another 1 billion dollars.

Harvard is not a huge university, though its graduate schools are much bigger than our graduate body in Oxford or in Cambridge. But its undergraduate body at 6,500 is barely 60 per cent of ours at Oxford. This makes the sometimes envied wealth of a few Oxbridge colleges look puny. Even the funds of the great (Cambridge) Trinity pale into relative insignificance.

That wealth has several effects. First, it enables Harvard, and others, to pursue a policy of blind admissions, based purely on intellectual merit, with high fees of course, but with the university able to ensure from its own resources that no one is excluded by inability to pay.

Secondly, it results, though not out of line in this respect with many other American schools, in an entirely different level of academic salaries from any prevailing here. If it were merely a matter of competing greed, we could just shrug rather cynical shoulders about it, rather as we may do when the most extravagant City bonuses are announced. But it is far from that. The real value of the always modest British academic salaries has been appallingly squeezed in the past 20 or 30 years by as much as 30 per cent in relation to professional salaries generally.

My evidence about the problem of return or, if you like, re-entry comes primarily from three eminent historians who have come back—two from Princeton and one from Colombia—to leading positions in this country. Because they wanted to return they accepted up to a 65 per cent cut in salary; that is not a cut to 65 per cent, but by 65 per cent. But they accepted this because they wanted to return. In my view, that is what gives their evidence a particular validity. They are not disgruntled expatriates, tax exiles in Florida or Belize who put their material interests above commitment to this country. Of course, they had spent substantial periods of time in America, but that in itself is wholly desirable. Cross-fertilisation is part, of the essence of academe. However, it must be two-way and not one-way. My fear is that we could be on the edge of a one-way avalanche of some of the brightest and the best.

That threat arises from more than salaries. Those who came back were, of course, wholly prepared for a plunge in salaries. What they were not prepared for was the vast increase in bureaucratic interference during their absences, resulting in a major diversion of their energies and efforts from their core duty of teaching and research.

The best academics at US universities are made "Professor of the University", which makes them totally unencumbered and able to get on with their writing and teaching. Here, promotion and esteem too often lead to appointments where filling in forms and questionnaires is a grave diversion from creative research and writing. This stems partly from the teaching quality audit and partly from the research assessment exercise. No doubt they both perform some useful functions, but hardly enough to justify the time consumed, The research assessment exercise elevates quantity of published papers over quality and produces the somewhat ludicrous effect that, as the end of each quinquennium draws near, university presses and editors of learned journals are inundated with hastily put together exercises.

The words of one of my three witnesses remain engraved on my mind. He wrote, "It took me the best part of 15 years to do the research and writing of my biography of the Count-Duke of Olivares"—the great Spanish 17th-century statesman—"Had I been working on it in this country, I am afraid [this concentration] would have made me a grave liability to any university". As Sir John Elliott's work as an Hispanic historian has now attracted almost every relevant European prize, those words of his should be taken into account.

It is possible that the noble Baroness, Lady Blackstone, may complain that I am too concerned with stratospheric characters and not enough with the run-of-the-mill routine teaching. I do not know whether she will in fact say that, but, if she does, I shall reject it head on. As I have said, universities are about excellence, and quality stems from the top. In the 1920s and 1930s Cambridge was the foremost university in the scientific world on the frontiers of knowledge, although Oxford fully maintained its position as the nursery of leading figures in most aspects of the national life and has since grafted on to itself a great new scientific capacity, particularly in biomedicine.

However, I prefer to put this argument at one remove, as it were, in relation to Cambridge. How much would Cambridge have achieved—how far would it have gone in achieving its outstanding pre-war position—without the star quality of J.J. Thomson, Rutherford, Keynes, Hardy, Dirac, and a handful of others? Universities depend very much for their international reputations on a few individuals of pre-eminent quality. If they are snuffed out, or induced permanently to cross the Atlantic, a sad mediocrity will follow.

How much would that matter to the nation? Clearly it would matter a great deal to the universities concerned, but it is the duty of this House to see these matters in a broader context. I think that it would be a grave blow to Britain's remaining world assets. Universities, and the nations which encompass them, are historically disposed to rise and fall together.

How are we to get the resources to stem this tide towards American monopoly? We in Oxford certainly do our best with private benefactions and, by the standards of this side of the Atlantic, we have done well. But there is a limit to the amount of juice you can squeeze out of that lemon. We also do well in terms of research contracts, with the result that, as the Prime Minister pointed out in his Romanes lecture at Oxford last week, less than a third of our total income now comes from HEFCE. He added, We look to you, and to our other leading universities, not only as the guardians of traditions of humane learning, on which your reputations depend; but also as one of our key global industries of the future, able to give the United Kingdom a decisive competitive advantage … That means government giving you the support only we can provide; but it [also] means universities generating the maximum entrepreneurial drive on a national and international plane". Entrepreneurial drive requires freedom within which to exercise it. Some voices are increasingly raised in favour of our cutting free from the state sector and becoming private universities, private at any rate to the extent that are the best United States institutions. I recognise that we could be forced in that direction, although I hope not. It would be a hazardous move with our much more limited British culture of private generosity, and I also believe that we should continue to play our full part as a national asset in the national education system. We could, of course, easily fill a large proportion of our places with high fee-paying overseas students. But that would not be exactly fulfilling our role. A foreign leavening is desirable in any good university, but it should be a leavening and not a near take-over. The role of our leading universities should be as spearheads of this country's educational system and not as international finishing schools.

But if we are to maintain our standards and our competitive position, we must get extra resources from somewhere. The sums involved are not huge. One informed estimate that I have seen suggests that another £100 million annually spread over perhaps 50,000 students in the top institutions, not just Oxbridge, could do the job. That may or may not be so. The figure cannot be totally accurately estimated. But at any rate that gives the order of magnitude with which we have to deal. Much the most desirable solution would be for the Government to provide that limited degree of extra resources. The sum of £100 million must be seen in relation to an HEFCE budget of approximately £4 billion a year and in relation to a total sum spent on higher education of £13 billion a year. I believe that would be a good national investment and it would be my preferred solution. But if that cannot be the case, the arrow points inevitably to differential fees.

While this may not be the wish of the DfEE and, I must make clear, is not the policy of the Liberal Democrat Party, it is my duty in this debate to point out realities and real choices as I see them. They are in the logic of the Prime Minister's remarks about the need for entrepreneurial drive on top of the support which government can provide. However, you cannot be entrepreneurial with one hand strapped behind your back. And, of course, the Government cannot fall back on a principled objection to fees. Rightly or wrongly—I have a certain sympathy always with the constraints of financial discipline—they have driven a large tank through that line of defence. In those circumstances I cannot see why they should try to erect a new and much less defensible line against differential fees. Such a line would only begin to make sense on the basis that all our 104 universities were teaching and researching at an equal level of quality. Such a view, as I endeavoured previously to show, is quite incompatible in the medium term with the maintenance of centres of excellence which can challenge the American monopoly.

Such a proceeding must not infringe the principle that inability to afford the fees does not exclude any of high intellectual merit. That would be the wish of every vice-chancellor whose university would be involved, and the Harvard experience shows that it can be achieved. The differential would not be vast; it would be for individual vice-chancellors to judge; and of course it should not be confined to Oxbridge but should be left to the wider group that I mentioned earlier of vice-chancellors and university councils and senates to judge. That is the essence of the entrepreneurial freedom of which the head of the Government spoke.

If the DfEE does not like it, I ask it please to provide more money for research-intensive universities. I would welcome that. But it cannot have it all ways: no extra public funding; no ability to raise charges. The result of that, gradually but inevitably, would be no first-class British universities. That outcome I shall resist to the uttermost because I would regard it as a tragedy worse than differential fees. I beg to move for Papers.

3.47 p.m.

Lord Shore of Stepney

My Lords, it is a pleasure to follow the noble Lord, Lord Jenkins, in his wide-ranging speech and to be able to thank him on behalf of the House for making it possible for us to have what I am sure will be a valuable and wide-ranging debate.

When I look at the list of those who have put their names down to participate in the debate I rather wonder at my temerity in speaking. We shall have the benefit of a tremendous range of expertise and experience during the course of the afternoon and evening. I certainly cannot claim anything like that degree of intimate knowledge, let alone academic appointment, which so many of the participants in the debate have experienced.

I at once acknowledge the special authority of the noble Lord, Lord Jenkins, speaking as he does as the chancellor of the co-equal first university of our country. He also speaks with great authority because, as we all know, he has access to the highest counsels of the land. I have no doubt that his words will be given that extra special weight which we all give to the words of those who enjoy access at the highest level. I claim no such authority. I cannot say quite that I am the man in the street; I am rather the visitor in the fellows' garden, if I can put it that way. However, I am a consumer of higher education and I am married into an academic family which, as my old and noble friend Lord Annan constantly reminds us, is a famous one in our land.

Having said that, I have two points that I wish to put to the House and, above all, to the Minister who will reply to the debate. The first is my concern at the major changes that were introduced almost as soon as we formed our Government. It may be that I am not sufficiently adjusted to the modern world, but I am unhappy about the introduction of fees for university education.

I am even more unhappy about the abolition of grants for students. Perhaps I am biased by the fact that I represented in the other place for more than 30 years a very impoverished community. I should say that it was impoverished only in the financial sense; it was full of the vitality and vigour of a mixed and fascinating population.

The average accumulation of debt that students now beginning a university course can expect to incur is something of the order of £15,000 or more by the end of the course. If they meet—as many do—their partners at that university, the partner will no doubt also bring into the association a further debt of equal magnitude. That is not a good send off towards battling one's way in the world, even in the 21st century. I do not like it.

Obviously debt has a relative impact depending on the family one comes from. I do not think I would have had a higher education but for the provisions made for returning warriors after the Second World War, where everything was paid for by the state. It was not very generous, but it saw me and many others through.

When I think of my constituents without a university tradition—people earning not high incomes by any means—it must be a barrier that their children will be faced with an almost certain debt of £15,000. My first request of my noble friend who is to reply is, please keep the closest watch on the student intake from the deprived areas—the inner-city areas, as they tend to be—of our country. I hope I am wrong about this, but if the Government find that there is a trailing off or diminution in the intake from those areas, please let us have a serious rethink about the whole policy of abolishing grants. That is all I want to say on that subject.

My next point concerns academic pay. The noble Lord, Lord Jenkins, has already touched on that. It is terribly important. We are very fortunate that there is a substantial number of people in our country who do not consider financial rewards or the magnitude of the pay packet as the great deciding factor in how they choose to work and pass their lives. On the contrary. Thank heaven that tradition is still there; that people still relish the task, the job, the fascination and the interest of academic life and of leaching and the association that they have with people in a similar and often pleasing environment. Thank heaven that is there.

But all that is not there in a number of our universities. When one considers that the load on the average teacher has increased by about 100 per cent in terms of teacher/student ratios in the past 20 years and that, as we all now accept, a gap of something like 30 per cent has emerged over those years between increases in the salaries of comparators and academics, it really is a very serious matter. While people are not wholly motivated by rewards, we cannot allow a gap of that size to emerge without it having a serious effect on people's career choices.

This is already being reflected in a kind of brain drain. Rewards are much better in American universities, as are the university facilities and research facilities. Many of our best people are tempted there. As the noble Lord, Lord Jenkins, told us, the number who come back in spite of massive reductions is quite remarkable. That is very creditable, but we cannot rely on it.

When one thinks also of the competing job availability in the City and of the financial services endlessly expanding, all of which offer rewards hugely in excess of those available in academia, we really have to do something about it now.

When I was last involved in a similar debate—I think it was in June—it concerned the Bill of the noble Lord, Lord McCarthy, to establish a kind of review body for academic salaries. The body would consider what the rewards should be and, hopefully, it would then be up to the Government finally to accept them. None the less it would be a very strong influence on the Government's decisions. At that time, my noble friend Lady Blackstone, who is to reply today, conceded that a very serious gap had emerged and she told us—I hope that she can go a good deal further than this today—that it was, first of all, a matter for the employers. I think it is a hit more than that. Secondly, she told us that there was a question of affordability. There always is. Thirdly, and the strongest point she made, she said that she would not want to pre-empt the Bett Report—I think that refers to Sir Michael Bett of the Treasury—which was just about to be published. I understand that very well.

We now have the Bett Report. That has been very supportive of the arguments and claims put forward by those who feel that the gap between academic and comparator jobs is insupportably large and should be diminished immediately. As I recall, its first recommendation was that there should be a 9 per cent increase in real terms for academic salaries. Within that there should be some much larger increases in the starter lecturer scale—the bottom of the scale should be very much higher than it is now—and for similar research posts. I should like to hear my noble friend say today that that at least has been accepted: that the Government, in making their forward budget provisions for the next three years, have written in the funding of the extra payment to help to begin to close the gap for research and academic employees.

I have kept my eye closely on the clock and I shall bring my remarks to a close. I get the feeling from my noble friend that the door is ajar. Let us see if we can kick it half-way open later tonight.

3.57 p.m.

Lord Baker of Dorking

My Lords. I, too, should like to thank the noble Lord, Lord Jenkins of Hillhead, for giving us another opportunity in this House to debate higher education and our universities. Indeed, the best debate in Parliament since the election has taken place in this Chamber. That is not surprising when one looks at the strength, breadth and reach of experience of the Members who will speak after I have sat down.

I should say to the noble Baroness that these debates have not been initiated in government time. The Government give the impression of not being very much interested in higher education or the universities. The noble Baroness is frowning and shaking her head in disagreement—I am not surprised at that—but I asked the research department in the Library if it could point me to one major speech made by our Prime Minister on universities. It could not find one. I then asked if it could find a major speech by David Blunkett in the last two and a half years on universities, and it could not. In forlorn hope, I asked if the Deputy Prime Minister had made a speech on universities in the past two and a half years. No Cabinet Minister has made a speech about university policy in the past two and a half years. The only policies initiated have been a vindictive attack upon Oxford and Cambridge over college fees and the rather botched-up fees proposals, which ended up in the bullying of this House.

I believe—as does the noble Lord, Lord Jenkins— that we in the university area are facing a very serious crisis. At the heart of that crisis is a lack of resources and cash. Two weeks ago, the noble Baroness announced a huge increase in university funding. When I read the press release I considered with amazement the spin doctors now working in my old department. The Minister announced an increase of £295 million, which represents an increase of 11 per cent over four years. However, the analysts got to the figures and revealed that they did not represent an increase but rather a real-terms cut. With great respect to the noble Baroness, universities are to have an extra £295 million in 2002, taking the total budget to £5.7 billion. That represents a 1 per cent real-terms cut in funding per student as compared with 2000–01. The settlement for that year will represent a 1 per cent cut on this year.

What the Government are doing is encouraging the expansion of higher education—which I fully support. I welcome the fact that more young people at university are from families which in the past would never have thought it possible. Indeed, the targets I set in my final year in 1989 for university participation by the year 2000 were exceeded in 1996. However, while the Government are encouraging expansion, they are providing less cash per student, and that is putting an enormous strain upon the system. In this argument, I believe that the Treasury has won.

The noble Lord, Lord Jenkins of Hillhead, spoke of the differentials between salaries in this country and those in other countries. A great deal of anecdotal evidence is available. I know of a teacher at a northern university who, in the past month, has moved to a German university—not one of the great state universities, but a small, provincial institution—at double his UK salary. He cannot even speak German very well, but they wanted him and he was prepared to go. Last week I learnt of two more academics from Oxford who intend to leave. The brain drain has begun and it will accelerate. I know perfectly well that university teachers are not solely concerned with money and dominated by cash returns. One has only to read the delightful book on dons by the noble Lord, Lord Annan, which would make very good Christmas reading if I may so recommend it to noble Lords and try to boost its sales. However, they are not indifferent to material rewards. The market beckons and they are leaving. Soon, more will join them.

What can we do about it? I have come to the reluctant conclusion that no government, including any future Conservative government, will ever give universities the resources they really need. In my time I tried very hard and achieved reasonable settlements, but I would have liked to have done much better. Some of my successors in fact cut funding, which I thought a mistake. However, I do not believe that in any government there is a sufficient degree of emphasis and priority to fund higher education in the way it should be supported. The noble Lord mentioned the figure of £100 million. I have to say to him that £100 million would disappear very quickly, given the needs of the universities. The noble Lord made a plea for the great élite universities of our country. That cry has fallen on deaf ears. This Government have taken money away from Oxford and Cambridge. I make that point to the noble Lord, Lord Jenkins, and to the then leader of his party who was trying to get into the Cabinet at the very time the Government were reducing funding to our two best universities.

If we accept that no government are going to provide the necessary level of support, where can universities look for funding? In 1986–87 when I introduced the concept of per capita funding for students, so that students would go to university and take with them a certain amount of money—whether they were arts, science or medical students—I believe that that marked the beginning of a process whereby universities would gather their funding from four principal sources: per capita funding that came with the students; endowments, although I agree that endowments here are small-scale by comparison with those of the great American universities; access funds, which we introduced in order to give colleges and universities money to help students from poorer families who could not afford the loans, much less the fees; and a form of fees. I have not mentioned research funding because that is a separate issue and should form part of a separate debate.

I was unable to introduce fees, but I did introduce student loans. Since you cannot have too much of a good thing I left it to the Labour Government to introduce the concept of fees, and they are now a reality. I agree entirely with the proposal of the noble Lord, Lord Jenkins of Hillhead, that we should now introduce differential fees and allow the universities to charge such fees.

Of course, universities already do this as regards overseas students. One of the features of British universities is that we attract more overseas students to our universities than do either French or German education institutions. Overseas students bring great cultural enrichment to our universities. Furthermore, when one examines the statistics for postgraduates over the past five years—1994–1999—it is clear that the number of English postgraduate students has remained steady at about 63,000 per year. However, in that period the number of postgraduates coming to British universities from Europe has risen by 9,000 to 15,000, and from overseas, from 17,000 to 23,000. The figures for undergraduates show that over the past five years, British undergraduate students from British homes have only increased by 5,000. However, undergraduates coming from overseas have increased by 25,000. So the universities are well versed in the advantages of differential fees. If the noble Lord, Lord Desai, were in his place, he would almost certainly intervene to point out that at the London School of Economics, one-third of the students now come from overseas and pay the full tuition fees, ranging from £7,000 to £10,000 per year.

I believe that we must face up to this situation, although I know that it is a difficult step for the Government. They will argue that, by introducing differential fees, it makes it easier for rich dullards to go to university but what happens to talented students from poor homes? There are two ways to approach this. First, the access funds that we introduced should be increased. Access funds were specifically directed towards the less well-off. Secondly, the Prime Minister should give the lead in ensuring that everything possible is done to encourage the increased endowment of our universities, possibly by more advantageous tax differentials, to try to close the huge gap with Harvard, Princeton and Yale. Again, that would provide a source of income to the universities so that they could better help those students who cannot afford the full fees.

What I have set out here is likely to happen. The pressures are building up. It is quite possible that one or two of the Oxford or Cambridge colleges will become truly independent, private institutions. Unless safety valves are put in place, I believe that that will occur. However, the arguments in my speech and those in the speech of the noble Lord, Lord Jenkins of Hillhead, do not concern only Oxford and Cambridge. Some years ago, differential fees were thought to be a cranky, right-wing notion. However, many Members of this House will have heard these same arguments from other universities such as Southampton, Nottingham, Durham and Exeter. Those institutions have come to realise that no government will provide the necessary resources.

When the noble Baroness responds to the debate, I am sure that she will reject this idea as being totally and utterly unacceptable. Or at least, I imagine that will be the case. If she does not, I look forward to her speech. However, before the noble Baroness damns it, I hope that she will not damn it too completely because she may have to eat her words. That is because if, three years ago, the noble Baroness had been asked whether a Labour government would introduce fees in our universities, I can imagine her splenetic rhetoric as she attacked the idea. Indeed, perhaps the noble Baroness can indicate to the House any speech she made before the general election saying that the Labour Party was going to introduce fees in the way that it has. I do not believe that those speeches are readily available.

For that reason, I hope that the noble Baroness will not reject this proposal completely out of hand. As the noble Lord, Lord Jenkins, said, our universities are one of the prize assets of our country. Furthermore, we are living in a brain economy, where brain power actually creates wealth. I hope the Government realise that there is a crisis in our universities and that it has to be addressed.

4.9 p.m.

The Lord Bishop of Derby

My Lords, as a new Member of this House, I approach this debate from the experience of a new university—the University of Derby, which is only 10 years old, having graduated from colleges of higher education without the intermediate stage of being a polytechnic. That move to becoming a university changed Derby's agenda. It increased the expectations of both government and the community. They relate now to a university as a place for the whole person, not as simply a provider of courses for the acquisition of qualifications.

We subscribe to the Royal Society of Arts' definition of "capability" (and thereby employability) as some 40 per cent specialist knowledge—be it in textile design, engineering, computer science or modern languages. Alongside that 40 per cent specialist knowledge, education should deliver some 60 per cent made up of a generic bundle including the ability to learn continuously and adapt; being self-motivated, self-aware, self-critical; developing empathy, team working, enterprise, a sense of purpose, and so on. For such important qualities to flourish, what is required is a community of learning, not simply a brochure of courses or a collection of classrooms and laboratories occupied by disconnected individuals. For that reason, in a time of expansion coupled with financial stringency over its first decade, Derby University has drawn the wider community into an enterprising achievement by building student halls for all those who want them.

For education to be expressed in this rounded way, the spiritual needs of students must be addressed. The Church of England in England alone has more than 150 chaplains in higher education and, if extended to Britain at large and our partners from the mainstream Churches, the number rises to some 600. In Derby our chaplaincy works as an ecumenical team, which is fairly typical. As a new university set in the multi-racial, multi-faith East Midlands, itself a region set in multi-faith Britain, Derby has pioneered inter-faith research and teaching. We are currently running an appeal to develop a multi-faith centre providing world faiths with spaces not only for research and teaching but also for worship, counsel and social activities. This is an expression of the conviction that there will be no world peace until there is peace among the world's religions. That conviction is another instance of how education well done, holistically benefits the world, its nations, its communities, groups, families and individuals in that kind of order, and not simply its individuals, nor solely because it increases employability.

In the context of globalisation and our increasing focus on economic aspects, we would be wise not to ignore this wider value of higher education and to promote it strongly. Here is a university which is also proactive in economic regeneration. Derby and Derbyshire are proud of their university. The university is an up-front player among the public, commercial and voluntary bodies energising the Derby City Partnership. It is the instigator of projects to enhance economic opportunities including employment in the High Peak, working with public and commercial partners focused on Buxton. The university's regional performance in business in the East Midlands has been recognised by the Higher Education Funding Council for England. Gone are the days when universities could be considered as relatively unproductive consumers of public funds; they demonstrably have the potential to be central to economic competitiveness. True though that is, higher education contributes not only to the material wealth of a region but also to its culture and values.

In all this we believe that our aims are congruent with the Government's declared policies, notably a commitment to lifelong learning and access open to students from a broader range of social backgrounds. Our chancellor, Sir Christopher Ball, speaks of creating in society a culture of aspiration. That is being fostered by the development of seamless links with local further education institutions, by taking courses to outposts accessible not only geographically but also psychologically to those unfamiliar with the notion of lifelong learning.

The tables published last Friday show Derby to be one of the highest performing universities in terms of access for the lowest social groups. That includes a high proportion of mature students. Courses are also being offered in Urdu and Hindi languages.

If we accept the conclusion drawn by HEFCE that young people from wealthy areas are 10 times more likely to enter higher education than those from poorer areas, we welcome the Government's commitment to widening penetration among families where there could be first-generation graduates. But we find present student funding still leaves major obstacles to penetration among those social groups which are most excluded. Now that students emerge typically with debts and student loans in the range of £10,000 to £15,000, higher social groups are more likely to take that in their stride than those with waged backgrounds, like manual skilled, semi-skilled and unskilled workers. Not only are they understandably inhibited by a massive debt culture but they are also likely to count the cost in terms of lost earnings over, say, three years at, say, £40,000 to £50,000. That applies particularly to mature students who might otherwise step back from earning for a while to improve their own skills and thereby their value to both employers and the community.

As the Government constantly review their policies to defeat social exclusion, here is an area for further attention. Education is unchallenged as one of the keys to inclusion. Adjustments are urged to strengthen penetration among non-professional families and to enhance support for those universities which show a commitment to lifelong learning and broader access.

4.17 p.m

Baroness Rawlings

My Lords, the honour falls to me from these Benches to congratulate, in the name of the whole House, the right reverend Prelate the Bishop of Derby on his maiden speech. It was an important speech by any standards. He is a most distinguished Member of your Lordships' House who has been Clerk of the Closet to Her Majesty the Queen since 1996. He has held high office in the Church all over the United Kingdom, a career of extraordinary achievement, where he even finds time, among his many recreations, for bee-keeping. We hope that he will play a prominent part in your Lordships' House and that we shall hear a great deal more from him on this and many other subjects.

Before I address your Lordships' House in this very important debate, I should like to declare an interest as chairman of the Council of King's College, London. I should also like to thank the noble Lord, Lord Jenkins of Hillhead, for introducing this debate.

I am sure that your Lordships are aware of the great changes that British higher education has experienced in recent years. This has strengthened the university sector. We at King's have found that this strength derives from a network of new partnerships with the private sector, between disciplines, with higher education, with government, with industry, with other public sector organisations and with our local community.

Perhaps I may take the case of King's College, London to demonstrate the changes that some universities have experienced. In recent years, we have seen major transformations of the college's size, estate and research. Fifteen years ago the college had 3,500 students. Today, following the mergers with the Institute of Psychiatry, and the United Medical and Dental Schools of Guy's and St Thomas's Hospitals, the college has 16,500 students. It is now the largest institution for medical education in Europe, as well as being one of the leading universities in this country for teaching and research in law, humanities, education and the sciences.

This very impressive growth in student numbers needs to be accompanied by a concurrent development of facilities, especially when university buildings, although distinguished and magnificent, may have been designed with 19th century teaching methods in mind. At King's, we are in the midst of a £300 million redevelopment programme, the scale of which is extraordinary in either the private or public sector. Furthermore, this massive investment has not been at the taxpayer's expense; King's has responded to the new world order of higher education by securing a substantial part of this money from non-governmental sources.

Growth is not an end in itself, however. There are many benefits that come with expansion, but principally, growth has allowed a holistic interdisciplinary approach to research that breaks down the barriers between disciplines and departments.

A fine example of this would be the new Wolfson Centre for Age-Related Diseases, to be established at the Guy's campus of King's College, London. This remarkable centre for research into the health problems of our ageing population—the first of its kind in this country—will bring together distinguished scientists from a variety of fields. Partnerships with four NHS trusts ensure that biomedical sciences are grounded in the realities of medical practice at a local level. The community at large stands to benefit immensely from such research and, what is more, the £6 million cost of the project has been obtained from private sources.

This country's record of groundbreaking research is the envy of the world. Research funding has always come from a variety of sources. The Government should be made aware that any proposals to channel research moneys entirely through research councils would be destabilising and would inevitably result in a weaker research base. A strong research base is often derived through partnership. King's works in partnership with government, providing more research for government departments than any other university. The college also works in partnership with industry to provide new products and services. A good example of this might be the Mobile Virtual Centre of Excellence, which has been created through a partnership with four other universities and 25 industrial groups, to provide multimedia communications on the move. This poses many complex technological challenges which only a consortia bringing a wide range of skills could expect to solve.

Like many other universities, King's is a research-led teaching organisation, but one where the interests of students are paramount. Widening access to students from a variety of backgrounds is an exciting challenge across the university sector, but it is not enough to target potential students at the age of 18 to encourage them to attend university; they must be encouraged from an earlier age. At King's, for instance, we recently held a weekend workshop for 150 schoolchildren from around the UK, who debated issues of medical ethics, on equal terms, with scientists and clinicians of international standing. At another level, we have plans to offer a fast-track system, bypassing A-levels, for bright children from under-performing schools who would make fine doctors, but whose education is unlikely to provide them with the necessary qualifications to obtain entry to medical schools.

The lay members of my council are increasingly vociferous about t what they see as unnecessary bureaucratic methods for achieving desirable ends. As an example, strong concerns have been expressed about the establishment of a centralised procurement system. Such moves towards centralisation can only be to the detriment of efficiency and initiative at a local level.

The fantastic possibilities of information technology may help to widen access and to increase steps towards an increasingly global university community. Britain must invest in this area to ensure that it remains a world leader.

One hundred and seventy years ago, a British Prime Minister, the Duke of Wellington, fought a duel over King's College. While not expecting such a passionate display from the present Prime Minister or Government, it is to be hoped that a similar commitment is applied to maintaining the distinguished position of Britain's leading universities on the world stage.

Universities are the intellectual powerhouse of society. As we enter a new millennium, the ivory tower is crumbling, to be replaced by a highly developed network of partnerships which not only strengthen higher education, but strengthen the service that universities provide to society.

4.25 p.m.

Baroness Warwick of Undercliffe

My Lords, I acid my thanks to those of others to the noble Lord, Lord Jenkins, for enabling us to have this debate. I must declare an interest as the chief executive of the Committee of Vice-Chancellors and Principals, but I want to address my remarks to the rich diversity of the university sector. I certainly want to say something about funding. I also want to celebrate the achievements of the whole of this richly diverse sector. I was delighted to hear the remarks of the right reverend Prelate the Bishop of Derby. I thank him for an excellent and thought-provoking speech.

Looking back 10 years, we were held back by outmoded student funding arrangements, arrangements which reflected the university system as it had been in the mid-1960s, when only a small proportion of people attended university. That system was compounded by an ongoing deterioration in public funding. In his excellent review, the noble Lord, Lord Dearing, pointed out that in the period between 1989 and 1995, funding was cut by 28 per cent in real terms. Worse, this meant that numbers entering universities were static, preventing the widening of opportunity and of prospects of many of our young people.

I do not think that any account of the present state of our universities can ignore the strides that the sector has taken to implement the core Dearing recommendations. These emphasised the need to revitalise the sector, not just in terms of a new funding settlement, but by action taken by institutions themselves to enable them to face future challenges, especially lifelong learning, globalisation and the explosion in communications and information technology.

I shall give two examples. Over the past two years, the sector has established the Institute for Learning and Teaching, which aims to secure the professionalism of teaching staff. Universities, with other partners, have set up the Quality Assurance Agency, in order to make more transparent the high quality and diversity of the system.

Performance indicators were published for the first time last Friday. I said in the debate in this House on the gracious Speech that I was confident that the indicators would prove that our institutions remain world class. They did, indeed, bear that out. Our efficiency rates—that is, the time it takes students to acquire a qualification—are first class, at 85 per cent on average. Our progression rates are second only to Japan, at 82 per cent. But I am not complacent about this; nor is the sector. It means that one in five do not complete their course, and we want them to succeed too.

But those least likely to succeed tend to come from poorer backgrounds, and to have had less success, for whatever reasons, at school; and they are more likely to be mature students. These students need our particular support and encouragement, and universities are looking closely at these figures as benchmarks to improve performance. They recognise that that must be done.

All of these developments—on teaching and learning, on quality, and on accountability—have been driven by the sector and are indicative of the progress made since the Dearing inquiry took place. But we are now emphatically in the post-Dearing era. Universities today are at the leading edge of some crucial national challenges, which have emerged fully only in the past two years. Universities have realised their potential as engines of wealth creation much faster than even Dearing anticipated. The Government have recognised, through their competitiveness White Paper, the various technology transfer initiatives and, we hope, in the forthcoming science and innovation White Paper, that universities will have a role as creators of national economic prosperity as well as consumers of public funds.

Last week, the Prime Minister set out his views on the contribution of universities to UK development in the next millennium. He went so far as to say that, In the knowledge economy, entrepreneurial universities will be as important as entrepreneurial businesses, the one fostering the other". He described universities as, one of our key global industries of the future". We face another challenge: the global opportunities presented by computer and IT developments. The United Kingdom's higher education needs to step up its global engagement, not least in the face of competition from Australia, the United States and elsewhere. The imperatives of the knowledge-driven economy demand it. The opportunities afforded by English as a global language demand it.

Perhaps I may give just one example. A recent advertisement in the Guardian, a British newspaper, featured an MBA offered by the University of Chicago in Barcelona, and marketed in London, Madrid, Brussels and Frankfurt. That demonstrates that the conceptual and physical borders that may once have restricted academia are dissolving with the emergence of new technologies. The United Kingdom's universities must be able to take advantage of that.

I want to end as I began, by considering funding. I hope that I have indicated that our universities are successful institutions. They represent a successful sector which is outward-looking, identifying and responding to challenges of the moment both at home and internationally, and thinking long term about rising to future challenges.

All that has been achieved by dedicated, often inspirational, staff, who have also delivered the massive expansion of the sector. It is vital that their dedication and sheer productivity is recognised and rewarded. Other noble Lords have emphasised that point. The Government have introduced some bold changes to the funding system, and the CVCP supports the principle of tuition fees as providing a vital income stream. Reassuringly, students clearly believe that the investment that they are making is worth while, as applications are buoyant. Yet the issue of the level of public funding remains.

Funding for year three of the current Comprehensive Spending Review has just been announced. The headline figure, as the noble Lord, Lord Baker, said, was an increase in funding of £295 million for 2001–02. That is a large sum, but translated into the amount of funding to teach each student it represents once again a cut—of 1 per cent. That must be seen in the context of the well documented cuts of 35 per cent in funding per student over the past decade.

The critical question is: can universities continue to sustain such further cuts without more damage? Will the all-important goal of expanding student numbers and creating a more socially inclusive higher education sector be put in jeopardy? Is there is a risk that the investment in schools and colleges aimed at raising standards and attainment levels will not be matched by opportunities at higher levels of study? Will students be taught on obsolete equipment, and how will that affect the global performance of our universities in the fierce competition for international students? Will recruitment and retention of the highest quality staff be jeopardised because there are no funds to deliver the necessary modernisation of pay structures? Will the rich diversity of UK higher education be constrained, with the added risk of dull uniformity? In a world where nations live by their wits, will the UK be able to compete effectively?

This is not intended as a catalogue of woes, but a realistic assessment of the kinds of areas that might be at risk if the funding base of our universities is not strong. I am reminded of the wise words of the noble Lord, Lord Dearing: the needs of the short term must not be allowed to damage the long-term prospects". The Government have given hope to the universities after a decade of cuts. The universities are delivering modernisation in return for investment. They now look to the Government to boost further their investment in higher education over the next review period. If they do, universities, too, can play a full part in the UK's global success in the 21st century.

4.34 p.m.

Baroness Prashar

My Lords, it is a great honour to be a Member of this House and to be addressing it for the first time. Before discussing the topic of this debate, perhaps I may take the liberty of making some personal remarks. I want to begin by expressing my thanks to many Members of the House for their support and friendship, and everyone who works here for their help, courtesy and warm welcome. Their generosity of spirit has been remarkable.

I never expected, when I came to this country some 35 years ago, to become a Member of this House. I wonder what my parents, had they been alive, would have made of their daughter being in this Chamber with the title Baroness Prashar, of Runnymede. By the same token, I wonder what the residents of the borough of Runnymede make of it.

During the passage of time, we have become a multi-racial and multi-cultural society. It was the noble Lord, Lord Jenkins of Hillhead, who, in 1966, defined a multi-racial society and integration not as a flattening process of assimilation but as equal opportunity accompanied by cultural diversity in an atmosphere of mutual tolerance—a definition which even today is relevant and has stood the test of time. It was the noble Lord who also introduced parole in 1967 as a way of "keeping out of prison those who need not be there".

I have been lucky to have had the privilege of working in both those areas, and today I find myself making my maiden speech in a debate initiated by the noble Lord, although I speak from a very different perspective. Currently, I chair the Parole Board and for some years I was director of the Runnymede Trust. The trust was founded by people of vision, with a deep commitment to social justice and human rights. I want to take this opportunity to pay tribute to the late Jim Rose, one of the founders, and the noble Lord, Lord Lester of Herne Hill, among others, for creating the impetus for change. It is the wisdom and work of such enlightened individuals and the resilience of those who came to this country in the 1960s and 1970s which have enabled us to make the progress we have made and defy the prophecies of doom and gloom. But there is much more to be done. There are, as we all know, severe problems of entrenched prejudice and discrimination. Those require urgent action. We need much stronger legislation and an effective public education programme. I know I am not allowed to be controversial but I shall say that I am disappointed that we have not been promised much stronger anti-discrimination legislation.

I now turn to the subject of the debate. In my work I have witnessed at first hand the disadvantage that results from lack of effective access to education. Nowhere is that more evident than in our prisons. Lack of education, illiteracy and consequent lack of self-esteem and confidence are all contributory factors to crime. It is estimated that 70 per cent of those in prison are unemployable due to a lack of basic education and skills. Prisons are a poignant reminder of social exclusion.

This debate on the state of our universities gives me an opportunity to discuss widening participation in higher education from a broader perspective. In recent years, we have moved from an élite to a mass system of higher education. Commendable efforts have been made by some universities, particularly our new universities, to widen participation. I speak as a governor of De Montfort University, which is located in Leicester with campuses in Bedford, Milton Keynes and Lincoln. Despite recent progress in encouraging the participation of under-represented groups, inequalities persist. These need to be tackled. We need to redouble the efforts made by schools, colleges and universities in collaboration with one another to develop access schemes. These efforts need to be supported and encouraged by government.

Some very imaginative schemes have been developed. This must be King's College's day. Last week I saw a scheme developed by that college which greatly impressed me. The scheme is aimed at widening social and ethnic participation in medicine. It will last for six rather than the usual five years and include support for students. Schoolchildren from Lambeth, Southwark and Lewisham will be selected for their potential as early as year nine and offered curriculum enrichment programmes by the medical school to raise their aspirations. They will be supported by medical students and specially trained tutors.

Schemes like these are very necessary corrective measures but they are not enough, for we all know that factors which influence participation and success are family background and academic achievement during compulsory education. Under-achievement at that stage has for many years bedevilled the education system. A turn-round in that situation will make a big difference. To achieve it we need to tackle the negative attitudes and cultural barriers to learning among those who have not traditionally participated in learning.

Lack of motivation derives from the absence of a learning culture or belief acquired from family and peers that "learning is not for me." There needs to be a major shift in attitudes to learning. Tackling lack of educational culture among the very young, particularly in deprived communities, is an essential preventive measure. We need a two-pronged strategy: first, to deal with those groups who are the hardest to recruit into the system; secondly, to invest in strategies designed to change the negative attitude and cultural factors which inhibit learning.

Long-term change takes time and perseverance, but it can be done. Here I want to share with noble Lords the approach of the National Literacy Trust of which I am a deputy chairman. The work of the trust is aimed at long-term change. Emphasis is on individual learners and factors that inhibit learning. It seeks to strengthen the work of schools and give assistance to parents by working with those who support schools and parents. The trust believes that success lies in a systematic partnership with many partners coming together to form a virtuous network.

In Newcastle-upon-Tyne the trust worked with the local authority and community to set up an initiative aimed at raising literacy standards across the city and introduced a learning culture. It involves all parts of the community—libraries, businesses, clubs, art organisations, health authorities, the Probation Service and individuals—in the building of partnerships with the local authority taking the lead. This process is time-consuming and there are no quick fixes. But it is effective. The second scheme established by the trust, entitled Reading is Fundamental, involves the distribution of free books to children at fun events to motivate and encourage reading. Children choose their own books and keep them. The trust works in socially deprived areas. For many children these are the only books they own. It is a simple scheme but it is designed to break the cycle of deprivation.

Early intervention and change in attitudes are just as necessary as initiatives to recruit students from a broader constituency if we are to achieve and sustain wider participation in education. Last week, the publication of the performance indicators for higher education showed that in some universities one student in three left without a qualification. Figures also showed a close correlation between students' social background and their ability to complete a degree. Various interpretations and explanations were advanced and different conclusions were drawn. I suggest that drop-out rates among the newer universities are high because those institutions were the first to make an effort to recruit students from a broader constituency. The drop-out rate is high, not because students cannot cope or have lower intellectual ability, but because they face greater difficulties in working to support themselves. The pressures on them are great.

So far some universities have done a remarkable job in increasing the number of students from lower socio-economic groups. However, to ensure better retention rates degree courses need to be more flexible and university students from families who have no tradition of higher education require more help. This raises the question not only of the future funding of universities but investment in initiatives that are designed to bring about a long-term change to encourage those from disadvantaged backgrounds into universities.

4.45 p.m.

Lord Wallace of Saltaire

My Lords, it gives me great pleasure to follow the noble Baroness, Lady Prashar. It came as no surprise to many of us that she should become a Member of this House. Many of us who have had professional dealings and known her over the years are aware that she is one of the many examples of the great contributions which those East African Asians who were forced to move to Britain in the 1960s have made to the life of this country in every single dimension. She has a great many areas of expertise, related to social questions, racial equality, refugees, prisons and parole, education and the arts from which to contribute to the debates in this House. We look forward to hearing more from her on many of those subjects.

I must declare an interest as a university teacher. In doing so, I am very happy that many people who are contributing to this debate are not university teachers. During the Second Reading of the Armed Forces Discipline Bill last week, I was almost the only speaker who did not come from a military background. At the time I thought that this might well be a debate in which, one after another, university teachers would rise to their feet and say, "Woe, woe, it's all dreadful", as the military did in relation to Armed Forces discipline. I am happy that here there are many who stand outside the self-interest which I and other professors represent.

British universities have gone through very rapid changes in the past 15 years. We have seen a vast increase in numbers, in the shift from the old élite system to the mass system, on which the noble Baroness, Lady Prashar, remarked. There has been a huge expansion in university institutions, as my noble friend Lord Jenkins said in his opening, with the end of the binary distinction. We have seen a sharp increase in government control and centralisation. It was always a great puzzle to me that a Conservative government should pursue socialist planning over the higher education system. The impact of the communications revolution has meant that we have all begun to teach and communicate with our students differently, and to invest in an entirely new set of libraries, laboratories and so on.

We expect that over the next 10 to 15 years there will be continuing rapid change. As the noble Baroness, Lady Warwick, remarked, we are now operating very clearly in a global market, and the question of how British universities feature in it is very important to all of us. We expect, and fear, more intense government expectations and demands. There are government plans to increase numbers further, from 30 per cent to 50 per cent of 18 year-olds. Importantly, there is a generational shift in university staff. As those of my generation who were recruited in the first great expansion in the 1960s come up to retirement, they have to be replaced by a new younger generation.

The consensus within the universities among all those to whom I have spoken, both in the Russell group and the new universities, is that the current balance of both funding and structures is not stable and will not last very long. Government interference has become more and more detailed. We face a further squeeze in funding, which is often disguised as efficiency savings. It seems as if there is a certain DfEE approach both to schools and higher education institutions in which inspections, tests, league tables, competitions and policies are used to give the appearance of new policies without the reality of the necessary funding.

The underlying questions are: what are British universities for and what objectives should they pursue? I hope that we can all accept that they have to pursue multiple purposes and objectives. They are national institutions serving national needs, but now they are also global institutions providing a British contribution to the emergence of a global civil society. Higher education in this country is an important invisible export. My institution, the London School of Economics, was awarded the Queen's Award for Export Achievement some years ago in recognition of the extent to which we were beginning to fund ourselves by attracting people from abroad.

We also expect universities to pursue research of a quality which contributes to Britain's future economy. The Department of Trade and Industry is clear that universities help to provide the new industries which Britain needs. I am happy to say that Salt's Mill in Saltaire now has two electronic companies working within it, both of which were founded by professors from Leeds and Bradford universities. That is the way in which new industries emerge in this country. The announcement by the DTI of the partnership between MIT and Cambridge is a good example of that.

On the opposite side, the DfEE talks about education and training within a national context: the investment in human capital that is the key to future prosperity. I am not entirely sure that this amounts to joined-up government, with two departments sometimes pushing in different directions, and the dead hand of the Treasury lying over all.

The Government are concerned to push universities on access. I do not think that they always give enough attention to privately funded current university initiatives. I have learnt a little of Peter Lampl and the Sutton Trust's efforts with regard to summer schools in Cambridge and Oxford. The London School of Economics is now running a series of Saturday schools for people from inner London boroughs. Both are privately funded. I was told this morning by a pro-vice-chancellor of another university that he had just received a collection of papers on the "Millennium Summer Schools" as part of the Excellence in Cities initiative. He had been given a short period to return the competitive proposals. On discussing the questions with the local education authorities involved, he discovered they did not think that the programme was yet fully enough focused.

The best answer to access lies in the schools: in greater investment in state schools at the primary and secondary level. My children have attended a comprehensive school in south London. I am conscious that many of the black and Asian children in that school would have benefited from better resources for teaching, and more encouragement, which is not being provided. The first call on extra funding for education should not be universities, but those schools.

On recruitment, I believe strongly that we need to care about the next generation, with good starting salaries for people we wish to attract. When law firms offer people straight from university starting salaries of £25,000 and banks often offer £30,000, it is difficult to persuade someone who has done a PhD for a further three or four years that he should accept a salary of £16,000 to £18,000 to start working in a university. I am conscious from ESRC figures that the number of British students entering research degrees has decreased in each of the past three years. There is a potential recruitment crisis.

So we face real choices. We want a diverse higher education system, not the uniform system which the last higher education Act attempted to impose. We want to see Hochschule, technical universities, not every university being treated the same. We want to see universities which can hold their head high globally as well as within a national context. We want either expansion with additional funding, or no expansion. We want to follow—I am a committed European in most other respects—the American model of global excellence; not the French or German model of expansion without additional funding, with 500 to 1,000 people in each lecture hall, with more than half the students who start failing to finish.

We need more public funds, or a relaxation of controls or fees. That is a hard choice; but a government who are prepared to privatise the air traffic control system should not blanch at the idea of moving towards a public/private partnership in the higher education field.

There are hard choices. But the Government cannot refuse to choose, for that would be an abnegation of responsibility: an acceptance that Britain's universities will drift slowly away from excellence into mediocrity.

4.54 p.m.

The Lord Bishop of Durham

My Lords, I, too, thank the noble Lord, Lord Jenkins of Hillhead, for introducing the debate. We take with a pinch of salt, I am sure, his reference to his almost maiden speech. If it inaugurates a new era of interventions by the noble Lord in this House then we should all welcome them and would be the gainers.

It is a privilege, too, to speak in a debate with two such outstanding maiden speeches. It would be inappropriate for one right reverend Prelate to praise another. No doubt it would erode the humility we are rightly expected to have. However, I can praise without qualification the speech of the noble Baroness, Lady Prashar. Few people can be more qualified to deal with questions of inclusivism with which she dealt so ably today. We look forward to more contributions from her.

The debate is timely because at a time when universities are undergoing enormous change it is important to ask some fundamental questions about the purpose and nature of higher education arid the values it seeks to cultivate. Some questions were posed by the noble Lord, Lord Wallace of Saltaire. I agreed with so much of what he said, but some of his remarks posed questions in my mind.

I believe there is danger of a subtle change in higher education away from the holistic concepts described by a number of people in the debate towards a concept of education in the light of the national economy and consumerism. The move towards "bettering" individuals for work and consequently asking them to pay for it serves only to reinforce my disquiet. Of course we want to prepare the next generation for occupations which can make a significant contribution to the common good. But if financial considerations filter through the system, as if they were the only ones that mattered, then we must question them. The idea of students as consumers, and universities as producers, must be challenged.

In that context, I was encouraged to see the purposes of higher education set out in the national committee of inquiry. It stresses a number of the ingredients referred to already by your Lordships, including the sustaining of a knowledge-based economy at local and regional levels as well a s at a national level. But it is the subtleties of language which ring some alarm bells. When I hear a Minister introducing the Government's White Paper on competitiveness with the words, Knowledge and its profitable exploitation by business is the key to competitiveness", and hear talk of the universities' role in driving the economy, and of translating ideas into wealth and marketable opportunities, I wonder whether we are in danger of getting our priorities wrong and are undermining the ideals of a university given to the purpose of developing whole mature people who are able to live and take a lead in the complex set of demands which make up modern society.

There is a danger that instead of opening up people to new possibilities, new horizons, and wider perspectives, higher education is closing people down, making them self-concerned and defensive. Is it overly cynical to see higher education's current enthusiasm for commercial partnerships as a threat to academic freedom and many other values that used to be held dear in academic circles?

A university education must not be seen as narrowly utilitarian, as training people simply for jobs. It makes a world of a difference whether we are providing for students desperate for a job, or students freely deciding how to spend their lives.

Of course we want to see our universities developing partnerships within wider society and not viewed as parasites upon it. But these partnerships need to he broadly based and the flow of knowledge needs to be two-way. An example of how multi-faceted partnerships can take place within a region has recently been developed in the north-east. There, six universities, including the distinguished University of Durham, have combined to secure funding to encourage more people from the region to enter higher education. I humbly stress to the noble Lord, Lord Jenkins of Hillhead, that it is a question of partnerships between universities and institutions of higher education, rather than competition between them, that will help us to progress the whole.

The new universities—at least, those in my experience; Greenwich and Sunderland in particular—display a good deal of excellence and should not be discounted as such. I say that with the highest respect and as a very humble graduate of the university over which the noble Lord, Lord Jenkins, presides. Indeed, with other Members of this House, I am involved in an appeal for one of the best colleges in that university. But, together, that group of universities in the north-east aims to raise the aspirations and expectations of young people and adults from a wide range of backgrounds where families have no experience of college or university.

As the initiative is developed, it will draw the universities into partnerships, not only with the business world, but also with schools, social services departments and the whole of the voluntary sector. Thus, while maintaining academic integrity, the universities will be demonstrating an ideal for education which addresses the whole person and a widening involvement in society as a whole.

Inevitably, in our modern world, where new demands and initiatives are being made and where personal debt and institutional financial constraints loom large, growing stress is a major feature of university life. Levels of stress are undoubtedly increasing, first, among students because of the necessity in many cases to take part-time jobs and uncertain futures and, secondly, among staff because of an increased workload and short-term contracts. Clearly, standards of research and teaching cannot be maintained in the context of mental stress and the consequent instability that that causes.

I want to close with an affirmation of the contribution of the Churches to the three areas of university life on which I have touched; namely, the ideal of education in its broadest sense, the developing of partnerships with other sectors, and the factor of stress. The Church of England contributes a great deal to higher education through its institutions, through its chaplains and through the work of such bodies as the Church's Commission on Overseas Students. It has a wide academic involvement through its members, its foundations and its colleges. The right reverend Prelate the Bishop of Derby referred to our commitment to chaplains. They contribute in a variety of ways towards the health and community life of universities through their involvement in welfare, counselling, special events and pastoral work at all levels of college and university life.

Through these commitments the Churches seek to keep the vision of universities both high and broad. They seek to help to build bridges between universities and the community at large so that any semblance of élitist culs-de-sac may be transformed into a two-way highway of the pursuit of knowledge and the analysis of all human experience for the good of mankind.

As the noble Baroness, Lady Rawlings, said, the days of the ivory tower are surely gone. But we need to ensure that the soul of education is not sold to the dogmas of economic pragmatism.

5.4 p.m.

Baroness Wilcox

My Lords, I join my noble friend Lady Rawlings in welcoming the maiden speech of the bee-keeping right reverend Prelate the Bishop of Derby. It was lovely to hear him today. I also join the noble Lord, Lord Wallace of Saltaire, in congratulating the noble Baroness, Lady Prashar, on her wonderful maiden speech. I am sure that had her parents been here, they would have been most proud of her.

I follow the noble Lord, Lord Shore of Stepney, in wondering at my temerity in joining in the debate: in my case, because I did not go to university. At my school, from quite an early age, the teachers identified and focused on those girls who were bright enough to go to university. They nurtured them and looked after them and sat them in different places in class. We knew that they were different; we that knew they were special; and we knew that really they were nothing to do with us. For the rest of us in my Anglican convent, the choices were the religious life—the highest, of course—marriage and motherhood, or training for nursing or teaching. Luckily, my father would have none of it and I was whisked away to a technical college which was full of exciting engineers and marine biologists. That worked well for me because I came from a fishing family. Indeed, I spent most of my life as a fish trader.

It is interesting that the university of which I am now a governor was the technical college I attended. I have been privileged to be a governor of Plymouth University for three years. I am also a governor of the convent which I attended and I am thrilled to see how things have changed; how we have moved from the teacher being the sage on the stage to the guide at the side. I am delighted to see how automatic it is for our girls to expect access to every form of further learning. It is wonderful.

I am pleased that the noble Lord, Lord Jenkins, has brought about the debate because it enables me to take part. To me, "the state of British universities" looks very exciting, changing and expanding. But, as I have learnt during the past three years and as we heard from noble Lords on all sides, there are serious concerns. I want to pose three questions and seek reassurances from the Minister. First, I must apologise to your Lordships and to the Minister because I shall be unable to be present later to hear her reply. I shall, of course, read it with great interest tomorrow.

First, can the Minister confirm that the Government intend to continue to seek efficiency gains from the universities of 1 per cent per annum? If so, can she explain how that is consistent with the Government's agenda to increase participation in higher education from under-represented groups; to increase the vocational element of undergraduate programmes; to improve pastoral care and career guidance; and to improve further the quality of teaching, all of which will require additional, or at the very least no decrease, in funding?

Secondly, given the importance which the Government place on the exploitation of university research, on links with industry and the need to encourage gifted researchers in whichever university to undertake high quality research, does the Minister believe that the policy of research selectivity, which now concentrates 80 per cent of the funds in 20 or fewer universities, has reached its limit without the risk of irreparable damage to the overall research base of this country?

Thirdly and finally, the recent Bett report on terms and conditions for staff in higher education reflected significant problems in inequalities of opportunities and pay within HE and difficulties in staff recruitment and retention in some subjects. Pay in higher education for academic staff is inevitably influenced by pay in related parts of the public sector—in particular, that of teachers, doctors and nurses. As a consequence, in the past two years, as I have no doubt the Minister is aware, pay awards in universities have significantly outstripped growth in income yet, according to the Bett report, they still do not address the well-researched problems. Does the Minister share my concerns and, if so, are the Government considering how they might assist?

I am proud of the university of which I am governor. I am proud of what universities in the United Kingdom have achieved for students, society and the economy. I want to see universities flourish and serve the nation, but I am increasingly concerned that we are in great danger of damaging those future prospects by failing to invest sufficiently in the present.

5.10 p.m.

Baroness O'Neill of Bengarve

My Lords, I, too, wish to thank the noble Lord, Lord Jenkins of Hillhead, for introducing the debate. It seems to me not only a necessary debate, but a timely one. This is, after all, the first year in which British undergraduates are entering university with no grant. It is perhaps an inevitable development, but we do not begin to know its effects. We continually see questions raised, particularly in The Times Higher Education Supplement, about the possible effects of those changes, to some of which the noble Lord, Lord Shore, drew attention.

It is early days and I want first to ask the noble Baroness the Minister whether the Government really are monitoring the sorts of changes taking place. We have all heard that questions are being asked as to whether students from certain backgrounds will dare to apply for higher education and that they may be deterred by the prospect of debt. So they may, or on the other hand they may not, and that is why monitoring is important. We need to know whether students are actually deterred, what lies behind any lowering of completion rates and which social groups are most adversely affected by the changed arrangements.

In particular, we need to be able to distinguish between those students who withdraw from their courses for a period of time, perhaps in order to earn some money to continue studying, and those who abandon their courses. We need to know why that is happening. We particularly need to be sure that those who are ostensibly full-time students are really full-time students, as opposed to those registered for courses and stumbling through them, but who are taking so much time off for employment that they are compromising their academic performance and even, perhaps, jeopardising their degrees. I am glad to note that the Government have already agreed to monitor changes in applications. I hope that they will monitor the effects of student employment on academic performance with equal vigilance.

I should declare a number of interests: I have been a university teacher for much of my life, much of it in this country under the well-known system of terms and conditions; I taught for many years at the University of Essex; and I am at present head of a Cambridge college. From all those perspectives, I do not believe that we can sit still while the information about the impact of new arrangements is gathered. We need to act now, soon and within the current framework of student funding, to do something to improve the situation of poorer students. On that point I, too, must congratulate the noble Baroness, Lady Prashar, on a wonderful maiden speech which drew attention to the realities for so many students.

One of the most helpful things for any poorer student is a bursary, which enables him or her to borrow less, to worry less, and to work more. It limits the temptation to take on too much employment while on course. I believe that there is a great willingness in this country, both in industry and on the part of numerous charitable bodies, to help poorer students in those ways. There are also many individuals whose own studies, like mine, were generously supported out of public funds in earlier years, who would wish to do what they can to help today's students. The engineering industry has shown the way to all of us by providing many bursaries—often generous bursaries in excess of £1,000 a year—to many engineering students. That is a model to which we might look more widely.

However, providing those bursaries is not merely a matter of smoothing the path of such students by making life easier and more congenial for them; it is also educationally fundamental. Students who know that their debt is running up like a taxi meter will be tempted to take on too much employment, including term-time employment and they will forego educationally valuable vacation placements which do not attract pay, or not much pay. I must declare an interest as chairman of the Nuffield Foundation, which at present makes available some 600 bursaries per year to enable science students to take up laboratory placements in industry and in university laboratories during the summer. Our bursary holders receive about £120 per week for a maximum of 10 weeks. It is a wonderful experience for them.

However, noble Lords will note that that is below the national minimum wage. The bursary is not much. We hope that it is enough to support them during the placement, but we know that it cannot build funds towards year-long maintenance. We do not want to see poorer students foregoing such opportunities. They are educationally valuable opportunities for the students. Students in various areas have to take on many other unpaid placements. Nor do we want the experience of voluntary work to become the prerogative of the better-off student.

I believe that there is now a serious new obstacle in the way of mobilising bursary funds for poorer students. I shall engage in some miniature discussion in the hope that the noble Baroness the Minister may be able to take action on that front at least. I should be happy to hear from her that the problem to which I am about to point is illusory and that it lies only in my reading of the Education (Student Support) Regulations 1999 which came into force in May. However, I fear that the problem is real. Schedule 3 of the regulations states that in calculating a student's income for means testing, only the first £1,000 of any, scholarship, studentship, exhibition, bursary, award, grant, allowance or benefit however described in connection with the student's attendance on the course", is to be disregarded. As soon as a bursary exceeds £1,000 poorer students will lose their tuition contribution exemption pound for pound; when the tuition contribution has been paid, the maximal loan entitlement will be reduced pound for pound.

While the reduction in maximum loan represents a fair adjustment to the good fortune of securing a bursary, as well as a reduced current outlay of public funds, I believe that the claw-back of the tuition payment exemption for poorer students is simply a new poverty trap. We know that the Government are committed to the elimination of poverty traps. If the system is operated in such a way, students from better-off homes in receipt of bursaries will face only a lowered loan entitlement, but poorer students will face liability for tuition payment as well as a reduced loan ceiling.

Thus the very students for whom bursary support is most vital will gain least by receiving it; the very sources that could help support poorer students and make a reality of the commitment to access industry— charities and private individuals—will be deterred from doing so by the fact that after the first £1,000 the Treasury, rather than the student, will benefit. I cannot believe that that was the Government's intention, and I hope that the Minister will reassure the House on that point.

5.18 p.m.

Lord Wedderburn of Charlton

My Lords, I should first like to thank briefly, but sincerely, the noble Lord, Lord Jenkins, for the opportunity of this debate. In addition, I most sincerely and warmly, albeit again briefly, congratulate the right reverend Prelate and the noble Baroness, Lady Prashar, on their maiden speeches. I am sure and, indeed, I hope, that we shall hear much more from them in the future.

The interest I bring to this debate is a life of 45 years spent in research and teaching in two universities. I emphasise teaching and research. Scholarship and the modern habit of buying years of teaching by money raised from sponsors is a mixed blessing. Teaching and research are at their best when they go together. That is a fabric of university life in many places of learning which we are now struggling to maintain.

I have never sought to join, nor was I qualified for, august bodies such as that composed of vice-chancellors of universities whose committee has vacated more trenches at the last moment than any general in our Armed Forces, although at times before that last moment they have done a noble job.

One wonders about past policies when one looks at them from the coal face of academia, which I apprehend I share with some of your Lordships. I accept that money is not the answer to all problems, and I agree with the noble Lord, Lord Wallace, that the situation is not all awful or dreadful. The crisis in higher education in Britain arises from a failure by the Treasury, above all, to have confidence in universities and to provide for the massive expansion of students since the 1960s. I have always been unstinting in my advocacy that universities must be accountable. However, that does not justify the creeping financial and other control from the centre since the 1970s. Even the luckiest universities—and I have had the luck to teach in two of them—at this time need a vote of confidence. On coming into higher education, the new institutions should not have imposed upon them a condition that they should be poor. The historian may come to see that lack of confidence in financial provision—a reaction of confused forces of conservatism—as the price of expansion.

Yet public funds fall every year. I know that at the London School of Economics we are luckier than some, perhaps many, but in 1978–79 the direct funds allocated to the school were 64 per cent of its income. In l 988–89 that had fallen to 42 per cent, and in 1998–99 the index of public funding has fallen to 26 per cent. How does the Treasury expect any university—either ours or any other—to maintain its teaching, research and competition at home and abroad for scholars in the top flight in this position? At Oxbridge, dons spend a disproportionate amount of time begging globally in the rich penthouses of their alumni. Other less fortunate universities have to bear the weight of teaching, research and administration. Universities as a whole have suffered.

Following the Bett and Dearing reports, the case hardly has to be proved that university salaries are rather low. They threaten to bring recruitment in some faculties to a halt. The Association of University Teachers has offered a pay review to the Government, which they appear to have refused. The Dearing Committee described it as a system of chaos. On 11th June this year, the Minister for Education disclaimed responsibility when my noble friend Lord McCarthy made a powerful case for a Bill proposing a system of pay review. At col. 1728 of the Official Report, my noble friend appeared to be in a sudden rapture about the blessings of collective bargaining and discounted the Government's position. It was simply a matter of settlement between employers and unions. If you invite people to take industrial action, perhaps you should not be surprised if you get it.

But, of course, we all know that our powers in that realm are very small. One should look at the salary position and make a start at putting it right. Faced with the figures on salaries, the Minister on that occasion relied, somewhat desperately, on a suspect survey of male full-time staff only. Even so, she acknowledged that our salary position compares badly in real terms with the public sector as a whole.

The restraints arise from three policies of central government: to multiply the student numbers, strip the staff of tenure and keep their pay down and, lastly, introduce a new Poor Law on student fees. It would be said of course, "Ah, your HEFCE funding will fall now that you have those wonderful tuition fees from students", which we did not want. When the Government introduced fees for overseas students in the far-off days of 1979, some of us believed that that was a misguided but crucial turning point. On 7th November 1979, at col. 813, I put to the noble Baroness, Lady Young, the Minister for Education, who, I hope, has not lost her interest in the subject, that that would damage irreparably university education, not just for overseas students but for home students as well. That has proved to be so. The fee policy has been absurd.

After the war, or at any rate since 1961, any entrant to higher education was entitled to a grant which might just cover them during their time in higher education. Now, boys and girls from ordinary homes have to mortgage their lives beyond the £15,000 mentioned by my noble friend Lord Shore, perhaps to £20,000 or more, to buy a first degree. It is not a pleasant sight. It is an unjust policy which causes anxiety for those in families experimenting for the first time with university education. Parents are troubled by it. I am sure mine would have been; they were ambivalent about my advance to university—some say rightly, but never mind about that.

Often in a seminar a teacher becomes rather like a customer service representative. A client relationship springs up, which is in many ways a force that is very sure on the student side. After all, who is responsible for those packed classrooms and gigantic tuition fees? Not all students go on to glittering prizes in their jobs. One student said to me recently, "A lot of them say they won't pay the loans back. But we all know that, if and when we get a job, they will just deduct it from our salaries and that will be that." I was part of the "they" in his mind.

With regard to graduates, perhaps I may mention a recent experience. I have a one-and-a-half hour seminar with graduate students. Two or three years ago there were 11 in the class: three from European states, four from Britain and four from further overseas. I asked whether it would be possible to reschedule the seminar of one-and-a-half hours to the following week. We could not find a suitable time for all the members of the class to meet. The overseas students had grants or some kind of support, but the British students admitted afterwards that they had been forced to take full-time jobs to fund their graduate studies from which they could not obtain release except on the day and time already negotiated with their employers. That is not a satisfactory position.

Perhaps I may add two points briefly. It has again become fashionable to attack the admissions tutors of Oxbridge for not admitting more state school students and fewer public school boys and girls. In the 1960s we began an attempt to move in that direction. Some of our efforts were jejune, like that of the fellow of a neighbouring college who, with almost apostolic fervour, pursued the examination paper which he said would concentrate on intelligence without any class factor showing up. That was a project which crashed the following summer when he set the never-to-be-forgotten state schoolboy's favourite question "Question 4, Write a eulogy of wine".

The 6 per cent of young people who go to institutions of a private nature will continue to be products who jump over all the hurdles that admissions tutors provide, even secretly. I have heard some amusing instances recently where admissions tutors have admitted that there is a limit to what one can do about admissions tests; that is, the limit imposed by current schools which educate a separate class in education in this country. If the Government want to look for a long-term policy for higher education in this respect, it is there in the schools, from common entrance downwards. The Government should look to reform if they have the courage in their next manifesto.

Finally, I refer to the aims of a great Secretary of State for Education who did not agree with me about whether public schools would disappear if we left them alone and increased state provision. Tony Crosland, as Secretary of State for Education, said: The more children we have in higher education, the more efficient our society will be, the more civilised our society will be, and the more democratic our society will be. For all those three reasons, any influence I have will be used in the direction of getting more money to education".—[Official Report Commons, 25/3/65; col. 779.] Those words are very apt today. Were he buried in university grounds, he would be turning in his grave.

5.30 p.m.

Baroness McFarlane of Llandaff

My Lords, I may well have graduated from that state of self-interest to which the noble Lord, Lord Wallace of Saltaire, referred. It is now 12 years since I retired from my post as Professor of Nursing at the University of Manchester, so your Lordships may feel this afternoon that, in what I say, you are "walking with dinosaurs".

My experience of research assessment was in the days of the University Grants Committee and the small sub-group which dealt with pharmacy and nursing as we carried out some of the first research assessments of nursing. I worked also on the Council for National Academic Awards and some of its sub-committees. I learned to appreciate the methods of assessing institutions as well as courses.

I am interested to learn that the issues facing universities today have not changed much from some of the dominant issues in my day—the competing demands for performing well in research; offering good quality teaching; and the challenges of offering widening access to university education and the objectives of lifelong learning; and, of course, we have been hearing a great deal about the perilous state of funding support and salary remuneration in the university sector.

I wish to focus on a few of those issues. In a clinical discipline such as nursing, I believe that the competing demands of teaching, research and maintaining one's competence in clinical practice place very great demands on the individual. I am sure that my noble friend Lord Walton will deal far more competently than I with the demands that that places on the medical profession. But in my own profession, we have had to try to weave a way in order to combine teaching, research and clinical practice. As I say, that places very great demands on the individual. I do not know whether your Lordships can imagine practising even on a part-time basis as a ward sister so that one is clinically competent to teach students the art as well as the science of nursing. That places a demand on the individual to find time also for research and for careful preparation for teaching, as well as for the necessary student contact hours.

Therefore, it is good that the recent report from the UKCC, chaired by Sir Leonard Peach, has drawn attention to the need for service providers and higher education institutes to continue to develop effective and genuine partnerships to support students and for curriculum development. The report states: We invite the CVCP and the National Health Service Executive to add criteria for joint working and effective partnership so that existing principles of agreement for England can be extended". I ask the Minister to what extent the Government are thinking of supporting those suggestions in the Peach report. I hope that in time this House will be able to devote some time to discussing that report and the whole question of nursing education.

I have heard from a Pro-Vice Chancellor and Dean of Nursing at the University of Manchester that a continuing difficulty for education funded by the National Health Service—that is, medicine, dentistry and nursing, but particularly nursing—occurs where there are fixed contracts which do not allow the universities to invest in buildings. If one has a short, fixed-term contract of seven to 10 years, the risk is too high to start investing in buildings. The NHS is unwilling to offer longer-term commitments, particularly for nursing and professions allied to medicine. So there are particular difficulties in developing new estate.

That is one problem of funding which I see; namely, the short-termism of much of the funding from the National Health Service and the question of how we can achieve some greater joined-up government between the National Health Service and the Department for Education and Employment.

There is also a problem with piecemeal funding and, in particular, the funding for sciences, where substantial resource for new building is required to keep abreast of international work. A great deal of our research is alpha-rated science and should be supported generously. I am informed that the University of Manchester may well lose out because of questions of scale in the most recent joint infrastructure fund bid.

In conjunction with the Central Manchester National Health Service Trust and the Christie National Health Service Trust, and with the assistance of the Wellcome Trust, the University of Manchester has developed a plan to create a biomedical and healthcare centre which will be of international quality. The MRI and the new children's hospital are to be funded by the National Health Service and by the private finance initiative. Wellcome has funded a clinical research facility. The bioscience incubator has been built and is in business. So patient care facilities, related research and facilities to commercialise research and develop spin-off companies are all in place in the inner-city area.

But the missing link is the resource to develop the university's biomedical building. The building is now 40 years old. It was a state of the art building when I first went to Manchester but it is now 40 years old and, as the elegant phrase puts it, time-expired in terms of research now being carried out. The science is rated alpha and has been rated for the joint infrastructure fund bid; yet I understand that it is possible that Manchester may well lose out in the bid because of scale.

I understand that four universities in the south-east have a larger scale of research than the University of Manchester. For that reason, the research is constantly being drawn down in the direction of the south-east and, increasingly, the regions will lose out.

It seems to me that in terms of the funding of university enterprises, whether by short-term funding or whatever, there is a need for us to examine the methods by which the enterprise of universities is funded as well as to look at the teaching and remuneration of teachers in the university sector.

5.38 p.m.

Lord Norton of Louth

My Lords, I, too, very much welcome this debate. I declare an interest as an academic. I suspect that having a time-limited debate with so many academics wanting to speak must be a Whip's nightmare.

I wish to reinforce many of the points that have already been made. Universities face a critical situation. They are being asked to do too much with too little. Universities in this country are now highly productive institutions. Productivity has increased remarkably in recent years. Universities are highly efficient. By international standards our efficiency rates, which compare the time the students should ideally take to complete a degree with the time they are expected to take, are second only to Japan. The universities have performed well in producing graduates. By the mid-1980s we already had graduation rates higher than other major European countries, including Germany and France.

The universities have performed well against a background of continual change. Some of the changes imposed on them may have served, certainly initially, to "ratchet up" the standards. However, we are now in a situation where many changes being imposed on universities are part of the problem rather than part of the solution.

I fully accept that in the 1970s universities adopted an ostrich-like approach to change. There was a sense of complacency and invulnerability; a belief that demands for greater economy and efficiency would not impinge upon universities, either in terms of funding or how they went about their business. The cuts of 1981 constituted the cold wind of change for higher education. Since that time universities have been subject to further cuts and uncertainty as to government intentions.

In the 1980s initial responses to funding reductions were disparate and, certainly in some cases, rather slow. However, universities have responded by cutting spare capacity, making better use of resources, concentrating on their areas of strength and accommodating expansion within existing resources.

I fully accept that there may be a case for improvements in a number of areas; not least coping with the stress mentioned by the right reverend Prelate the Bishop of Durham. There are a number of areas in which improvements can be made. However, the essential point is that universities have, on the whole, done what is expected of them and more. They have done that while resources have declined in real terms. As we have already heard, universities have coped with a rapid expansion in student numbers, while the unit of resource has declined. As my noble friend Lord Baker mentioned, the spending plans announced last month by the Secretary of State represent in real terms a cut in funding per student for the second year running.

Universities have done what is expected of them, in many cases despite and not because of changes imposed on them. Many of the changes have been problematic but it is the nature and scale of change which has created uncertainty and low morale. When I first entered university teaching, campuses normally had a few Trotskyist students espousing continual revolution. They seemed to disappear from campus just as their philosophy appeared to gain acceptance as the basis for education policy.

I shall touch briefly upon some of the changes and the questions they raise. We have had a massive expansion in student numbers. I fully accept, and always have, that such an expansion necessitates a change in the way we fund higher education. However, expansion raises important questions of principle as well as practice. How far can and should expansion be taken? In his letter to the Higher Education Funding Council, the Secretary of State said: Anyone who has the capacity to benefit from higher education should have the opportunity to do so". That begs a number of questions. How do we determine the capacity to benefit? What are the consequences for universities of what is not just a major change in quantitative terms but in qualitative terms? The questions have not been discussed, at least not fully, in the way I think they deserve to be. They also need to be addressed in the context of the other changes.

As mentioned by the noble Lord, Lord Jenkins, we have had an ending of the binary line. I know the arguments that led Ministers to accept the need for that, though I am not persuaded that such arguments were necessarily conclusive. Many colleagues take the view that this led to a blurring of what higher education is meant to deliver. Again, it has to be seen in the context of other changes. The former polytechnics, the so-called statutory universities, are now judged by standards applied throughout the university sector and so naturally seek to emulate the older or charter universities rather than necessarily playing to their particular strengths. Conversely, the quality control practices employed by the old polytechnics are now being applied across the university sector, in some cases getting in the way of rather than ensuring good teaching.

We have new and extensive methods of quality control in terms of both research and teaching. The methods employed are highly bureaucratic and have created a substantial burden on the institutions and the individuals who work within them. I can see the case for monitoring quality, but the means employed are questionable. They may be effective but are essentially inefficient. They are also building up a notable body of resentment on the part of academic staff, and undermining morale. Furthermore, the case for them may not be as great as it once was.

Arguably, the most effective form of quality control is already in place as a result of the changes in funding students. Because students now carry a large share of the burden in funding their own education, they and their parents now demand value for money. The most effective pressure for ensuring quality may thus come "bottom up" from students rather than "top down" from Government.

Most universities have implemented semesterisation and modularisation. I am familiar with both. I took one of my degrees at an Ivy League university in the States. However, neither has worked particularly well here. I see little evidence that they have delivered what they were designed to do. I see some evidence of them having a negative impact, not least on examination performance. In my experience students tend to achieve better results when they take examinations at the end of the year rather than when they take two sets of examinations spread over the year. In my view there is a strong case for moving back to a three-term system with year-long courses.

For reasons of time I shall not touch upon other changes. One could produce a long list. Indeed, at times it is difficult to keep pace with what is happening, even within the academic world. I believe I have said enough to illustrate the extent and range of changes.

As has been stressed, we are being expected to do things for which the resources are not provided. Not only are the institutional resources lacking, so too, are the incentives and rewards. As has been mentioned, the Bett Report suggested that academic salaries have, over the past 18 years, fallen behind salaries for other non-manual staff by 30 per cent. Academic pay is being massively outstripped by pay increases for other professionals.

There has been no reward for substantial increases in productivity. University employers pay proportionately less and less of their budgets on salaries. As has been mentioned, there is a problem especially for those entering academic life for the first time. That was recognised in the Bett Report. Salary is low and there is increasingly little incentive to enter academic life. That is storing up problems for the future. Bright students, knowing that salary prospects are so poor, are discouraged from staying on to take higher degrees. The implications for recruitment in future years are very serious indeed.

We thus have problems of morale and, as I believe we shall increasingly discover, of recruitment. We also have a problem because of what is increasingly asked of us and for which we have limited responsibility. Universities can only do so much to solve the problems of the rest of society.

I could give various illustrations but for reasons of time I shall settle on one. We are asked to do more to recruit students from disadvantaged backgrounds. My own university, the University of Hull, has long had a policy of encouraging students from non-traditional backgrounds. For as long as I can remember, certainly since I have been there, we have had a schools liaison programme in which I have been actively involved. We continue to develop links with schools, not least in our regional hinterland. The proportion of students we recruit from state schools is above the national average. Our drop-out rate is below the national average. That juxtaposition is important. That is pretty good going. However, like every other university, we can only do so much.

Universities cannot change fundamentally what happens in pre-university education. We are largely dependent upon what happens years before students ever appear on campus. As I have said, there are other illustrations one could make of the demands being made of us. However, I am conscious of time and shall conclude.

Universities do a good job with productivity having increased remarkably in recent years. As I have conceded, there is always scope for improvement. However, as many noble Lords have stressed, universities need the resources to do the job expected of them. I also emphasise that they need greater autonomy to get on with their work. Had Lord Beloff still been alive, he would have been here giving one clear message to Government: leave university teachers alone to do that which they do best; that is teach and research. That is a view I echo.

5.50 p.m.

Lord Patel

My Lords, I too thank the noble Lord, Lord Jenkins of Hillhead, for enabling us to have this debate. I also add my congratulations to those of others to the right reverend Prelate and my noble friend Lady Prashar on their maiden speeches. I hope that your Lordships will forgive me when I say that I had a special feeling when my noble friend was making her maiden speech for, with the noble Lord, Lord Dholakia—who is not in his place—there are now three of us who left East Africa many years ago to make this country our home.

I have no doubt that our universities and institutions of higher education face many difficulties. But despite that, we should be proud of what they contribute in education and research, and in making this country the success it is. It is not just the three universities in the golden triangle; I for one am grateful to my Alma Mater for my training and education. It is nearly as ancient as the universities of Oxford and Cambridge; I refer to St Andrews.

I am in no doubt that in relation to many of the challenges that universities face, they should and would find solutions themselves. But some issues require national solutions, and I should like to speak about some of those related to the recruitment and retention of career academics, the research infrastructure and the commercialisation of university research.

First, I should like to address the problems of the recruitment of young medical doctors for clinical academic medicine, particularly as it relates to their training. I declare my interest in that I am a professor of obstetrics and gynaecology and should like to see more of our brightest and ablest young doctors being recruited to academic medicine, despite the fact that I have spent most of my life being a service doctor looking after patients.

So what are the constraints? There is no clearly defined training programme for young doctors wishing to make a career in academic medicine. There is no career structure for young clinical academics. Dual responsibility to two masters—university and the NHS—and short-term university contracts are a further handicap. Academics keen on teaching and less interested in research are not valued as much. The current regulation of training of specialists in medicine is more geared towards service-based clinical training.

There are solutions, and both the Specialist Training Authority in medicine, of which I am chairman, and the Academy of Medical Sciences, of which I am a council member—particularly the latter—produced a paper with suggestions to address the problem. Those proposals, however, would require changes in the current rules and regulations to enable trainees in medicine to enter academic training programmes. The numbers required would not be large. Those changes, together with funding that already exists for young clinical scientist; from the Medical Research Council, the Wellcome Trust and associated medical charities, would enable university clinical departments to attract young doctors and to re-establish clinical lectureships. I ask the Minister to convey that to her colleagues in the Department of Health, and I hope that they will be willing to discuss this with appropriate, professional organisations.

The next problem that I should like to address relates to the retention of high-calibre scientists. The United Kingdom is fortunate in having world-class, highly respected scientists. In my own university of Dundee, particularly in the field of genetics and cancer research, over 300 scientists are working in different aspects of cancer research, led by several of our country's top scientists. One such person—Professor David Lane who is renowned for his ground-breaking work on molecular genetics as it relates to cancer, and credited for discovering P53, the gene involved in colorectal cancer—recently wrote and spoke widely about the problems that scientists of his calibre face. It is not easy for them to obtain the funding required for major research and much time is spent writing grant requests and relying on local charities. It is not surprising that lucrative offers of high salaries and significant research funding from overseas, particularly the United States, become attractive.

Those are the scientists who are the future income generators of our country, as has been mentioned by many other noble Lords. We only need to look at the success of some of the biotech companies. Many of those scientists work in clinical academic departments and yet do not receive clinical academic salaries. The same applies to young lecturers and research workers, not only in medicine. but also in other fields, as mentioned in the Bett report. I hope that the Government will try to address those issues.

I should like to speak briefly about research infrastructure and the commercialisation of university research. The Joint Infrastructure Fund, welcome though it is, has been heavily oversubscribed with applications greatly exceeding the resources available. As a result, many first-class projects remain unfunded. That demonstrates the desperate need to upgrade research facilities in universities if we are to remain a world leader in research; retain our leading research workers and make the contribution to national competitiveness and the knowledge economy sought by the Government. Faced with such evidence, will the Government provide additional funds to help to close this yawning gap in research infrastructure when the JIF scheme has run its course (the last bidding rounds will be in the year 2000)?

Many universities, including Dundee, are fully committed to commercialising their research findings for the benefit of the economy and to seeing their research applied in practice; for example, in licensing intellectual property; forming spin-out companies (such as Cyclacel and Cyrex); and developing start-up companies and research agreements with industry. Developing such initiatives can often require preliminary funding which is difficult for universities to provide. Also, there is a risk that the most outstanding research workers who produce all the innovative new knowledge on which commercialisation depends can get drawn into commercial ventures which absorb all their time. There have been some valuable initiatives to address that issue and I applaud them. But what is needed is a sustained "third leg" of funding, in addition to the hard-pressed funding for the core functions of teaching and research which facilitate the early stages of commercialisation. A partnership between universities and government is what is needed to achieve greater success.

5.58 p.m.

Lord Woolmer of Leeds

My Lords, before I deliver my speech, I should like to convey my appreciation of the maiden speeches of the right reverend Prelate and the noble Baroness, Lady Prashar, to whom I listened both with great interest and future anticipation.

First, I declare an interest in this debate as the Dean of the Business School at the University of Leeds. I want to make a few introductory remarks about some of the things going on in my university in order to make the point that the issues that many of us are raising in this debate are not a whinge; they are not simply a plea for more, without thought; they arise from universities that are doing enormously good work and getting on with the job. But that does not mean that they are not serious problems that need to be addressed.

In my university, which has some 26,000 students, external research awards were obtained during the past 12 months totalling some £66 million, an increase of 18 per cent on the previous year, and about £2.5 million was awarded for plant and microbial genomics to provide help for those making decisions about GM foods. Professor Alan Watson in our Department of Physics and Astronomy was awarded some £2 million to be joint leader with Professor Cronin of the University of Chicago on a 50 million dollar project to build a cosmic ray observatory in Argentina, the largest astronomical project in the world. Funding of £1.5 million was awarded to establish at the University of Leeds one of the six Biological Sciences Research Council research centres. This was won in partnership with Sheffield, Manchester and UMIST.

That partnership approach saw the establishment in 1997 of the White Rose consortium, bringing together the universities of Leeds, Sheffield and York. This consortium was recently awarded £4.5 million from the Government's University Challenge Fund. This will provide seedcorn for a capital fund to be run by White Rose Technology Limited, to back university innovation in its early stages, and to fuel the creation of spin-off companies and jobs in our region. The consortium was also recently awarded £3 million by the Office of Science and Technology to establish a new Centre for Enterprise, to stimulate enterprise in our universities and across the region.

The University of Leeds has been one of the most successful in Britain in achieving technology transfer. A new innovation centre is currently under construction at a cost of £4 million, in partnership with Shepherds Development Limited. The university actively supports third-arm activities and has recently established a new Institute for Corporate Learning to provide a one-stop link between industry and the large research, teaching and consultancy resources of the university. It has also recently secured funding of over £1 million to improve the ability of departments to "reach out" to industry. Moreover, an Institute of Lifelong Learning has been set up, building on the success of a large Department of Continuing Education.

A Yorkshire businessman, Roger Ogden, has provided a grant of £500,000 to fund a scheme to be run in collaboration with the university and three local education authorities. This will provide scholarships for 16-plus students in schools and colleges in the old mining areas of South Yorkshire to encourage them to stay on at school and move on to university at Leeds. The students will receive £500 a year to complete A-levels and £2,000 a year, each year, to enable them to go through university.

On the international front, the School of Education commenced work this year on a five-year £10 million project for the Government of Oman to upgrade the qualifications of 1,000 teachers of English. I could continue to outline a whole range of ventures in research, in teaching and in outreach, but the fact remains that major problems face Leeds and similar universities.

Universities are being very badly squeezed; indeed, our leading research-led universities have been especially badly squeezed. When I first went to university, 95 per cent of the population were being asked to support just 5 per cent who wanted to go to university. Today, 65 per cent of the population are being asked to support the 35 per cent who want to go to university. They will not; and the situation will not change. We may say that we want to have more and more state funding, but, in reality, a high proportion of that 65 per cent are the least able to fund those who will go on to earn the most in our society.

The issue of fees and of differential fees for our leading universities will not go away. There is no remedy around the corner whereby 65 per cent of the population will get universities and governments out of that jam. It is indeed a difficulty. We face real problems in staff recruitment and retention of high-quality, world-class researchers. Those people have all the options in the world before them. Why should we expect them to stay here for poor pay? Top professors earn no more than a Member of Parliament in the other place; indeed, they earn less than £50,000. Young people are expected to stay on for three more years to take a doctorate and not earn a penny until they are in their mid-20s. They are then expected to start earning incomes that they could have earned if they had left school at the age of 18 or 19, and certainly if they had left university at the age of 21.

Like other noble Lords who have spoken today with similar backgrounds to me professionally, I speak with passion because I care deeply about our leading research universities. I care about all universities, but we cannot speak on every issue and include every item and interest in our speeches. We need to address these issues. This is not a political point because successive governments have faced the problems and will do so in the future. However, unless we do something about the financial circumstances of our leading research-led universities, we shall critically damage not only the prospects of the country but also the intellectual opportunities of our very brightest people.

It is simply not the case that 35 per cent of our population are all capable of world-class research. We are not thinking about how we ensure that the next generation of researchers are cared for and brought through the system. It is almost impossible in some disciplines to recruit PhD students. Indeed, in some disciplines, almost no students are funding themselves to go through three further years. As I said earlier, the problems of staff pay, retention and recruitment, together with funding, will not go away. Just as the Government are able to think imaginatively and laterally in their modernisation programmes, I hope that they will also be able to think laterally about our universities.

I conclude by mentioning China. Out of its hundreds or thousands of universities, it has decided that only 10 universities in the country will be selected for major funding from now on. Two or three months ago the academics in those universities were given a pay rise from the equivalent of £2,000 a year to £10,000 a year, thus making them the élite in China. At the same time, fees are gradually being introduced into Chinese universities. We call ourselves a world-class power, but we are in great danger of letting down our future leaders in research.

6.7 p.m.

Lord Walton of Detchant

My Lords, as the noble Lord, Lord Jenkins, said, the problems facing our UK universities are currently of very great concern to all who are working to enhance this country's future intellectual capital and economic prosperity. Had time allowed, there is much that I would have wished to say, not least by drawing upon the report of the Hamlyn Foundation National Commission on Education, which I was privileged to chair. However, many of those points have already been raised in the debate. Hence I propose to concentrate on two issues; first, the UK science base; and, secondly, the plight of clinical academic medicine, to which my noble friend Lord Patel has already referred.

Some years ago I was privileged to chair a sub-committee inquiry of your Lordships' Select Committee on Science and Technology into international investment in UK science. We were much encouraged to learn that 40 per cent of all US overseas investment in science came to the UK and that 42 per cent of that from Japan also came here because of the perceived strength of our science base, largely in our universities.

While we have been less successful than some other countries in exploiting and developing the discoveries of basic science, I believe that that position is improving as the "D" of R&D achieves greater prominence. Sadly, however, there has been much evidence of decline in our science base since we reported. Many of us in medicine have wearied of saying that the percentage of cur gross national product spent on health is greatly less than that of many of our overseas competitors. Unfortunately, as Save British Science now shows, the position of general university funds provided for scientific research is equally dire. The UK universities receive from governmental sources approximately £30 per head of the population for scientific research compared with over £100 in Sweden and the Netherlands, £70 per head in Germany and £50 per head in France.

From 1984 to 1997 there was a progressive decline in government funding. In 1981 such investment in R&D was equivalent to £7.5 billion at today's prices. By 1997 it had been reduced by almost 20 per cent. Of course private sources, not least the Wellcome and many other trusts and industry, make a major contribution. Happily, within the past year, following the comprehensive spending review of 1998, there has been a welcome increase in science funding. Even so, by 2001 science funding in real terms will still be almost 17 per cent lower than in 1981. As many other noble Lords have said, the recent Bett Report has clearly shown that the remuneration of young university lecturers, and even of young professors, has fallen sharply, in stark contrast to the sometimes grotesque rewards received by some captains of industry.

Can it be right that a young lecturer, after an arduous undergraduate course, followed by at least three years of research leading to a Ph.D., should now be paid £15,500 per annum, while the minimum professorial salary still stands at £33,000 in the non-clinical disciplines? It is not surprising that all too many of our bright young graduates leave science, as did one of my grandchildren who, after achieving an honours degree in physics, is now working in the finance industry. Many posts in prestigious university departments of science are either vacant or difficult to fill. This is so in disciplines as varied as engineering, biological sciences, mathematics, information technology and, of course, medicine.

The Government will surely say, as they did in response to a question I tabled in your Lordships' House some time ago, that the issue of academic salaries is a matter for the universities and not for government. Nevertheless we are plainly in a crisis so far as concerns academic pay and recruitment. This must be rectified if Britain is to continue to hold its proud and long-established place in scholarship, and especially in science.

I am, of course, especially interested in medicine. Four years ago I chaired another Select Committee inquiry into research in the NHS. That report, published on 15th June 1995 and subsequently debated in your Lordships' House, drew attention to the parlous state of clinical academic medicine. No fewer than 57 clinical chairs in the UK were then vacant for lack of suitable applicants and the universities were facing serious difficulties in recruiting doctors into junior academic posts. The reasons were multiple and complex. While the Government accepted then, and do now, that there must be parity between salary scales for medical practitioners in the universities on the one hand and those in the NHS on the other, it became increasingly clear that the additional income achieved by many NHS consultants through private practice was not open to academics, who are expected to spend just over half their time in patient care and the remainder in teaching and research.

It was also clear that because of pressure upon health authorities to increase patient throughput and reduce waiting lists, many academics were being required by hospital managers to see more and more patients, to the detriment of their academic responsibilities. Clinical audit, governance, research assessment, continuing education and administrative responsibilities have also encroached upon research time. The bar upon distinction awards being awarded to clinical academic staff in general practice has exacerbated the recruitment problem in this specialty, one of great importance in student teaching. Even now, one in four chairs of surgery in this country remains unfilled. There are now not just 57 but 74 vacant clinical chairs across the specialties, half of which have been vacant for more than one year.

The concerns which we expressed led to the appointment of the Richards Committee, which made a number of important proposals, echoing the concerns expressed by the Select Committee, and suggested remedial measures. Sadly, few if any of these have been implemented, if only because of financial constraint. Now we envisage a welcome and substantial increase in medical student numbers along with the establishment of several consortia between existing schools and other universities to facilitate that expansion. I must, however, warn that unless the increasing problems of clinical academic medicine are reversed, recruitment of the staff required to teach these extra students and to maintain Britain's leading position in medical research cannot be implemented.

As the noble Lord, Lord Patel, said, changes in the training of NHS specialists resulting from the so-called Calman reforms have added further problems because of the difficulty encountered by some junior clinical academic staff in being able to take time out from their clinical training, say to read for a Ph.D., before returning to the clinical career ladder. The Department of Health has this year produced a memorandum for your Lordships' Science and Technology Committee making several recommendations in the hope of protecting and advancing the career prospects of doctors in clinical academic medicine. The Academy of Medical Sciences has established a working party under the chairmanship of Professor John Savill. That report is being finalised, but in draft it makes several invaluable proposals, not least the establishment of new clinical scientist posts which should help to reverse the decline in this area of crucial importance to the future practice of medicine and to the training of our future doctors. The BMA has today published an important report on medical student selection.

Our UK universities as centres of outstanding scholarship, of innovative and exciting scientific research, and with a proud record of training of scientists and doctors, have been for many years the envy of the world. That phrase is perhaps trite but that pre-eminence has been under serious threat in the past decade. Only now, through a number of innovations by government and others, do we see the potential for significant recovery. I urge that that process of recovery be accelerated, as unless some of the problems I have mentioned can be corrected rapidly, we can anticipate little other than continuing decline, with serious consequences for this country's intellectual and economic future and to the lasting detriment of the reputation of British academe across the world.

6.17 p.m.

Earl Russell

My Lords, looking at where people are sitting in the Chamber I wonder whether the debate should be subtitled "Changing Places". Although many of us have changed our parts in the script, the play is quite wearily the same. The substance of this debate could have taken place any time in the past 11 years. The only thing which I can see has changed is the diminishing hope that it will ever lead to any meeting of minds.

As a serving university teacher, I must, of course, declare an interest in this debate. In that context, I listened with pleasure to the noble Baroness, Lady Rawlings, speaking as chairman of our college council, in which capacity she is proving a great success. The college deserved the praise she gave it, but listening to it I was slightly reminded of those maps which have been appearing in the press over the past two weeks which show the likely effect of global warming on the British coastline over the next few centuries. If one lives on top of the Chilterns, one may take pleasure if one's own place remains above the water while still seeking to call attention with some urgency to the rising level of the floodwater around one. That is the way I feel today.

I thank my noble friend Lord Jenkins of Hillhead for initiating this debate. I remember vividly that he opened the debate in which I made my maiden speech, on the Second Reading of what became the Education Reform Act 1988. My noble friend then expressed the fear that this country might not have any world-class university in the 1990s. There was a reaction of "shock, horror" around the House. My noble friend has expressed the same fears today. I hear no reaction of "shock, horror" at all, only a slight subliminal anxiety about whether my noble friend's horse may perhaps have already been stolen. I hope that it is not so. But in every year since 1988 things have got worse than they were before. People need hope. The expectation that that process of getting worse will continue as far as the eye can see is not a great encouragement.

Almost all of the damage has been directly government inflicted. I remember saying in the debates on the Further and Higher Education Bill in 1992 that the greatest threat to quality was the Secretary of State. That created again an atmosphere of "shock, horror". I was extremely surprised that it did so. I could have repeated that remark at any time since, quite irrespective of the identity of the Secretary of State of the time. With regard to Secretaries of State for Education, I have quoted previously the old song with the chorus that goes, verse after verse after verse, I married another far worse than the other, and I longed for the old one again". I first used that in this Chamber at the expense of the noble Lord, Lord Baker of Dorking; today, I use it to his comfort.

One of the clearest things about the whole process is that there has been not one bit of change as a result of the general election. I see the Minister shaking her head. I have checked this. I have consulted people in my college who have far more dealings with government than I ever do in my academic capacity. Every single one of them says the same: it is exactly the way it was. Indeed, it is a little bit worse because it has been going on longer.

The damage is done in three ways. First, and most seriously, I refer to the collapse in the level of student funding. Figures about rising university drop-out rates were published in all the papers last Friday. I do not know why anyone thought that that was news. I have been drawing the attention of the House to that fact ever since 1990. The noble Baroness complained about this, saying that high drop-out rates are, a potential waste of talent and an inefficient use of taxpayers' money'', So I am tempted to recall the remark of Mill about the inability of the unanalytic mind to recognise its own handiwork. This is government work and these are government changes, which the noble Baroness has not reversed.

It goes back to the fact that the amount of money needed was grossly miscalculated in the 1990 changes, of which the most serious was the abolition of a student's right to social security. I was wrestling with the consequences of that as recently as yesterday afternoon. Those figures show that drop-out rates relate to social class. Of course they do. If one's sum of money is not adequate, one depends very heavily on a large amount of support from one's parents. Those who can get it do much better than those who cannot. Those who fare worst of all are those who are estranged from their parents; those whose situation is so desperate that one wonders whether they should be advised not to go to university at all. That is something that I mind very deeply.

It is not only the waste and cruelty which matters, but the decline in the level of academic work. Most of the people I teach are now doing paid work for something like 12 or 16 hours a week. I know that in other countries students do that amount of work, but they have a longer course—four years or, in some countries, even longer. We combine the intensive three-year course with a support system designed for a much longer course. The amount of work done per undergraduate since 1984 has approximately halved. Because examiners do not like blaming students for what they could not help, the tendency has been to mark them on the quality of their reasoning and not on the amount of their knowledge. I think that explains what has happened to results.

The second way damage is caused is by the reduction of the unit of resource—I shall not spend much time on it because it is generally recognised. I refer to the sense, which is quite common, that we have been set up to fail because we have been given more to do than can possibly be done with the resources. That is felt throughout the public services, and we are no exception.

Thirdly, damage is caused by the interference with academic judgment involved in performance indicators, funding formulae and all the rest. I am reminded of the emperor in "Amadeus" saying, "Too many notes, Mozart". Let us consider, for example, the teaching assessment. That has rewarded people for innovation in teaching methods. It leaves out the fact that innovation in teaching content is usually much more important than innovation in teaching methods. Introducing one is usually inimical to the other.

A conversation which took place recently has been brought to my attention. I have permission to repeat it solely on the condition that no attempt is made to attribute it. A head of department said that it was necessary to make a substantial shift of resources from undergraduate teaching to taught MAs because the funding formulae had been changed. A junior member of the department asked whether that was justified on academic grounds. The head of department said that the funding formulae were now so powerful that we could not afford to take any account of academic grounds. If I had been in his position, I fear that I would have had to say the same thing—which is why I am extremely glad that I am not.

Academics have regularly accepted low pay because of vocation; because they believe in what they are doing. If they are not allowed to do what they believe in, they may claim the pay they could have got outside. That would be a very expensive mistake.

6.27 p.m.

Lord Annan

My Lords, after hearing this debate there can be no doubt that universities are at the bottom of the pile. I know that the Government put schools first. It may well be that the noble Baroness will say that nursery schools are even more important than the universities. The universities are rather like a discarded mistress; they have been dumped by the Government because they did not produce in the Seventies and Eighties the spin-off in industry and industrial performance which many people thought they would.

The vast expansion that has taken place in the number of higher education colleges and universities was very much harmed by the mad act of destroying the binary line. That destroyed the distinction between what universities and other admirable institutions were trying to do. But of course it was a triumph for the Department of Education. Now, at last, it could put the whole of higher education under a quango—the HEFC—and that gave it the ability to downgrade the élite.

I see the last 20 years as a war between the bureaucracy and the universities in which the heavier guns were inevitably on the side of the bureaucracy. The universities have lost their economy and autonomy, and with it the trust that used to exist between the UGC and the vice-chancellors committee. Of course I accept that to give more 18 year-olds and more mature students the chance of a degree will have enormous repercussions—I have always been a champion of extending access to higher education—but the bureaucrats saw expansion as the long-desired chance to instruct universities how they were to behave, and justified this intrusion on the grounds of accountability.

The universities are now told how they must spend public money and on what they must spend it. Hence we hear of a measure to cover special educational needs and another to examine the relationship between graduate and commercial skills. The Government tried to placate the universities by setting up committees to examine their plight—the Dearing and the Bett Committees. I very much hope that the noble Baroness will be able to respond to the pleas made by other speakers in the debate as to what the Government response to the reports of those committees is going to be.

I realise that the noble Baroness will no doubt expect me to speak about Cambridge, and so I shall, but not perhaps the university in Cambridge upon which she was expecting me to speak. I wish to speak about the polytechnic university—the Anglia Polytechnic University. Historically, Cambridge District Council and the city authority were never generous to that institution in its former state. As a result, its baseline is very small, the buildings are run-down and there are no funds for refurbishment. Many students come from dreadful schools and take paid jobs for 20 hours a week in order to help them pay for their fees and loans. Most of those who drop out do so on sure financial grounds, in particular mature students, who sometimes also have family difficulties.

In the humanities, the best way to teach students is to require them to produce written work. But with a staff to student ratio of 1:25—and still more in one department, which had a staff to student ratio of 1:50—and with the modular system that makes students produce written work only at the end of the term, how can teachers take these students through their written work? No wonder the drop-out rate is so high.

But the overwhelming complaint in that university, as in many others throughout the kingdom, is about the Quality Assurance Agency for Higher Education. In the good old days, a small team of inspectors from the CNAA would talk to students and then to staff at the Anglia Polytechnic University. They would then inspect some work, look at the resources and read the reports of the external examiners. It took little more than a few hours to prepare for their visit. The inspectors were well informed because they had experience of looking at examining institutions.

What is the substance of the system today? Each discipline has to compile statistics for the annual monitoring report on intake, the progression of students, average and mean marks for each module, not to speak of other material that it must contain. The only document relevant to the quality of the teaching is the external examiner's report. The preparation for the Quality Assurance Agency teaching quality assessment takes months, time that should be spent on scholarly work and teaching. A small team of mainly inexperienced assessors arrives—each assessor looks at three to four institutions. They have a base room filled with 50-plus boxes of material. In addition, they do a few spot checks on teaching and then they quiz the staff.

Exactly the same complaint would be made by the other university in Cambridge, because the detail that universities are expected to supply is gargantuan. For example, in a University of London college a single department filled 80 feet of shelf space with the material that it was expected to provide. The effect on morale in the universities has been disastrous. Perhaps I may also say that it has had a disastrous effect on morality. Universities now blithely distort tables, poach teachers from other universities if they can, so that their publications record looks more impressive, and they do not dare to admit that the increase in the number of students that they teach has resulted in lower standards. Of course, if they did that, they might well be marked down and penalised. Am I really to congratulate the Government on turning vice-chancellors into practised liars? All vice-chancellors are at times somewhat economical with the truth, but that is very different from what happens today, when, if they possibly can, they will falsify records.

The more the bureaucrats in the department are fed, the hungrier they become. Their latest insolent demand is to require universities to produce statistics of what jobs those who have recently graduated now hold. Universities will be punished by loss of grant if they do not provide adequate information. Which arrogant, power-drunk official engineered such a scheme? Does not he or she realise that when a recent graduate receives such a request—always supposing that, since graduating, he or she has not changed address several times over—that he or she will most likely drop the form into the wastepaper basket? Or will the noble Baroness say that this waste of time by university teachers is really vital if a grant is to be made available by the Treasury? If it is, why cannot the department itself chase the graduates? All the civil servants would have to do is to ask each university to send them a list of graduates and their last known address. Why put another back-breaking task and threaten penalties on those who are paid to teach and research?

I wonder if the noble Baroness will tell the House that she promises to end this wretched waste of time. Will she promise to get the department and the HEFC off the backs of the universities? Of course I accept that it is vital to differentiate between universities. Some of the newer universities need guidance and public assurance that they are not wasting taxpayers' money. But surely the old élite institutions do not need to be put through this purgatory so often, and a good department does not really need to be examined every seven years. On that note, I shall end.

6.37 p.m.

Baroness Lockwood

My Lords, I declare an interest as Chancellor of the University of Bradford. Bradford is not part of the Russell group; nevertheless it produces research of world-class standard and is a leading university in many respects. Its motto is, "Making knowledge work." Since the university was established in 1966, that has been reflected in much of its work.

I believe that over the past 25 years our universities have proved themselves very robust and have absorbed enormous changes with remarkable resilience, as was indicated by the noble Lord, Lord Norton of Louth. They have moved from an elitist system with a participation rate of under 10 per cent to become a mass system with a current participation rate of 33 per cent that is set to rise further. This has been done with surprisingly little damage to the system. Yes, according to last week's tables, the drop-out rate has increased on average from 10 per cent to 18 per cent and, yes, that is too high. But the situation must be looked at in perspective.

When A-levels were almost the sole qualification for university entrance, the drop-out rate at A-level was much greater. 'We must recall that at that time some 8 per cent of our school leavers left with no qualifications at all. Now entry to university is on a more diverse basis: A-levels, NVQs, access and pre-experience for mature students. Given this, the 18 per cent drop-out rate is perhaps not to be regarded as remarkable. The changes have been made without any serious drop in standards. Here I would take issue with the noble Earl, Lord Russell, and the noble Lord, Lord Annan. It is a fact, of course, that aspects of study may have changed. A wider range of knowledge and skills is now required of students. Students have to be computer literate and have to acquire entrepreneurial skills. There are different teaching methods and learning skills. But in the end the test is in the number of first-class achievers and in the added value for all students, as the right reverend Prelate the Bishop of Derby said in his very thoughtful maiden speech.

The changes have also been made while the universities themselves are changing. Most, if not all, universities have links with industry locally, nationally and internationally. The present contribution made by the universities in the knowledge-based industries, including the cultural and creative industries, must be acknowledged. We must also recognise that universities themselves are an enormous industry bringing in considerable income through home and overseas contracts and overseas recruitment. All these achievements are on the plus side and have been made while the unit of resource, as indicated already, has declined by some 35 per cent over the past 20 years. That is the deficit side.

There are other aspects of the deficit side too. The Bett review on university salaries indicates that the so-called efficiency gains have been made at the expense of university salaries. The noble Lord, Lord Baker of Dorking. said that the universities face a serious crisis in funding. I should remind him that in 1996 the Dearing Committee was set up for exactly the purpose of looking at the financial crisis in our universities, trying to find away to steer us through it and picking up that very hot potato of student fees with which the noble Lord said he declined to deal.

So the financial situation is still very serious. It would have been even more serious had not the Government introduced student fees and had not the Government injected some funding for the infrastructure for widening access and for science which has been welcomed, certainly by my university and many others too. So, too, has the injection of funding from the DTI to strengthen links with industry, to encourage technical transfer and to strengthen the science base. But—and it is a very big "but"—the basic formula funding is still being squeezed.

I accept that there are many competing priorities across education. But, surely, higher education now needs to he given a higher priority, particularly in the Government's own priority areas. For example, cannot something be done to stop the decline in mature student recruitment? Among mature students are single parents who face the greatest financial difficulty especially in universities. In further education, the support facilities for single parents are much more generous. Cannot something be built into the funding formula to deal with that problem?

If higher education is to continue to export education and to bring in more overseas students, as the Prime Minister urged in his speech at the London School of Economics in June, and if universities are to play the part they and the Government wish them to play with the RDAs in regional regeneration, then further funding for the infrastructure is essential.

University pay is now so uncompetitive—it is down some 30 per cent—that institutions are finding it difficult to recruit key staff in a number of subjects with consequential effects on teaching and research. I made that point in the debate on the gracious Speech and many noble Lords have emphasised it today. Given the enormous contribution that our universities make to industry and the economy generally, as well as to the social and cultural life of our country, can my noble friend the Minister give some indication that from the next financial round in 2002 there will be some additional funding to implement the suggested new pay scales? Could this include the eradication of the discriminatory differential in women's pay, given the Government's commitment to equal pay?

The employers' association and the staff side in the universities are in agreement on much of the Bett Report. But as the report itself concludes, without additional government funding, meeting the costs of the needed reforms would raise serious doubts about the sector's capacity to sustain (let alone improve) the quality of teaching and research, and put plans for widening access to higher education seriously at risk". That is something the Government surely cannot afford to risk.

6.46 p.m.

Baroness Warnock

My Lords, it will come as no surprise that at this late stage of the debate I have absolutely nothing new to contribute. We have made, in my view, our great mistake which was to allow the universities and the polytechnics to collapse into one another. I have to say, without pride, that during that debate I said nothing whatsoever because, strongly as I felt against it, I felt also that that most depressing of responses would have come; namely, "She would say that, wouldn't she?" I kept quiet. I really do believe, as I think my noble friend Lord Annan believes, that it was a huge mistake which has had very bad consequences; but we cannot undo it.

Now we have somehow to ensure that we do not allow the élite universities to disintegrate as well. I use the word "élite" with pride. The best universities will always constitute an intellectual élite, in their undergraduates, their postgraduates, those who embark on research as well as those who teach. Not everybody will either wish to or be able to belong to this élite. That is, I think, a necessary truth. One of the most important things that has been aired in this admirable debate—I thank the noble Lord, Lord Jenkins of Hillhead, for initiating it—is the standard of excellence in the best universities. I am referring not only to Oxford and Cambridge, but to Imperial College, York, Warwick and many others. That standard of excellence cannot survive unless those who work in the universities are paid a salary comparable with, as it used to be, the salaries paid in the Civil Service and with those paid to various other professionals. That point has been powerfully made by many noble Lords, including the noble Lords, Lord Woolmer of Leeds and Lord Shore of Stepney.

It is too much to expect that graduates, burdened with debt and with further debts ahead of them if they want to go into research or take a further degree so that they may enter the profession, should be willing to do so when they know that in that profession they can never hope to earn a proper professional salary. That point has been made by many previous speakers and, indeed, is made in the Bett report.

Perhaps I may return to élitism and make one important point. We seem to be completely hung up at the moment on the need to attract to our top universities undergraduates who come from comprehensive schools or working-class homes, or both. I do not think that comprehensive schools need worry us at all. Many comprehensive schools have undoubtedly become very much better. I do not think that it is a test of whether an applicant comes from an upper middle-class background or working-class background that he has been to a comprehensive school. After all, one has only to think of the numerous children of university professors, readers and lecturers who undoubtedly go to comprehensive schools. They will not constitute an underclass in any sense whatever.

I recognise the need to try to get more people from disadvantaged backgrounds to apply to university, but that is by no means a new aspiration. As long as I have been in any way connected with universities, that is what we have tried to do. When my husband was senior tutor at Magdalen College, Oxford, he spent many, many hours visiting schools trying to recruit people. Indeed, at that time Magdalen exercised positive discrimination in favour of people who had not been to independent schools. So this is not at all a new preoccupation, but it may have become a rather obsessive one.

I do not know how many of your Lordships saw the huge pull-out supplement in The Times Higher Education Supplement last Friday entitled "Order of Merit" or "Order of Excellence". In it universities were graded according to how many of their students satisfied the description of coming from a working-class background. The people who were most shamed were people from Oxford. But, like the noble Lord, Lord Annan, I am not referring to Oxford University, but to Brookes University, Oxford, which used to be the polytechnic. It had an intake from working-class homes of about 2 per cent. The next worst was the University of Bournemouth. Yet a great deal of anger has been expended against Oxford and Cambridge in particular for not admitting such undergraduates.

One should also remember that many working-class, inner-city, deprived young people do not want to go to university; and if they did, they would not, and sometimes do not, flourish. What is needed is an earlier start to a culture of being ready to learn. People should be encouraged at school not to think that learning is not worth going in for. It should be done at that level, not by running round helplessly trying to get people to come to university when they do not particularly want to. Many of them are being chased in vain.

That pull-out supplement from The Times Higher Education Supplement revealed an obsession. Of course we do not want the élite of the universities to be a closed élite; nor is there any danger of that happening. We have had in place the means of admitting undergraduates from whatever background. In passing, I should say that as the A-level examination is to be changed from next September, and as the standards reflected in that examination will undoubtedly change if they do not quite overtly decline, there will be such an enormous number of people with A grade at A-level that that will no longer be a useful way of selecting students. It might be timely to think of devising some kind of aptitude test, not unlike the tests that are already set by Cambridge for people who want to read Law, or by Oxford for people who want to read PPE—but universal and regular, as are the tests in America. That might very well rule out the distinction between people who had been well taught and people who had been badly taught. I ask the Minister to give some attention to that point.

The danger of thinking of nothing except how widely the university education that we supposedly prize should be spread may make us forget the purpose of universities. Universities are not there to go in for any kind of social manipulation. They are not there solely with a view to equality. Universities are there to educate their students—and to educate them properly. It is seriously important to bend our mind, as the Bett report suggested we do, to the question of how to recruit really good people to teach. What is the use of a university if there is neither teaching by, nor research from, people who are in the very top class academically. We must not face a future in which the values of imagination, scientific understanding and, perhaps most important of all, historical insight have been allowed to wither away. We rely on the excellence of our élite—and we must ensure that it is an élite, although not a closed élite.

6.57 p.m.

Lord Plumb

My Lords, the noble Baroness, Lady Warnock, has just reminded us that this has been a fairly lengthy debate. We are all anxious to hear, and perhaps patiently awaiting, a response from the Minister. Many words of wisdom have been spoken by those involved in universities and colleges up and down the country. It is very appropriate that the debate is being held at this time. It is particularly appropriate because the performance indicators for higher education institutions in universities and colleges have been produced for the first time by the Higher Education Funding Council. I join other noble Lords in thanking the noble Lord, Lord Jenkins of Hillhead, for his excellent introduction to the debate and for its timing in particular.

During the course of the debate we have had a fair tour of various universities. I declare an interest as Chancellor of Coventry University, a university that was a polytechnic until about eight years ago. I am also on the Court of Warwick University and I am a Fellow of Wye College, which has recently been linked with Imperial College in London. Like the noble Baroness, Lady Wilcox, I did not have a university education. There was a little problem of a war, which prevented some of us of a certain age at that time taking advantage of going to university.

As many speakers have said, the recent financial settlement indicates the Government's present failure adequately to fund the expansion of higher education, at the same time expecting a further significant efficiency gain. That has been the policy for many years. It makes it extremely difficult to be internationally competitive in research and teaching. It inhibits the capacity of institutions to provide the support systems that traditional part-time and non-traditional students require. It puts standards at risk. To be internationally competitive, well run universities require a clear policy direction. They need targets for longer term planning, explicit plans for achievement and identification of resources, clear ideas as to who is accountable for the necessary improvements, and career development for improvements and training plans, particularly for staff. I have been impressed by the comments of several noble Lords their concern in regard to staffing. A properly thought out reward structure is needed for students and staff. We look forward to hearing Minister's comments.

Regional development agencies are recognising that universities are the drivers of the knowledge-based economy and have a major part to play in terms of social inclusion. Government must work closely and constructively with universities to realise the vision of an inclusive society in which all have the opportunity to develop their potential.

We recognise the importance that the Government give to the widening of participation in higher education. However, it is totally unacceptable that opportunities are so low in some communities—either because of where students live or because of the occupation of their parents. That was clearly indicated by the noble Lord, Lord Shore.

Some universities have made great strides in their provision for disadvantaged groups. Coventry University, for example, recruits over one in three of its young full-time students from the unskilled and semi-skilled social classes. That compares with a national figure of one in four. Nearly all its intake comes from state schools and colleges often located in areas that are socially and economically the most deprived. There is a cost in making adequate provision for those students. They need extra support to compensate for their disadvantage. Often, they do not have a place to study at home or any computing facilities. They can afford few books or expensive educational visits. The extra 5 per cent premium provided for universities by the funding council in respect of those students is far too little.

But there is an even more fundamental issue. Students from economically deprived backgrounds suffer enormous financial pressure. Even if they have their tuition fees paid for them, they still have to live. Taking out a loan from a student loans company is not in their culture. Even if they take the maximum loan, it is nowhere near adequate. Those students have to take jobs while still trying to study full-time, and the majority work up to 20 or 30 hours a week. There are plenty of examples. It is no wonder that a higher proportion of such students do not complete their degrees in the minimum period. The universities provide some funding for students on a discretionary basis from their own resources because the access fund provided by government is hopelessly inadequate. However, there is a limit to what the universities can do.

The Government should take note that there is a close correlation between social exclusion and the universities' so-called drop-out rates. Students at universities which are exclusive in their intake have the highest rates of completion. Conversely, students at universities which are at the heart of tackling the Government's (quite proper) agenda of social inclusion find it more difficult to complete their studies. To describe such universities as "failing" or "inefficient" is a travesty. It is the Government's policy which is failing. If the Government are serious in their desire for an inclusive university system, they should provide a more realistic student loan system—larger loans and less onerous repayments; raise the income threshold below which tuition fees are paid by the state; and greatly increase the access fund in proportion to universities' records in attracting economically disadvantaged students.

One action that many universities have taken is to allow students to spread their studies over a longer period than the standard three years. Coventry University, for example, has created a modular structure which enables students to combine employment with studying so that they can take modules at less than the normal full-time rate—say, over four years—to achieve their degree. That is the kind of innovation that the Government and the funding council should be encouraging. It is one way, perhaps the way of the future, in which people from disadvantaged groups can benefit from higher education. Yet the recent performance indicators from the Higher Education Funding Council described that approach as "inefficient". I find that offensive. All our universities need to be more like Coventry University, tackling social exclusion in innovative and creative ways. They should not continue to be forced into an outdated, inappropriate mode. UK universities represent a huge under-utilised resource. The country could put that resource to better use by improving their links with industry and their managerial capability so that they can respond to the many major pressures for change.

7.7 p.m.

Lord Butler of Brockwell

My Lords, I join other noble Lords in congratulating the noble Lord, Lord Jenkins of Hillhead, who is chancellor of the university in which I now serve, on initiating this debate. I note in passing that this is the second time in my career when I have had the good fortune to serve under his leadership when he has been in one of his chancellorial modes. I declare an interest as head of an Oxford college.

In the time available to me, I shall concentrate on the financing of universities rather than on their supervision. I should like to remind the noble Lord, Lord Annan, that it is the traditional view of former Cabinet Secretaries to share the dictum of Edmund Burke that being economical with the truth is a virtue.

We need to see the financing of our universities in the wider context of a change of attitude to public services, not only in this country but in other countries also. The Robbins report was written and implemented at a time when governments did not apologise for high-spending, high taxation economies. But about 25 years ago, Britain, like other countries, began to move into a mode in which electors put much greater pressure on governments to hold down taxes. The reason is obvious. Electors want first-class public services, but they also want more money left in their pockets to spend on consumer durables, foreign holidays and the other attractive goods and services available to them today. So governments are under pressure not to raise taxes. In a competition for scarce public resources, it is not surprising that, whatever the rhetoric of successive governments, higher education finds it difficult to compete with services which have higher voter appeal such as health, social security, law and order and primary education. At the same time, we know that higher education has had to cater for a huge increase in the number of students. The result is a 40 per cent reduction in the funding of students over the past 20 years as identified by the Dearing committee. That has been referred to by many speakers today.

Does anyone expect that trend to change? I see nothing in the pressure of politics to make it do so. I share the view expressed by the noble Lord, Lord Baker of Dorking, that the only realistic assumption on which to base our expectations and policies is that the public funding of higher education will continue to be squeezed for the indefinite future as it has been over the past 20 years. We do not need to peer into the crystal ball when we can read the book.

It was in response to those pressures that the previous government established the Dearing committee and the present Government introduced the £1,000 student charge. I pay tribute to the Government for the way in which they have enabled higher education to retain the greater resources which those contributions have provided and have mobilised increased sums for research in partnership with the private sector.

Ironically, all this is happening at a time when the opportunities open to universities in this country, at any rate those with a research capacity, are enormous. Advances in the physical sciences, life sciences and electronics mean that breakthroughs in research are happening every day which are commercially exploitable to huge effect. The investment of major companies in Oxford and Cambridge and other universities is testimony to that, as is the number of spin-off companies in the universities and their surroundings which already command huge values on the stock exchanges.

I believe that when account is taken of research commissions, student contributions and income from endowments, only about one-third of the total income of the University of Oxford is now derived from the Higher Education Funding Council. For my part, I welcome less dependence by higher education on the taxpayer, with the very large proviso that youngsters of ability should continue to have the benefits of higher education, whatever the income of their parents.

This year my college, University College, Oxford, celebrates the 750th anniversary of its foundation, which makes it—I am sorry to be disobliging to the noble Lord, Lord Jenkins, who is a Balliol man—the oldest college in Oxford, Cambridge or the English-speaking world. Noble Lords will not be surprised to hear that we have associated this anniversary with an appeal to our alumni. We have made it an objective of that appeal to finance bursaries and scholarships to help students of limited means to meet the contribution to their education that they are now required to make without amassing a huge burden of debt. I do not believe that it is unreasonable to ask former students whose tuition has been fully financed by the taxpayer—in some cases, they have substantial incomes on which, unlike their parents, they pay income tax at no more than 40p in the pound—to assist the students of today and tomorrow who will have to contribute more. In passing, I observe to the Minister who is to reply that the DfEE make this harder for us by offsetting any scholarship of more than £1,000 a year with a pound for pound reduction in the subvention from public funds to tuition fees. I find that policy incomprehensible. I am glad to say that the response to that appeal has been generous.

I would prefer a regime in which universities can charge those who are able to pay a rate that is nearer the true cost of their education while meeting the costs for those less able to pay. If opposition to student charges in Scotland causes the movement in that direction to be reversed, it will do a great disservice to higher education in this country.

I say that all the more emphatically as extra resources in our higher education system are urgently needed, as has been made clear by other speakers. The money which is becoming available for research is naturally tied to that purpose and does not enable us to deal with the general level of academic salaries which, as others have said, is dangerously low. Some noble Lords have referred to its effect on our ability to attract scholars of the highest distinction for whom we are in competition with the American universities. I am aware of instances where the attractions of working in Oxford and Cambridge have not been sufficient to draw such people of distinction back to this country.

However, I believe that it goes much wider than that. I spent my life in the Civil Service, which is not a profession that is notable for its high salaries compared with the kinds of reward that can be earned in the City. Fortunately, in general civil servants preferred to remain in that profession despite the low rewards, subject to one matter. Occasionally, we reached crisis point in civil service salaries. That happened when people felt that they could no longer make what they regarded as the minimum provision for their families; for example, when they could no longer afford to live in safe areas, educate their children as they wished and afford even a second-hand car or a modest family holiday. I believe that we are reaching that crisis point in the case of academic salaries, and the Government should take it seriously. It was plainly documented in the Bett report of which the Government have so far, I am sorry to say, washed their hands. It would be tragic if, at a time when we have the opportunity to exploit our natural talent for research to the great benefit of higher education and the country generally, we were to squander that opportunity through neglect of the precious stock of human capital on whom progress depends.

7.16 p.m.

Baroness Sharp of Guildford

My Lords, in winding up the debate from these Benches I begin by declaring an interest. Until the end of September I was employed by the University of Sussex and I remain a member of the Association of University Teachers.

The debate today initiated by my noble friend Lord Jenkins has been very stimulating and has ranged far and wide. We have discussed student finance, tuition fees, access and access costs and student poverty. We have looked at research and Britain's place within the global research community. We have also discussed the broad cultural value of education. We have enjoyed two excellent maiden speeches, both stressing in different ways the importance of one of the main planks of the Government's current policy on higher education, namely access. Above all, the debate has illustrated the vast changes that have been taking place in higher education over the past two decades, to which the noble Baroness, Lady Warwick, referred at some length.

I begin by returning to a fairly fundamental issue. The Dearing Report covered at some length the research undertaken to look at the rate of return on investment in higher education. It indicated that both the social and private rate of return on higher education was very substantial. Private rates of return are much easier to measure and are reckoned to be in the region of 12 to 14 per cent. Social rates of return are much more difficult to quantify because, for example, they attempt to value the benefit that we get from a more highly educated workforce that is better able to take responsibility and decisions associated with that responsibility. In the world of global competition in which we now operate we know that we cannot compete for manual jobs with the low labour costs of third world countries. We must compete with our wits, which need to be honed and trained.

Estimates of the social rate of return on education range from 8 per cent to over 30 per cent, in part because of the difficulties of making those estimates. Even if we take the lower level of 8 per cent, it is higher than the present long-term rates of interest. If we borrow money at the current gilt-edged rates and invest it in higher education we shall get more back than we are putting into it.

That is precisely what the Government are doing. As we have heard, they are anxious to expand access to higher education, especially for those social groups whose participation has to date been poor, because they know that it is an investment worth making. The question central to much of the debate is who should pay for that investment. The Government, and the Opposition whose policies the Government have adopted in many respects, are anxious to minimise their own investment and believe that a considerable part of that cost should come from the students themselves—in the form, on the one hand, of tuition fees, and, on the other, the withdrawal of student maintenance support.

From these Benches we have consistently opposed the introduction of tuition fees for higher education. We have argued throughout that this is an issue of principle: tuition at all levels of education should be free and the costs met by the state. It is an investment which is clearly worthwhile and the state should make it for the benefit of the whole nation. That does not exclude those who benefit from higher education from making some contribution. In itself progressive income tax means that those who earn more pay more back. Other countries have introduced graduate taxes, which to some extent are a hypothecated form of tax.

What has happened to the Quigley Report on the vexed question of whether English and Welsh students should pay fees for their fourth year in education in Scotland? The report seems to have been lost.

From these Benches, not only would we make that investment, we would make it properly. The precedent set by the Opposition when in government of expanding student numbers but of refusing to make the appropriate complementary investments in teachers, teaching premises and equipment leads to the present situation faced by many universities of overcrowded, run-down and out-of-date facilities. If we are going in for mass higher education, we must do so properly, using the facilities of new technology to mix and match: distance learning with personal contact and feedback. Few universities can afford to make that investment. Instead we offer more of the same: overcrowded lecture rooms and tutorial classes of 20 or 30, sometimes even 50. The degree of personal contact—an element of higher education on which Britain has always prided itself—is often now minimal.

In the circumstances it is not surprising that we see the drop-out rate rising rapidly. In this country, we used to pride ourselves that although we took relatively few into higher education, unlike our continental counterparts, we graduated most of them. Drop-out rates were only 2 per cent or 3 per cent. As we saw from last week's figures, the average is now 20 per cent. A figure of 25 per cent or 30 per cent is not uncommon. The Government argue that if one has a system of mass higher education, some of that is inevitable; and I think that they are correct to a degree. But the evidence is alarming for it shows that many students are dropping out because they cannot afford to stay on. Compared with jobs elsewhere, the opportunity cost is too great—an issue raised by the right reverend Prelate the Bishop of Derby. Drop-out rates are disproportionately high precisely among those students whom the Government want most to attract into higher education—mature students and those from poorer home backgrounds.

Student loans, as we all know, are an inadequate way to cover living costs. Most students are now having to take part-time jobs. The noble Baroness, Lady O'Neill, raised this issue. The overall burden of loans, jobs, the pressure on time and the lack of time to pursue their studies adequately are telling upon students.

I turn to the other side of the universities, and one with which I am more familiar: that of research. Many noble Lords have paid tribute to Britain's research base and the contribution it makes to the national economy. Many have warned that, again, we are in danger of failing to invest enough and killing the goose that lays the golden eggs.

I should like to bring to your Lordships' attention three pieces of information, not unrelated, which passed across my desk recently. First, I refer to the figures quoted by the noble Lord, Lord Walton, from Save British Science on the amount of general university funds devoted to research in higher education on a per capita basis. According to those figures—I believe that they come from the OECD—whereas Sweden, Switzerland and the Netherlands are spending well over £100 a head, the UK spends about £30 per head of population, with only Spain, Greece and Ireland spending less.

Secondly, I cite some recently released figures from the US Department of Labour on productivity growth per hour worked. Sweden, the country with the highest figure on university spending, saw an average growth over the period of 1990–98 of 4.6 per cent, the Netherlands 3.8 per cent, the US 3.1 per cent, and the UK 2.2 per cent.

Lastly, and perhaps most gloomily, I refer to a report from the US Office of Technology Policy on global patenting trends in five leading-edge technologies. It finds that the UK was a leading player in only one of the five, the health sector. But even here, the report remarks, that, The UK is not nearly as significant a player as we had expected". Those figures are from recent publications. However, they indicate that perhaps the UK is not now pulling its weight internationally in terms of science and technology, as it used to do. Many of us suggest that under the previous government the long years of squeezing the budget are beginning to take their toll.

The Government have sought to reverse those trends. In the Comprehensive Spending Review they put £1.4 billion into the science budget. That sounds a great deal of money. However, we have to look carefully at that £1.4 billion. Of that sum, £700 million goes to what is called the joint infrastructure fund, which makes good the dilapidations in equipment and buildings over the long years of squeeze from the Conservatives. In 1996 the Manchester group PREST considered how much was needed to make good those dilapidations. That was nearly five years ago. The figure was £1 billion. The £700 million will not meet the amount required. The sum of £110 million goes into university industry links, such as the new science enterprise scheme. All those initiatives are to be welcomed, but it is not new money going into university research.

That leaves only £515 million of the new money for the universities, of which 50 per cent represents what is needed to keep up with real levels of expenditure at current rates of inflation. In real terms, of that £1.4 billion only £275million is new money into the science budget. We are delighted to have it, but is it enough?

And what about the unfinished business of the Bett Report? The Government conveniently wipe their hands of that: Bett was a CVCP report; it is up to the universities to implement it. But they know well that unless the Government provide some of the funding the universities are in no position to implement the provisions of Bett. Yet unless they are implemented, as many speakers illustrated, the universities will bleed to death and will fail to recruit top quality brains. That does not always show up immediately because of the lag involved. But Save British Science indicated recently that more than 75 per cent of academic institutions report that they sometimes experience difficulties in recruiting any suitable candidate; and, alarmingly, 6 per cent say that such difficulties occur more often than not. Particular problems have occurred in a host of scientific disciplines, including engineering, biological sciences, mathematics, information technology and medicine. Ninety-five per cent of institutions report difficulties in retaining academic staff. That illustrates the points made by other speakers.

Given that the noble Lord, Lord Butler, spoke of the Civil Service, perhaps I may mention that last week I wrote a reference for a graduate student who was applying for a job as economic adviser at the DTI. The rates of pay quoted for someone with at least a Masters degree and two to three years' experience were £36,000 to £50,000. If I were recruiting her within the university, I should be offering her a salary of £15,000 to £17,000.

I want to conclude with the issue of selectivity. As my noble friend Lord Jenkins made clear, we in this country have reached the position in which we have, effectively, a super league of universities. That has been introduced by stealth—we have not debated it properly—and it has come about as a result of the research assessment exercise. There has been a great deal of disquiet about the whole process of bureaucracy. I suggest that if we are going down the American route of having a hierarchy of universities in which we do not assume that every one is the same, do we need that heavy burden of bureaucracy any longer? Are we not, as the noble Lord, Lord Norton, suggested, using the market system and should we not remain with it?

Lord Bach

My Lords, I am sorry to interrupt the noble Baroness, but we have kept closely to the time constraint and to extend it is not fair on the other noble Baronesses who are to speak.

Baroness Sharp of Guildford

My Lords, I am sorry. I have reached my final point. I believe that the Government are trying to reconcile the irreconcilable. They have four different objectives: to expand access; at the same time, to maintain the traditional high standards in teaching and scholarship; to play a prominent role in leading edge research and technology; and to put no more money into the system.

I believe that those four objectives are irreconcilable—with difficulty, three could be reconcilable—but if the Government will the ends they must will the means to those ends.

7.31 p.m.

Baroness Blatch

My Lords, I, too, am grateful to the noble Lord, Lord Jenkins of Hillhead, for introducing the debate. It has been an interesting and, it goes without saying, important debate. As the noble Baroness, Lady O'Neill, said, it has also been a timely debate.

I, too, welcome the two excellent maiden speeches; the first from the bee-keeping Bishop, the right reverend Prelate the Bishop of Derby, and the second from the noble Baroness, Lady Prashar. She touched a chord with me when she regretted that her parents were not present during her maiden speech. Had they been, they would have been immensely proud of their daughter in this place. But perhaps I speak for many people who arrive here not expecting to do so by saying that we regret that our parents are not here to witness our introduction and our maiden speeches.

A country is judged by the quality of its education and particular focus rests on the quality of its higher education. The Government, when they came to office, declared that education was their first, second and third priority. Some of us have considerable reservations about such proclamations when witnessing the way in which core funding for our schools has been reduced as a direct result of the unprecedented and costly expansion of the Department for Education and Employment. I refer to the rise in the number of political advisers on the payroll, the massive increase in non-accountable quangos and the volume of moneys held back—or, in the departmental jargon—top-sliced by government to fund endless centrally-controlled projects.

However, before I am intervened upon for straying from the subject, I declare that I wish to confine the rest of my remarks to higher education and in particular to the state of our universities. Universities can be forgiven for believing that they have been omitted from that list of priorities.

Higher education students were deceived by the Government—indeed, by Mr Blair personally—when pre-election and post-election pledges were made that a Labour Government had no intention whatever of introducing tuition fees.

Sir Ron—now Lord—Dearing made recommend-ations following considerable consultations and deliberations by his committee. They included the recommendation that students, particularly poorer students, should retain up to 50 per cent grants towards their maintenance at university. This was ignored by the Government and we are beginning to see the signs of debt accumulating for the students from low income backgrounds.

Since the changes in student funding, the fall in applications has been most marked among mature students. Sadly, one problem is highlighted. It is that those students who drop out of universities, sometimes because they are ill-suited for a higher education course, have for a year or more accumulated debt and then have to make a fresh educational start somewhere else.

It will continue to baffle political scientists that it was a socialist Labour government which introduced a system of student finance which resulted in the poorer student carrying the greater burden of debt on leaving university. A great deal of emphasis has been placed by many, including the National Union of Students, on the introduction of tuition fees. However, for the brightest young people from poorer homes the greatest adverse financial impact has been due to the wholesale removal of maintenance grants. Recently on BBC's Radio 4 I heard an NUS representative admit—with hindsight, of course—that he regretted not putting up a greater fight for the retention of maintenance grants for students from low income families.

Before leaving the issue of fees, perhaps I may ask the Minister what progress is being made with the investigation into the absurd anomaly of Scottish and European students receiving preferential treatment over English and Welsh students and those from Northern Ireland by having their fees for the fourth year of their university course waived. Also, what is the latest situation and what are the projections for the Government's support for the collegiate tutorial system at Oxford and Cambridge Universities?

Despite the priority claimed by the Government for higher education, the so-called additional funding has not taken account of student numbers. It is also now clear that the funding per student has fallen. The Minister, when responding, will no doubt repeat her assertion that the "unit of resource", as it is known, fell under the previous government. It may come as a relief to the noble Baroness to hear that I shall not argue with her about that. However, I shall say that there was recognition that a review of higher education funding was an issue and the Dearing Committee, with all-party support, was set up to consider it and to report back to government. That point was made by the noble Baroness, Lady Lockwood.

The Government claim to have addressed the issue, but I believe that there is considerable evidence to the contrary. The additional income from tuition fees has turned out, predictably, not to be truly additional funding. It has done no more than mitigate—and only in part—a reduction in funding per student. In each year to 2002, funding per student, even including a proportion of tuition fee income, will fall.

As the Association of University Teachers claimed, student income has supplanted planned central government expenditure. And expenditure as a proportion of GDP fell from 0.7 to 0.6 between 1997 and 1999. What comfort can the Minister have for that third of our universities which, in their returns to the Higher Education Funding Council, are predicting a deficit budget for next year and beyond? The increases for the next three years, announced in another place by the Minister, Mr Wicks, of £318 million, £253 million and £295 million do not begin to address the recommendations in the Dearing Report, especially if participation levels continue to increase. The Dearing Report advised that there would be a shortfall of £350 million in 1989–90 and of £565 in 1999–2000.

The Bett Report on academic salaries has been received by the Government, who so far have washed their hands of it. One argument used by Ministers—indeed, the only argument to date—is that the report was commissioned by higher education employers and that therefore any response is a matter for them. Well, that is in part true, but given the centralising nature of the Government, the lack of flexibility for universities on top-up fees and the dependence upon central government for funding, how can Ministers take the view that there is no link between grant in aid and the cost to universities of paying their staff? If the Government really are saying that any increase in salaries must come from within present resources, and that universities must continue to strive to achieve the Prime Minister's target of additional students—up to 50 per cent of young adults—then the funding per student is heading for serious decline and with it a fall in standards, a rise in wastage rates and the risk of a lemming-like exodus of the best academic staff.

Ministers have sent out confusing signals on participation rates. Will the Minister please clarify the position? In July, the Minister said in this House that no decisions had been made on participation rates. Mr Blunkett continues to talk about expansion. The Prime Minister said in his conference speech: today I set a target of 50% of young adults going to university in the next century", and the Chancellor is said to have claimed that almost all young adults will go through higher education by 2020. I asked for clarification on that issue when responding to the gracious Speech, but so far I have received no reply.

If the participation levels are to rise, what is the timescale and what is the source of funding? Expansion must not lead to a compromising of standards. The key to sustaining standards lies in the schools—as the noble Lord, Lord Wallace of Saltaire, mentioned. I can add to the examples of interesting summer schools designed to encourage children to think and to work harder in order to benefit from higher education. At Teesside University there is an effective programme of summer schools and the signs are extremely promising.

I turn to the issue of standards. Are the Government concerned about the standard of entry qualifications to higher education courses? Are the Government concerned about the proliferation, quality and academic content of courses? Do the Government accept that the rise in drop-out rates from university courses may have some link with poor entry qualifications; an inappropriate match between the skills and talents of a student and the courses offered? The acceptance of students through the clearing system often has more to do with filling places than with educational considerations.

I should like to know the Minister's reaction to the following. One university—I shall refrain from using its name unless I am pressed by the Minister—looking to fill vacancies on 184 courses through the clearing system offered civil engineering to students with a mere 12 points; that is, the equivalent of three Ds, geography to students with eight points; chemical sciences to students with a mere six points; and mathematical sciences to students with only four points. At another well-known university, 12 points were enough to study physics with nuclear physics, while a student who preferred his astrophysics straight could be accepted with only 10 points.

Does the Minister agree with last year's report from the Higher Education Funding Council which presented widespread evidence of the dumbing-down of degree standards? What response is there from Ministers about degree courses in rock music and kite-flying, which I believe do little to enhance the academic reputation of higher education?

The publication of tables providing information about higher education intakes, social backgrounds, completed degree courses and drop-out rates is to be welcomed. In all those areas perspective is important and therefore I understand why we should note that the situation for the proportion of students completing courses and the drop-out rates in the United Kingdom show a much better picture than in most other countries. It should not, however, give rise to indifference. The overall figure of 18 per cent of students not completing courses may look reasonable in comparison with other countries, but the drop-out rate at some institutions gives rise to serious concern and does at least beg the question that it could be linked with pressure to increase participation levels, student funding, academic salaries or even misdirected young people who might be more effectively provided for by sub-degree courses, highly vocational and educational training.

One has to speculate as to whether the Government really are working towards a redefinition of the role of universities as the equivalent of comprehensive schools providing for all abilities in one institution. Perhaps the Minister will confirm or disabuse the House of that assumption.

I have not touched on research because of time constraints. I ask only one question: given the number of different higher education institutions, including those from the polytechnic and higher education sector and the different historical records for research ranging from a high degree in some universities to very little in others, is it government funding policy to recognise those differentials, to level up, or to average out across the whole sector? The Government should clarify the role of universities and give serious consideration to the consequences of a relentless expansion of higher education without proper regard for standards, quality of teaching and learning, academic salaries, funding and the capacity of universities to cape without compromising standards.

Finally, I wish to point out that the burden of bureaucracy, the lack of flexibility and increasing central government control are strangling education, from nursery school to the university, emasculating and demoralising professional teachers and lecturers. As my noble friend Lord Norton said, echoing the sentiments of the late Lord Beloff: set the professionals free by less intervention. Unless those issues are addressed, what has been a world-class higher education sector will be at risk of losing that reputation. As I said when opening, a country is judged by the quality of its education and particular focus rests on the success and quality of its higher education.

7.45 p.m.

The Minister of State, Department for Education and Employment (Baroness Blackstone):

My Lords, I begin by congratulating, the two maiden speakers in this debate. We learned a great deal from the wisdom of both the right reverend Prelate the Bishop of Derby and the noble Baroness, Lady Prashar. They made two really excellent speeches. I look forward greatly to hearing both speak in the House on many future occasions.

I am grateful to the noble Lord, Lord Jenkins of Hillhead, for introducing the debate. I am sure that the noble Baroness. Lady Blatch, will agree with me that the position of a Minister responding to a debate on universities in this House is always difficult because there is a great deal of expertise and knowledge here, of which we have heard much today.

When the Government took office, higher education was somewhere between a shambles and a crisis. There had been drift and uncertainty over several years. Universities were certainly unsure of their mission, funding per student had been sharply cut, investment in the universities' infrastructure had collapsed and there was a serious threat to quality. Soon after the report of Lord Dearing's National Committee of Inquiry was published, which set challenges for Government, the universities and students, the Government responded quickly to the main recommendations on the shared responsibility of students and the state for funding higher education and to the remainder of the recommendations not long afterwards. I shall send a copy of the Government's response to the noble Lord, Lord Annan, who did not seem to be aware of it.

I was immensely surprised by the comments of the noble Lord, Lord Baker, about the lack of interest by the Government in our universities. I believe that he was exaggerating; indeed, I thought that his measure of lack of interest—which was how many speeches the Prime Minister, the Deputy Prime Minister and the Secretary of State for Education had given—was rather limited in any case. His remarks in that context were quite inaccurate. I was present at a speech given by the Prime Minister on higher education in the summer in which he advocated an increase in the number of students from around the world coming to, as he rightly described it, our world-class universities in a world-class system". My right honourable friend the Secretary of State has made a number of speeches on the subject. In a speech at the University of Exeter last year, he said: It simply is not true that this Government is not interested in our universities. Nothing could be further from the truth". We are always entertained by rather colourful prose from the noble Lord, Lord Annan. He described the Government as having treated the universities like a "discarded mistress." I prefer the analogy of an active lover. There is an extremely strong partnership and good relationship between the Government and the CVCP, which represents our universities, and, indeed, with many individual universities.

The Government are quite clear about the critical role of universities in an era when the rhetoric about the knowledge economy is becoming a reality. First, universities must provide high quality training and knowledge across a wide range of subjects because the economy is demanding more highly trained people than ever before. Graduates need to be equipped with both specialist knowledge and the skills which our employers expect from them.

Secondly, our universities must generate knowledge through research and be ready to ensure that that knowledge is exploited where possible, as through links with industry and others.

Thirdly, as I believe was said so clearly and eloquently by the right reverend Prelate the Bishop of Derby, universities must contribute to the social and cultural fabric of the nation through teaching, research and scholarship. However, the Government do not expect all universities to be identical. Rather, we expect them to play to their strengths, with some universities paying particular attention to research and others perhaps to developing new approaches to teaching in vocational areas. As my noble friend Lady Warwick rightly emphasised, diversity is of enormous importance in the system we have today. And we shall ensure that resources for teaching, research and special projects are carefully directed so that those diverse missions are properly underpinned. Therefore, for some there should be more money for research and more money perhaps for widening participation and for other projects.

In commenting about diversity, perhaps I may say also how much I agree with the right reverend Prelate the Bishop of Durham. Excellence is to be found not only in our research universities. Excellence can take many forms and many of our new universities are demonstrating that in a variety of ways.

I believe that our universities need to do two things. First, they need to preserve their justified reputation as world centres of excellence in learning, research and scholarship. They are continuing to prove this. An extra 4,200 postgraduate overseas students have chosen to study in the UK compared with just two years ago. The noble Lord, Lord Wallace of Saltaire, rightly referred to the importance of universities in this area of invisible exports. We should not downplay that. And they need to be a powerful economic force, not only in their own right but also in enabling a wide variety of industries to grow through exploitation of the knowledge that universities generate, which will be to the benefit of us all. We want them to maintain their excellence and to promote diversity.

The Government are playing their part. In spite of what has been said in the debate, there has been an appreciable increase in the number of students over the past decade or so. We welcome that, and I believe that most speakers in the debate have done so with the possible exception of the noble Baroness, Lady Blatch. I can confirm to the noble Baroness that the Prime Minister has now announced—he had not done so when she asked me a question about this in July; therefore, I was not able to inform her about this—a further target of having 50 per cent of young people benefiting from higher education by the time they reach the age of 30. Many of those new places—I believe that this is more along the lines of what the noble Baroness was suggesting—will be for sub-degree courses with a vocational leaning, which students will be able to take part time as well as full time. Those who take the courses part time will be able to combine work with study. Many of those students will be mature, coming into higher education when they are ready and fitting it in with work and family responsibilities. That will contribute further to the widening of access to which the noble Baroness, Lady McFarlane of Llandaff, and a number of other speakers referred.

At this point I must say that I was rather saddened by what the noble Baroness, Lady Warnock, said. She does not seem to want to encourage to go to university those students who do not come from a tradition of universities and higher education. We must reach out to those students. We cannot say that because they appear not to want to go, we should simply leave them to miss out on the potential they may have.

As I believe the noble Baroness, Lady Blatch, did, some may argue that the expansion of higher education which her government initiated has gone far enough; even too far. I invite noble Lords to look at the evidence. Graduates still earn more than non-graduates with university entrance qualifications. Graduate unemployment is low; their starting salaries rose by 7 per cent between 1997 and 1998. As the noble Baroness, Lady Sharp, said, the personal rate of return of a university degree—roughly what an individual can expect to gain over a lifetime—remains very high. Employers are reporting shortages of graduates in a number of disciplines, and especially at sub-degree level. Those do not seem to me to be the symptoms of over-production or falling standards. Moreover, our schools and FE colleges are now preparing more young people who have the qualifications that are needed to enter university.

As I have already said, rapid expansion was introduced by the previous government. There was an enormous increase in the age of participation rate; indeed, it doubled. The noble Lord, Lord Baker of Dorking, said on an earlier occasion in this House that that is something in which he believes. I believe he endorsed that position today. The expansion we are initiating at present is a more measured one. It will take into account improvements in achievement in schools and further education to ensure that we can maintain standards of entry in our universities.

Many speakers have commented on the issue of funding for higher education. Of course, the Government have increased funding for universities in order to maintain the quality of our higher education and to support a small amount of further expansion. I did not recognise the comments of some of the contributors to the debate on this matter. I feel that they are perhaps still trapped in the environment left by the previous government when universities were indeed starved of funds. The Secretary of State—

Earl Russell

My Lords, has the noble Baroness read the eighth report of the Treasury Select Committee on the comprehensive spending review? If so, will she tell the House why she disagrees with its arguments?

Baroness Blackstone

My Lords, if the noble Earl will wait just a moment, I shall give him the figures. I shall give him chapter and verse on the investment which the Government have already made in higher education. My right honourable friend the Secretary of State has just announced that an extra £295 million will be available in 2001–02. That is an increase of 5.4 per cent in cash terms, and is on top of £253 million in the previous year, £318 million the year before, and £165 million the year before that. All told, that is an increase of just over £1 billion—an 11 per cent increase in real terms since April 1998. Most of the increase is new government funding, not just additional fee income.

Baroness Blatch

My Lords, those are precisely the Figures I gave. But they represent a fall in funding per student and they represent also a fall in GDP from 0.6 to 0.7 per cent.

Earl Russell

My Lords, the noble Baroness has not answered the point about the Treasury Select Committee which found the method of calculation of those figures altogether deceptive and mistaken. The Treasury Select Committee's findings coincide with real experience as I see it.

Baroness Blackstone

My Lords, I am not going to enter into a discussion of the details of the Treasury Select Committee in a debate this evening on universities. Many issues have been raised and in the time available I should like to try to address those issues which are pertinent to the debate. I shall pick up later on the point raised by the noble Baroness, Lady Blatch, about efficiency savings.

Perhaps I may say to the noble Baroness, Lady Sharp, that over 80 per cent of that funding will come from new funding provided by the Government and not from the income raised from tuition fees. That demonstrates clearly our commitment to supporting higher education.

Lord Baker of Dorking

My Lords, the noble Baroness takes great pride in the money that the Government have made available. We debated earlier whether or not that is an increase. On this side of the House, we do not believe that it is an increase in the way that she has explained it. She said that money is available for higher education. Does she believe that the money which the Government have made available for higher education will go any way towards addressing the problems of academic salaries and the specific problem that a professor in a university will probably earn about £40,000 per year, which is exactly half the salary of a head teacher in a large city comprehensive? Will the money that the Government have provided allow the universities to close that gap significantly?

Baroness Blackstone

My Lords, I very much hope that noble Lords will allow me to continue this speech. If I am interrupted every other sentence, it makes it very difficult for me to answer the points which have been raised. I shall deal later with the Bett report.

It is a bit rich for members of the main opposition party, both of whom were in the previous government, to upbraid this Government for not providing enough funding for higher education. What this Government have provided is in stark contrast to the funding provided by the previous government. Between 1989–90 and 1996–97, the amount of funding per student decreased by 35 per cent. That is a figure confirmed by my noble friend Lady Warwick. That was a reduction of £2,553 in cash terms per student. By any standards, that is a swingeing decrease. It is no wonder that when the noble Lord, Lord Dearing, looked at the previous government's spending plans, he said that further rapid reductions in unit funding were not achievable without putting quality unacceptably at risk.

We responded positively. We have stabilised university funding. As the noble Lord, Lord Dearing, acknowledged, there is room for universities to make improvements in efficiency while student numbers continue to increase. The previous government wanted those improvements in efficiency while they put a ceiling on increases in numbers. In that respect, our universities are no different from any other sectors of the economy.

The noble Lord, Lord Dearing, believed that efficiency improvements should be limited to 1 per cent per year for two years and did not agree with the far higher level which the previous government demanded. We have agreed with that limitation and implemented it. We have now extended that for a third year.

I turn now to the Bett Committee. I know that there are concerns about the pay of university staff and I am extremely sympathetic to what has been said in the House this evening. I understand those concerns. After all, I was in that sector until two-and-a-half years ago. But as a number of noble Lords have conceded, the Bett Committee, which set out some evidence and suggested a number of elements of restructuring, reported not to the Government but to the universities. Moreover, the committee made it absolutely clear that there is no further funding in this CSR which can be used to address some of the problems which the universities face in that regard. Again, that is hang-over from the previous government.

For the time being, its recommendations are for the universities to respond to. The Government do not negotiate university pay nor would it be appropriate if they were to do so. I am sure that many Members of your Lordships' House would become extremely concerned were the Government to take that on. But I recognise the disparity in some salaries to which the Bett report has drawn attention. The next spending review is now under way and university staff will clearly be a factor. But the House will understand that I cannot prejudge the outcome. However, perhaps I may say to the noble Lord, Lord Butler of Brockwell, and to the noble Baroness, Lady Blatch, that the Government are not washing their hands of that issue.

Part of the funding arrangements comes from a new compact between universities, students and the taxpayer, to which a number of noble Lords referred. We accepted the principle of the noble Lord, Lord Dearing, that the burden should be more equally shared. That means that full-time students who can afford to should contribute to part of their tuition fees and those on lower incomes—about one-third—do not have to contribute at all. My noble friend Lady Lockwood was right to say that that has been welcomed by the universities. I was grateful to the noble Lord, Lord Butler of Brockwell, for his support in relation to that.

We have modernised the system of student support. Maintenance loans are offered at a very favourable rate of interest and with flexible repayments made when the graduate can afford to do so after leaving university. Perhaps I may say to my noble friend Lord Shore of Stepney that I thought he was being rather nostalgic in talking about a period when he went to university when the numbers of young people were about 3 or 4 per cent. We are in a very different position today.

Our new arrangements mean that those who benefit financially from higher education make a contribution to its cost, and not just the general taxpayer. We are waiving fees for part-time students on low incomes or those who lose their jobs while studying. Next year, loans will also be available to them. That will help mature students which my noble friend Lady Lockwood and a number of other noble Lords want us to do. We have increased help for those in financial hardship by trebling the access funds to which the noble Lord, Lord Baker, referred and introducing hardship loans. Of course, those are for maintenance and not for the payment of fees.

The evidence shows—a number of your Lordships asked about this—that there are more young people, not fewer, entering university. The figure is more than 1 per cent up on last year. So those new arrangements have not affected the numbers coming forward.

Perhaps I may say also to my noble friend Lord Shore and others that there has been no deterrence to students from the lower socio-economic groups. Indeed, they comprise a slightly higher proportion of new entrants than before. Nor need they have higher non-completion rates than other students. I do not believe that we should have lower expectations of such students. But of course it is right that we should continue to monitor the new arrangements. I am very concerned that we should do that and do it rigorously. After all, as a social scientist who has always believed that such changes should be properly evaluated, it would be most remiss of me in my present position not to ensure that that happens.

The recently published performance indicators to which other speakers have referred will give those who lead universities helpful, objective and clear information about how students are faring and provide a good guide as to what action universities need to take to improve completion rates across the board. Part of that will be modernising teaching and learning. Universities should grasp the opportunity that information technology presents. I believe that the noble Baroness, Lady Rawlings, referred to that. If we do not, we shall be rapidly overtaken by other parts of the English-speaking world.

I turn to the quality of teaching. Universities are unique in having such wide control over all aspects of their teaching, examining and awarding bodies. I see every advantage in our universities being able to demonstrate that their standards are high. I believe also that having some measure of external scrutiny is valuable to them. That should not restrict their freedom nor the range of courses they teach. Nor should it stifle the freedom to develop new and imaginative courses. However, neither should it mean a mountain of paperwork.

I endorse completely the need to avoid unnecessary bureaucracy. I want a light touch and have asked the Higher Education Funding Council to ensure that that happens. However, that depends on universities demonstrating that they already have sound systems for internal control. By the same token, the RAE does not prevent good quality research. I disagree with the comments of the noble Lord, Lord Jenkins of Hillhead. He suggested that it is only quantity that counts in the RAE. Quality does and should count. We must remember, in respect of both teaching and research assessment, that it is not done by bureaucrats in the Department for Education and Employment. I must defend my civil servants against charges of that sort. It is done by peer review; by other academics looking at the record of their colleagues in different universities. However, I take the point about the importance of not having measures that put universities into a strait-jacket. I do not believe they will. We must recognise the need to show that universities provide good value for money and are accountable for it.

Regrettably, I am running out of time. A number of specific questions were raised on a range of issues. I have the answers but perhaps it would be right for me to write to noble Lords concerned. However, perhaps I may say a few words on research. There has been a great deal of additional support for research from the Government with £1.4 billion being made available through the joint infrastructure fund. The first tranche of that spending was announced yesterday. That is a large amount of extra funding. I believe that it was desperately needed. Universities have been unable to invest over the past decade because funding has not kept up with their needs.

In conclusion, I do not recognise the rather gloomy picture painted in speeches made by some Members of your Lordships' House. Nor do I believe that many vice-chancellors, university staff and students would recognise it. Nor is that the view around the world of British universities. As I travel the world carrying out international work for my department, I discover that our universities are the envy of many people.

The Government have a clear vision for the universities in which they are both centres of learning and teaching at the highest level. They are central to the transformation needed for a knowledge-based economy. That means that the universities taken together must teach a wide range of subjects to a high standard. They must conduct the best research. The Government have assured the funding. We have a new target now for participation by students and have set clear objectives. I know that the universities will demonstrate what they can do. I am confident that they will continue to be diverse players in a world class system competing successfully with the best in the world.

8.14 p.m.

Lord Jenkins of Hillhead

My Lords, I have never greatly believed in an extended second bite of the cherry when initiating a debate. I shall therefore not detain your Lordships for any great length of time. I thank the many speakers who have participated. In particular, I much enjoyed the two maiden speeches, as I am sure did everybody else. I believe that the noble Baroness, Lady Prashar, whose speech was one of the few I missed, was kind enough to make a graceful reference to my time as Home Secretary. I am grateful to her for that.

I have rarely participated in or listened to a debate in which there were so few speeches with which I disagreed. I refer, for instance, to the speech of the noble Lord, Lord Shore. I have not agreed with a speech given by the noble Lord for a very long time, but I agree with at least 60 or 70 per cent of what he said today. The same applies to the noble Lord, Lord Baker. He made a fine speech. That is an example, of which there are many others, of how leaving office can improve the quality of a person's speaking. Perhaps to some extent that applies to us all.

I thank the noble Baroness, Lady Blackstone, for winding up and for her exhaustive replies to many parts of the debate. She did not reply in great detail to most of the points I raised. However, I make no great objection to that She made a legitimate riposte to the noble Baroness, Lady Blatch, with a fine phrase; that she inherited a position in higher education which was between a shambles and a crisis. I do not necessarily contest that. I refrain from saying that after two and a half years she has produced a position which is between a crisis and a shambles; first, that would be too glib; secondly, it would be a little unjust; and thirdly, I would not wish to make such an unfriendly remark at the end of a debate of this kind.

However, in my considered view, the Minister is deluding herself if she thinks that there is high morale and a state of general satisfaction in the university communities. I am an admirer of many aspects of the work of this Government. I remain hopeful for the future, but I cannot say that higher education is, so far, one of their outstanding achievements.

Finally, at one stage in her speech, the Minister indicated that we might be going down a bifurcated road with some universities specialising in research and some in teaching. I am sure that the general view is that in all the best university institutions, research and teaching are necessarily closely linked.

Baroness Blackstone

My Lords, perhaps I may clarify my remarks. In no way did I mean to suggest that research and teaching should be divided; that some universities should do only research and others only teaching. I suggested that in a diverse system we need to get universities to play to their strengths. The noble Lord will recognise that some universities are stronger in research and others are particularly good at widening participation and reaching out to some of the new students we want to bring in, and at prodding sub-degree courses.

Lord Jenkins of Hillhead

My Lords, there are some which are strong in both. I thank the noble Baroness for her clarification. I thank also those noble Lords who participated in the debate. I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.