University Funding

HL Deb 19 March 2003 vol 646 cc285-326

5.55 p.m.

Baroness Howe of Idlicote

rose to call attention to the relationship between arrangements for the funding of students and student choice in British universities; and to move for Papers.

The noble Baroness said: My Lords, I rise to speak with some hesitation, and admit to not only being surprised by my success in the ballot, but somewhat daunted by the prospect. That is not only because of the expertise and experience of those who will follow me in the debate, but also because it is the third debate on the subject in less than four months. However, all that, and the lively debate in the press on the higher education White Paper, has certainly helped to establish the background, and I suspect much common ground, for the debate.

I intend to focus very largely on methods of funding and in particular, on the link in that respect between university institutions and their clients or customers—their student body, actual or potential. I shall have nothing to say about, for example, the allocation (as between different institutions) of research funding, important though that is, nor about the quite lamentable level of academic salaries, which was the subject of the recent debate led by the noble Lord, Lord Lamont. I look forward, of course, to what others may have to say on those and other topics. but I shall concentrate today on arrangements for the funding of students.

The details of those arrangements have huge importance, because of the effect that they can have on two fundamental matters: the independence, and therefore the quality, of universities, and the extent to which those crucial, nation-building institutions are accessible, as they should be, to all those who can benefit from them in all sections of the community.

Having stressed the importance of access, perhaps I may start with my one major criticism of the Government's strategy, as set out in the recent White Paper. Even without targeting of the kind proposed by HEFCE last week—it was nevertheless pretty effectively dismissed—the Government are heading in the wrong direction with the proposed appointment of a so-called "access regulator". That does not mean that I am content with the present patterns of access. Of course we should be concerned at the small proportion of non-middle-class children reaching university. Certainly some able children who could and should benefit from university education are not getting the chance.

It is important to understand why. It is not because universities, consciously or unconsciously, are biased against those children. The reason is essentially because our "early years" support, although well under way, and particularly our schooling system is letting them down—much more, it has to be said, than used to be the case in the heyday of the grammar schools. In the 1960s, before the grammar schools started to disappear, more than 60 per cent of university students came from state schools. Today there is a struggle to get the figure above 50 per cent.

The point is expressly acknowledged in the White Paper, which states: The single, most important, cause of the social class division in higher education participation is differential attainment in schools and colleges". Certainly that problem requires proactive responses, and not just in schools. Good examples are already being set by many universities, as the White Paper again makes clear, with initiatives like "Excellence Challenge" and "Partnerships for Progression" now to be merged into "Aim Higher".

However, I do not believe that the problem calls for more bureaucratic, central control of the "access regulator" kind. Indeed, the last thing that our universities need is any increase in central planning, regulation or control.

I am very glad to be able to say that that message at last seems to be getting through and is beginning to spread more widely. It was presented in last autumn's higher education debate in this House by a number of distinguished university leaders. On that occasion, if I may risk causing offence by making a choice, the case was perhaps put most compactly and comprehensively by the noble Lord, Lord Desai. He made very clear, above all, the lessons that we should be ready to learn from the United States.

What is even more encouraging is that that type of case is now being put with increasing clarity by our universities, not least by some of the newer vice-chancellors, who bring with them important fresh thinking from distinct and different backgrounds. One such example is that of Sir Richard Sykes at Imperial College, who came straight from his challenging experience at the competitive heights of a global pharmaceutical industry. Another—possibly less controversial but certainly equally relevant—example is the new vice-chancellor of Brunel University, Professor Steven Schwartz. He is a New Yorker who has spent the past six years as vice-chancellor of Murdoch University in Western Australia.

Encouraged by their wisdom, I now turn to the numerous aspects of the White Paper which I warmly welcome, not just for themselves but for what they imply—for what I certainly hope they imply—for the further development of policy, and not least for the enlargement of student choice.

I begin with the first plus point about the White Paper. Most striking and most welcome is the substantial commitment of extra resources: 6 per cent in real terms for the next three years. I emphasise that that figure must be maintained. That is needed to help to reverse the serious and long-running decline over the past 15 years: a fall in the annual funding per student of about 40 per cent. Of course I—and, I am sure, most if not all noble Lords—have considerable sympathy with students who complain about increased fees and their consequences. Our generation, after all, had most of our higher education paid for by the state. However, we live in very different times and there is no justification—if ever there was—for those who will earn considerably more as a result of their university experience being paid for by those with a lower lifetime income.

So, the second plus point is the decisive move in the direction of variable fees. We should note, incidentally, that the "cap" of £3,000 per annum is criticised by Richard Sykes of Imperial College and others for being set too low. Nevertheless, it is a substantial move towards freedom for universities to set their own prices—variable and diverse.

Both of those words are important for three reasons. The first is because it will give universities an important, and potentially growing, source of' independent income. The best already enjoy that to a significant extent, operating as they do in effect as entrepreneurial businesses. LSE, for example, now generates some 80 per cent of its own income—only 20 per cent comes from public funds.

Secondly, those words are important because it will be an incentive to higher education institutions of all kinds to compete with each other not just in terms of cost but in terms of character, quality, length of courses and so on. On that point, I dare say that some of your Lordships will have seen, in last week's Independent on Sunday, the report that some universities are already now thinking of following Buckingham University's example, by offering two-year degree courses, not least because they will be specifically attractive to mature students. The market is already beginning to respond. The OU, of course, has for many years been awarding high quality degrees that are spread over a longer part-time period of study. Again, that meets a market need.

Thirdly, the words are important because, as this system develops, it will shift the balance of power decisively away from central planners and producers to consumers: students and employers. It will enlarge choice. There will be real benefits for universities, students and society as a whole.

The third major plus point of the White Paper is the rejection of a crudely comprehensive graduate tax in favour of personalised, income-contingent loans.

The fourth (and last) major plus point relates to the far-reaching improvement proposed in the income-contingent loan system that was introduced by this Government in 1998.

Taken together and further developed—the loans must be sufficient for a student to live on, although there has been criticism about that—these last two features will have the properly balanced effect of shifting resources in the direction in which they should be shifted. At the outset, they will be shifted from those who can afford to pay more. and who will lose some of their subsidies, to those who are less well off. They will benefit from the waiver of tuition fees and from the restoration of maintenance grants.

In the next stage, resources will be shifted from those who can afford to repay loans to those who cannot. That is because the repayment, in due course, of contingent loans will be strictly related to the income of the borrower. That is much fairer and more efficient than a general graduate tax.

So what should follow from all that? I was delighted—rather belatedly, in fact—to come across reports of the speech that the Minister responsible for higher education, Margaret Hodge, made at the Aberystwyth annual conference of Universities UK on 11th September last year. There I found my central argument foreshadowed: "Universities", the Minister said, are not all the same. and should stop pretending they are … [they] will need to find their unique selling point, as they begin to operate in more of a free market, … driven … by … student … demand". That, in my view, defines exactly what we should be aiming at; it is the logical next step. It would, of course, be the antithesis of increasing central control.

That should, in my view, lead to three conclusions. I look forward to hearing the Minister's comments on them. First, once people have got used to the notion of paying fees, financed through an income-contingent loan system, the ceiling on those fees should be progressively raised. Eventually, we should have a wide range of differential prices, set by universities themselves to reflect the nature, complexity and length of courses. That has been well explained by Professor Nicholas Barr in his impressive evidence to the Education and Skills Select Committee in another place.

That would effectively involve creating a genuine market, increasingly responsive to student choice and consumer demand: with diversity of supply, financed by differential fees, and an end to price control. However, as Professor Barr has crucially warned, that change would have to happen in stages over a period and most certainly not in a "big bang". That is why, in his view, a similar proposal ran into political trouble in New Zealand. Complementary measures will also be necessary; for example, the need to build up a considerable bank of student bursaries. Some suggestions were made about that in a previous debate by the noble Lord, Lord Baker. Here, both individuals and businesses will need not only encouragement but also substantial tax breaks.

My second conclusion—and probably the most important innovation—is that we need an end to the quota system. By that I mean the system whereby HEFCE in effect both limits and effectively guarantees the numbers of students who may attend each British university. So long as university numbers are centrally controlled in the present fashion—with a cap on expansion for the successful and a guaranteed stock of students for the mediocre—then, as Professor Schwartz rather sharply pointed out in a valuable discussion in Prospect in January 2003: There is no incentive for universities to compete, because each will get its students, no matter how lousy their outcomes or their research". All of that would change. With quotas removed, with fees no longer capped and with loan-financed, income-contingent funding that followed a student's choice, we should have created a dynamic market that was responsive, as it should be, not to bureaucrats or producers but above all to student choice.

Finally, my third—and possibly most important—conclusion is that it will be essential to accompany the changes with repeated emphasis that, far from being regressive, a system that is structured and financed in that way will work to the benefit of people from poorer families. I quote Professor Schwartz for the last time: In Australia, the introduction of fees paid through graduate taxes has not reduced the number of people from poor families. In fact, quite the contrary. It made more places available and more people from all parts of the spectrum have come in. So fees are the solution. But without deregulation, without making university tees student driven, we might make matters worse. Universities are one of the last nationalised industries in Britain". It is high time that we set our universities and our students free. My Lords, I beg to move for Papers.

6.10 p.m.

Baroness Lockwood

My Lords, I thank the noble Baroness, Lady Howe, for the very wide-ranging way in which she introduced the debate. I agree with much, but not all, of what she said. The debate is timely but the subject is not new. It goes back over the past two decades when the rapid rise in student numbers began, together with the accompanying erosion of university funding. The signposts were as follows.

The first was the beginning of the phasing-out of the student maintenance grant and the introduction of a student loan system in 1988. The second was the Dearing report in 1997, with its recommendation of a student contribution to fees—widely accepted at the time—coupled with a retention of the maintenance grant. The third was a student contribution to fees. That was quickly accepted by the new government in 1997 but accompanied by the final phasing-out of maintenance grants. To cushion that change, a more benign loan repayment system was introduced. The fourth was the January 2003 White Paper.

The proposals of the White Paper which are relevant to this debate are: first, the abolition of the up-front payment of fees, making investment in one's future clearer; secondly, repayment on an ability-to-pay system after graduation with a £10,000 income threshold; and, thirdly, that students from lower income groups should receive a new maintenance grant. All those seem to indicate a more equitable and cohesive system and one less likely to be a deterrent. But accompanying them are proposals to permit universities to introduce a top-up fee of £3,000 and the establishment of an access regulator to ensure that universities which accept the top-up fee accompany it with a genuine access programme.

The last two proposals are the most controversial. I n January, I wrote to the Secretary of State expressing my opposition to top-up fees. I believe that if anything will act as a deterrent to students, it is the top-up fie. Even now, I hope that the Government will have second thoughts on it.

Then there is a fear that the regulator could lead to some kind of quota system. Like the Government, I am opposed to quotas, but I believe that some serious questions need to be asked about qualifications for university entrance. Are A-levels, or their equivalent, the only answer to the need for a transparent, across-the-board qualification? Surely not. Already almost 40 per cent of students enter university on other than A-levels. My own university of Bradford. which is largely technology and science-based and has a research profile, is nevertheless strong on widening access and has a wide-ranging strategy in place.

A recent meeting of the All-Party University Group discussed the topic: "A-levels—is there a future?". The discussion was led by the very experienced head of a private school and a senior officer concerned with access from the "university industry". The synergy between the two was quite remarkable. Both agreed the need for an academic route and a parallel route based on basic skills and potential.

Clearly, a good deal of deep thought is being given to the contents of the two routes, and we need to begin to draw upon it and on the experience already in the field to establish a transparent and equivalent system which is acceptable all round. Such a system would extend student choice for many but would lessen the ability of others to obtain the university course of their choice. We need to ask ourselves which provides the greater amount of student choice and which is more in keeping with the needs of the 21st century.

I am critical of some aspects of the recent White Paper but, overall, I believe that it advances both the opportunities of today's young people and the opportunities of our universities, whose success is so vital to the success of our country.

6.16 p.m.

Baroness Carnegy of Lour

My Lords, I note that the noble Baroness, who is eminent in the land in talking about universities and eminent in her party, is against top-up fees. I wish the Secretary of State well.

I want to widen the debate a little. The Motion is about students in the United Kingdom as a whole. I want to point out to the House that at present there is considerable anxiety among academics in Scotland, Wales and Northern Ireland about how the Government's proposals for England will impact on their universities and on United Kingdom student choice.

Many, indeed, are wondering whether, in developing these plans, the Department for Education and Skills gave any consideration at all to the predicament that it was creating for the rest of the United Kingdom's higher education systems. Perhaps I may illustrate that with the predicament in Scotland. Apart from money coming from the research councils and from sources outside the public sector, Scottish higher education is funded by the Scots Parliament. Historically, the cost has been much higher than in England. That, as your Lordships know, is because of the four-year degree, the higher participation rate and the greater number of institutions in Scotland per head of population.

Since devolution, the Scottish Executive has widened the spending gap further. Scots students contribute a third less than do those in England for longer courses. As a result, the Scottish Executive, via its funding council, pays its universities far more per student to replace what students are not paying themselves.

At the same time, the Scottish Executive's spending has moved ahead of England in other areas. There has been a big increase in school teachers' salaries, free personal care for old people and, of course, the Parliament building with its running costs, to mention but a few. All that comes from a finite budget which. under the Barnett formula, is increased only as England's spending is increased, less a £200 million squeeze each year.

Therefore, what will happen to Scottish universities if the proposals for England are implemented? Will the Scottish Executive be able to find the extra 6 per cent per year promised to England? Will the Scots Parliament's aversion to top-up fees and to the development of some universities which are much better funded than others be sustainable?

We must realise that all United Kingdom universities operate in a United Kingdom market—indeed, in an international market. If, as a result of top-up fees and other White Paper proposals, some universities in England become higher spending, research-rich institutions and they and others become teacher-rich, then, with the status quo in Scotland, the best researchers and teachers will be tempted south, as will the most academically able students. To a certain extent, students from south of the Border, particularly those most averse to borrowing and with lower academic aspirations, will come north to Scotland because of the lower fees.

That would be bad for Scotland. Our population is falling, particularly our population of well-qualified people. We need to do everything we can to bring in and hold able students and academic staff; people who may stay and work or may return later.

Our economy needs its research-led universities to stay on top. The vice-chancellor of the University of Dundee—and I see the chancellor of another university sitting in his place—estimates that his university will be £15 million per year poorer than its English counterparts if the White Paper is implemented in England. It seems that in Scotland, the much-vaunted status quo will not be an option. Some universities will need top-up fees; some top teachers will have to be rewarded; and a greater concentration of research and of high-quality teaching may be needed.

The system in Scotland does not have to be identical to that in England. For example, I regard the idea of bullying and blackmailing universities about access, by means of an access regulator, as contrary to the tradition of academic freedom in Scotland. But the system will not be able to be all that different.

I hope that Westminster, and particularly the Treasury, as well as the Scots Parliament are now taking these facts on board. The devolved matters in the White Paper are not, as the Government claim, only about England.

6.22 p.m.

The Lord Bishop of Chester

My Lords, I too welcome this debate. I declare an interest as chairman of the governing body of Chester College of Higher Education, which is a popular college within the Church college set-up, with 7,000 students and growing. With the other Church colleges and universities we make an important contribution to fair and widening access. According to the HEFCE figures across our sector the numbers of undergraduate entrants from state schools, social classes III. IV and V and also from low participation neighbourhoods exceed national averages.

That is due as much to the strong sense of community in the Church colleges as to specific initiatives, because the more vulnerable students find us attractive. It is also worth pointing out that the new Church schools which are currently being founded are often in areas of comparative deprivation, one of which is in the diocese of Chester. There have been about 25 new secondary schools in recent years. We welcome the challenges brought by the social setting of these schools.

The White Paper has a good deal to say about freedom and choice in higher education, and understandably so. However, one intrinsic problem is that societies which emphasise freedom and choice to the neglect of mutual and communal values usually end up generating an overemphasis upon winners and losers. That has been the story in our schools. The publishing of relatively unrefined league tables, for example, has tended to brand certain schools as losers. It is then easy for a vicious cycle of low expectations to develop, with the consequence that the statistics for widening access to higher education remain stubbornly low from areas served by schools which are lower down the league tables.

We need generally to work for a higher sense of dignity and honour in all aspects of education. The White Paper, in dealing with higher education, concentrates in a rather unbalanced way upon the economic aspects of higher education in relation both to the individual and to society. It rather downplays the wider cultural importance of our universities and colleges in the setting of education in general. But the prospect of a greater earning potential should be only one, and perhaps not the most important motive, for entering higher education.

I turn to the impact of freedom and deregulation in higher education. The move towards deregulation of the higher education sector has much to be said for it, although many in the sector will believe it when they see it. If the Government are to achieve their targets for higher education they need the broad spectrum of existing institutions to flourish, and not some at the expense of others. Recent deregulation of entry quotas, for example, seems to have led to a great rise in admission numbers to certain large civic universities at the expense of some of the newer and smaller institutions—the very institutions which actually have a better record on widening access.

The balance between regulation and untrammelled freedom for institutions to develop is a sensitive balance to strike. It is all too easy to find that choices inadvertently narrow. The prospect of variable top-up fees may seem at first sight to offer the prospect of an increased choice for students, but the reality may turn out to be that most institutions will seek eventually—sooner or later—to charge the maximum fee for most courses. The sheer economics of higher education point to that scenario.

Will that deter the very students whom the Government would most like to see enter higher education? The reintroduction of a maintenance grant for some students is welcome in itself but could be more than swallowed up by the additional fees that are likely to emerge. The average student debt is likely to grow sharply. The increase in the threshold to £15,000 for repayments is welcome, but surely it is still rather on the low side. For low-paid workers outside certain favoured areas of public sector employment, repayment will be a major blow. perhaps at a time when they are struggling with a mortgage and a young family. In saying that, I do not doubt that the principle of students making a contribution to the cost of higher education is right, but only within the limits which serve the good of society as a whole.

The additional money cannot simply conic from government. The White Paper rightly calls attention to the generally poor endowments of British universities. The comparisons with North America are striking. Outside Oxford and Cambridge the endowments are small: the 10th best endowed of our universities equates to the 300th best endowed north American institution. The White Paper says that the Government will support institutions to build endowments in a range of ways. It will be good to hear more detail from the Minister on that point. For example, do we not need to work harder for a major change in our society towards charitable donations in general? We have nothing approaching the North American culture in that regard. The assumption is still widely there that at the end of the day— usually the Government—will be expected to pay.

The Government have made some creative changes to the taxation of charitable giving in order to encourage such a change of culture, including a continuation of the 10 per cent premium on the Give As You Earn scheme beyond the tax reclaimed as such. But, frankly, the message has yet to get across. With the general tax reforms of the past 20 years, the better off in our society are better off than ever, but a culture of charitable giving has yet properly to emerge.

There is a real challenge here. Actually the universities will benefit, partly because of the link between higher earnings and education and the loyalty of students to their former universities. I hope that in this and in other ways the initiatives in the White Paper will be developed and complemented.

6.28 p.m.

Lord Palmer

My Lords, ever since the Robbins report, it seems to have been taken for granted that pushing as many 18 year-olds as possible into university is a good thing.

Many school leavers now feel that they do not have a choice concerning university. Some feel unable to incur a huge student debt at the end of their course and these are lost to the system. Others feel pressured into going to university—pressured by their schools. which want to look good in the league tables; pressured by the false promise that the possession of a degree will automatically enable them to get a good job; and pressured by society's belittling of jobs that do not require a degree, though they may require a high level of skill, intelligence and training.

Many students do not want to be at university. All they want is the piece of paper they are given at the degree ceremony. A surprising number are so uninterested that they will settle for almost any course that is perceived by them—however mistakenly—as easy. Some may not be up to the demands of a university course, having reached their peak at A-level. Enormous pressure is put on students prior to higher education, resulting in some peaking too early. Sadly. many of us have seen that relatively modern phenomenon among our young people.

Unfortunately, with the funding of universities now being based on student numbers, those institutions are desperate to fill their courses, and the consideration of whether a university degree is really the best choice for any one individual does not seem to have the attention that it once had.

University courses go on too long. The funding problem would not be so acute if students were able to put more hours into their daily study, so that courses could be dramatically condensed. I recently asked a student how many lectures she had a week. I was told, "Only one, at nine o'clock on Monday". Not surprisingly, she did not turn up that often. To me, that is a scandal and a waste of human and financial resources.

Most students now feel constrained to find a job—not just during holidays but during term time—to try to keep their student debt under control. Often, those jobs keep them up late at night. Sometimes they are day jobs, which mean that they cannot attend classes. All jobs eat into their study time. That affects even the ablest students; for the weaker ones it can be detrimental to the quality of their student work.

Those factors, together with the universal move to examination by course work, have led to an explosion in cheating. There are numerous websites from which it is possible to download essays on almost any university topic and there are many individuals who openly advertise their services as writers of course work in exchange for a fee.

Universities should be the nucleus of our academic talent and potential in their ever-challenging role of competing in a global community of excellence. I do not believe that one can be considered a success in life only if one studies for a degree. There are better ways in which we can provide for the future of our young people. Going to university is not like a superior form of youth training, nor, to quote Professor Zellick, is it a, thoughtless way of getting people off the streets". I am neither an academic nor an educationist and am probably the only member of my generation in your Lordships' House without an A-level. I did not excel in any way during my schooldays and, as a practical solution to my scholastic lack of achievement, I embarked on a three-year apprenticeship in a well-known biscuit company. I was given the opportunity to work at every job in the company, with the perpetual challenge of doing each to the best of my ability. That apprenticeship changed my life and taught me valuable lessons. When I changed career at the age of 25, I went to university and completed a three-year course crammed into one.

If universities are taking in students in increased numbers who are not suited to academic study, they must lower standards or else suffer high rates of failure. It is now considerably easier to get a degree than it was 20 years ago. That is an unpalatable fact to which academics admit in private. Employers certainly know it. Only in yesterday's Evening Standard a survey revealed that 90 per cent of graduates are turned down for jobs because their applications are full of spelling mistakes.

Many big employers used to go round universities on recruiting drives but are now boycotting those universities because they consider them below standard. Graduates have a rude awakening when they find that their business or media studies degree is one of thousands and they cannot get a job—even one remotely close to what they were encouraged to expect. Ironically, they also find that many jobs are closed to them because they are "over-qualified". Universities claim that 80 per cent of their graduates find jobs within a year, but, sadly, many of those are dead-end jobs.

Meanwhile, the country is suffering from a shortage of people qualified in practical skills. Fifty per cent of the UK's middle-ranking companies are suffering from shortages in such skills, which are all so vital to our modern society. Why do we belittle such valuable skills? It is not because they do not pay. A plumber can earn more than a solicitor. I recently got a plumber to fix two washers in my tiny apartment round the corner. I knew that it would be expensive. I received a bill for £120. I related that story to a noble and learned Lord later that day. He told me that he had had exactly the same experience and had said to the plumber, "Gosh, you are more expensive than a lawyer". To which the plumber replied, "I know, because I used to be a lawyer".

We should surely all encourage a really good system of apprenticeships, such as that which exists in Germany, for those of a practical turn of mind, allowing youngsters to start from the age of 15. Rather than pressuring young people into universities for which they are not suited, and producing a surplus of graduates that we do not need, we should balance the educational system and produce people with the skills that the country so desperately needs and requires.

6.34 p.m.

Baroness Prashar

My Lords. I, too, congratulate the noble Baroness, Lady Howe of Idlicote, on securing this important debate on funding and student choice. As other noble Lords have said, the issue has been debated several times, but the implications of the White Paper on funding must be debated and aired.

The intention in the White Paper to deal with student finance for the long term to open up access to universities is welcome. There is much in it to be commended. As the noble Baroness, Lady Howe, said, the understanding that universities are different and need to pursue different missions is indeed encouraging. It is recognised that higher education is under-funded, and that considerably enhanced investment is needed if we are to give students the choice that they deserve.

The White Paper also identifies the real additional costs associated with recruiting and retaining students from disadvantaged backgrounds. Also welcome is the continued support for working partnerships with schools and colleges to enhance the aspirations of all our young people.

Although the lifting of the cap on fees presents some concerns, the fact that there will be no up-front payments for any student entering higher education, and that the repayment mechanism is equitable, is helpful. Furthermore, the introduction of a modest maintenance grant is a first step towards assisting some of the most needy students.

However. I have some concerns. They are based on my experience as Chancellor of De Montfort University in Leicester and Bedford. We have been innovative and successful in widening participation. The students whom we recruit are talented young people from all backgrounds and ethnic origins. but they are often burdened with financial problems. The vast majority of them hold jobs and work long hours to pay for their studies.

It is therefore essential that the proposed changes do not deter students from poorer backgrounds, place intolerable burdens on them or diminish the quality of education that they receive. We all know that students from poor backgrounds tend to be more debt-averse. The Universities UK report, Attitudes to Debt, states that those most averse to debt are from lower socioeconomic classes, lone parents and black and other ethnic minorities.

I am not sure whether the post-graduate repayment scheme will reassure those groups. Moreover, the proposed maintenance grant is insufficient to support those in real financial need. Young people from disadvantaged families will form a minority of recipients of the full grant. The question is whether the maximum payment of £1,000 will be enough incentive to change the attitudes of those who are debt averse.

I turn to the intention in the White Paper to create a differentiated fee structure. Such a fee structure is, again, likely to disadvantage those who are most vulnerable. It would surely be wrong for students whose choice of institution may be limited—perhaps because of the need to study at home, or because of early educational disadvantage—to receive poor higher education experience because the only institutions to which they can apply are themselves poorly funded.

Making the necessary changes to the funding of higher education for the future should not lead to the creation of an under-class of institutions that all but the most vulnerable can afford. Neither opportunity nor student choice will be enhanced if a limited number of high-demand institutions, which draw their students from the best-prepared cohorts, are the only universities with adequate funding for teaching and teaching support. The proposed increase in funding for teaching is modest. I doubt, therefore, whether universities will be able to invest significantly in teaching quality and to increase fees introduced in 2006.

Differential fees carry their own dangers. They create an ever-increasing funding gap between institutions, which will be reflected in the facilities and staff-student ratios. It will be unacceptable if disadvantaged students not only have financial pressures but must also accept a second-class version of higher education driven by a false market of fees.

Similarly, greater focus on research is welcome. But all universities should carry out research, and excellence should be rewarded wherever it is found. All students should have the opportunity to be exposed to scholars and research of high calibre. At De Montfort University, we have successfully developed a strong research culture that supports our academic strengths. Without a commitment to research, it would be difficult to recruit and retain the high-quality staff that we have. That has benefited students. Erosion of funding will damage valuable research and weaken the overall research base. Much more importantly, it will significantly worsen the university experience of many students.

As I said at the outset, there is much to be welcomed in the White Paper and the aspirations that underpin it. But, if we want the experience of higher education to be extended to the talented and the best from all backgrounds, other concerns need to be addressed. I look forward to the Minister's response.

6.41 p.m.

Lord Judd

My Lords, I declare an interest as a governor of the London School of Economics and a member of the court of Lancaster University. I also do some professional work—indeed, with de Montfort University.

Returning to first principles, I wish to ask what we are trying to do and what is our vision of society. It seems that, as we go into the 21st century, a decent United Kingdom is one in which our objective is to ensure that no child born into society goes prematurely to the grave having failed to fulfil his or her potential. Our education system should be there to ensure that. It should enable all youngsters to develop themselves fully, not only professionally but creatively.

Of course society must function, and we need people who will enable it to do so. The noble Lord, Lord Palmer, spoke convincingly about that. But we must also remember another aspect of the vision for education: in a decent, civilised society, there is merit in education in its own right as an end in itself. The process and enjoyment of learning is part of living fully. We therefore must be careful when talking about specific dimensions of our education system—it is not either/or. Of course, some people will be creatively fulfilled in craftsmanship or technology; but we must be careful not to limit people to a functional educational experience if they have the potential also to enjoy further education. Therefore, flexibility and interplay between the systems is extremely important.

I wish to make a further point about the basic objectives and vision. We have moved into an age in which we are told that we cannot afford to pay for a convincing, full system of higher education from general taxation. I realise that it may be a forlorn battle at present, but there is a difference between not being able to afford and choosing as a society not to afford. I hope that we will not allow the argument about the emphasis on general taxation to go by default. Education has a crucial role in ensuring the cohesion of society. It is an opportunity for those who enjoy it, but it is an indispensable strength and guarantee for the future effectiveness of society. Because of that, society as a whole should feel a responsibility for ensuring that it is available and that no potential is wasted.

Sometimes our agonies about whether or not to have top-up fees are brought upon ourselves because we have run away from the challenge of asking what society needs and should be, and how we will finance that. I do not want to make cheap points, but it seems a poignant moment, when no money is too much to win the war that is coming in Iraq, to wonder why we find so much difficulty in generating the resources to win the battle for humanity at home.

If there is to be a variety of approaches, if there is to be access, and, if everyone with potential is to have the opportunity to develop it, we will need many institutions. In an otherwise commendable and encouraging White Paper, one approach disturbs me: the developing concept of a two-tier university system. Some universities are to be centres of excellence, and others are to teach the masses who want to go to university. That is a disastrous concept.

First, we need very good teachers to bring out the best in people who have not had the opportunity to develop their own self-starting capabilities. We must remember that that is costly, probably more so than teaching self-starters. Secondly, in any lively higher education institution, some research needs to take place, because it feeds, encourages and creates interplay with teachers and ensures quality of work. It is difficult to over-estimate the adverse impact on the morale of any higher education institution told that it is not good enough to involve itself in research and has no part to play in that field. It is a disastrous concept about which we ought to be wary.

To conclude, we are all deeply grateful to the noble Baroness, Lady Howe, for introducing the debate. I have had many opportunities to hear her at work in higher education, which I have found enjoyable and stimulating. But I was concerned by her market preoccupations. Her anxieties about regulation are understandable on one level, but we have an immense challenge in society. At present, 48 per cent of pupils in the top three social classes go to university, and only 18 per cent in the bottom three social classes do. Is that answering the challenge of human potential, or does it begin to do so? Unless we introduce instruments to ensure that universities do what they should be doing, I am anxious about the extent to which it will really happen.

In my county of Cumbria, on the west coast, we have some of the most deprived communities in the nation. Of course, the problem will not be rectified by universities alone. The problem there is a lack of horizons and a lack of thought that university has any relevance to life. We also have much work to do in the secondary education system. We must include that in our discussion this evening.

6.50 p.m.

Lord Butler of Brockwell

My Lords, I warmly agree with what the noble Lord, Lord Judd, said about the purposes of higher education. However, as he implied, we must be realistic about the extent to which any government will provide the support that we need from taxpayers' funds. For a generation, finance from taxpayers per student has declined steadily, and there is no prospect, I am sad to say, that that trend will reverse. I congratulate the noble Baroness, Lady Howe of Idlicote, on securing the debate, and I agree with her conclusions.

I shall start by talking about the good things in the White Paper. Like the noble Baroness, Lady Howe of Idlicote, and other speakers, I applaud the recognition in the White Paper of the diversity of the higher education sector. It is a diversity not just of institutions—the balance between teaching and research, for example—but, essentially, of students and their requirements. My main criticism of the White Paper is that it does not go nearly far enough to recognise that diversity.

The increase in the student's contribution to tuition fees from £1,1000 a year to £3,000 a year—I predict that the great majority of universities will have to adopt it, so that there will not, in effect, be variable fees—will create increased student debt. That level of debt will deter some of the poorer students whom the Government rightly want to bring into higher education.

There is another downside. For our major research universities, the increase will not begin to scratch the surface of the current financial problem. Before I illustrate that with reference to the University of Oxford, I declare an interest as Master of University College. For Oxford, raising the student contribution to £3,000 will bring in extra revenue of £20 million a year when it is in full effect. But, as it can apply only to each new generation of students from 2006 onwards, it comes in over three years—an extra £7 million, say, in each year in the three years from 2006 to 2008. That represents just over 1 per cent of the university's budget—that is, about half the rate of inflation in each year. So if we had to rely on the £3,000, we would go backwards, not forwards.

The Government have fallen squarely between two stools. I say that with some sadness. They have introduced a charge that must be a deterrent to poorer students, while, for a university such as Oxford, the increase has not begun to tackle existing and prospective financial problems. I may be told that it is a first step and that the Government have been courageous in taking it. However, I remind your Lordships that it is a first step that does not even come into effect until 2006 and is then frozen until 2011. It is too small and timid a step.

The only way to ensure that the funding of students does not limit student choice is, as the noble Baroness, Lady Howe of Idlicote, said, to ensure that students are admitted to the university most suitable for them on a needs-blind basis. If students need not face the prospect of debt and can go to the university of their choice, there will be no interference with their choice. We need not despair of achieving that. In my university, we could provide the bursaries necessary from three sources. First, we have our endowments. Secondly, there is what wealthy families could afford to pay by way of fees, for it is absurd that those who have paid up to £20,000 a year in boarding school fees need pay no more than £3,000 a year towards tuition fees at a first-class university. Thirdly, there is alumni support. In my experience, there is no more potent target of appeal to alumni than that of helping today's and tomorrow's students have the benefits that they enjoyed.

It may be objected that, although that would be all right for Oxbridge and some of our great research universities, the younger universities, on which poorer students also depend, could not afford bursaries on that scale. My answer is that the Government should concentrate their help on those universities, enabling them to provide the bursaries that their endowments and alumni support could not provide alone. It may be said that that would prompt some of our research universities to take the Ivy League route. Given what we see across the Atlantic, need we be afraid of that?

It is not only desirable but necessary that the Government be bolder and show more urgency in this matter.

6.55 p.m.

Lord Wilson of Tillyorn

My Lords, I thank my noble friend Lady Howe of Idlicote for launching the debate and declare two interests: one as a relatively recently appointed Master of a Cambridge college—more recent than my noble friend Lord Butler of Brockwell at Oxford—and the other as Chancellor of a Scottish university.

Like other noble Lords, I thought that there was much in the White Paper to be commended. It was courageous of the Government to grasp the nettle of increasing fees; and to say that there were different types of university and I hat people went to university looking for different things. It may seem ironic that people such as myself, who went to university entirely funded by the state, should say to the present generation that they should pay more for the same privilege, but it is only realistic. As other noble Lords have pointed out, the universities—rather like the railways and some other great British institutions—are chronically underfunded, and university teachers are chronically underpaid. Although I understand what the noble Lord, Lord Judd, said about the desirability of funding from general taxation, I cannot see it happening in practice. Increasing fees seems more realistic, although that may not be a pleasant message for the students of tomorrow.

I suspect that the increase will mean that more students will choose to stay nearer home. That is a pity, for part of education at that level is to get away from home—but there it is. It would be worse, however, if students of talent were deterred from going to university by increased fees. That is the point on which we should focus. There is, as other noble Lords have said, a need for a vastly increased system of bursaries, so that those who want to go to university and have the talent will not be deterred by the increased fees.

It is encouraging to see that, in the White Paper, the Government say that private endowment of universities should be encouraged. It is depressing to see the contrast between universities here and those in the United States. I saw in the Times Higher Education Supplement that the Sutton Trust had provided a list of the sort of endowments that places such as Harvard had—about £11 billion—compared with Oxford and Cambridge, with approximately £2 billion, Edinburgh, with £160 million, and the other British universities, with much lower figures. That is the area on which we should concentrate.

We can see the effect of some of the bursary schemes in small ways. Recently, I met a group of Aberdeen University students, who have what are called Prince of Wales Scholarships, funded by the Royal Bank of Scotland. Over 75 per cent of those students were from families that had no tradition of going to university. Because of the system of bursaries or scholarships, they were able to go, fitting into that long and wonderful Scottish tradition of the lad, or lass. o' pairts, who is given the chance to go to university and will make a tremendous contribution to the future life of the country as a result.

It is worth pointing out that it is just over 100 years since Andrew Carnegie gave 10 million dollars—then, a king's ransom—to fund a trust that would enable any young person of talent in Scotland to get to a Scottish university—then, there were only the four ancient universities—even if they could not pay the fees. It is that scale of generosity that I believe we should be looking for, and I hope that my noble friend Lord Butler is correct to say that there are places where one can look for it. I suggest, however, that included in that must be further encouragement from the Government to do exactly what they state in the White Paper that they want to see. It would be helpful if the Minister, when she winds up the debate, could tell us a little more about how the Government intend to promote that kind of encouragement.

The other choice is the one that is the other way round: it is the university choosing its students. As one who has only recently re-entered the English higher education scene and who has read so much —including a good deal of criticism—about the system of choice, in particular at Oxford and Cambridge, I have to say that my experience in Cambridge is one of a tremendous effort being put into trying to attract students of talent from a far wider catchment area. That catchment covers the whole country and embraces all kinds of schools. The university is painstaking in its efforts aimed at trying to choose the right people: those who have talent, have built a good record and who have potential. The university is able to select partly by interview. Some universities cannot do this. A huge effort is put into the process, although of course there is no room for complacency and much more needs to be done. Nevertheless, an immense effort is being made.

I do not believe that the curate's egg part of the White Paper, if I may put it that way, regarding the Access Regulator is the right way to go about it. Rather than that kind of control, universities need encouragement—and help with the dispelling of myths—in order to widen access.

Finally, perhaps I may put on my Scottish mortar board and follow the noble Baroness, Lady Carnegy of Lour, in asking the Minister what consideration has been given to the Scottish dimension. As the noble Baroness pointed out, as a result of the proposals in the White Paper we shall see a tremendous play-across from what is done in England and Wales to what happens to universities in Scotland. It would be interesting to learn from the Minister what discussions took place with the Scottish Executive and what consideration was given to the effects across the Border of the White Paper here.

7.2 p.m.

Lord Oxburgh

My Lords, I, too, should like to thank my noble friend Lady Howe for initiating the debate. The recent White Paper merits careful attention and extends thinking on higher education with some important new ideas. I should declare an interest as someone who has worked in universities in various capacities for most of my working life. Perhaps what is most relevant to what I have to say is that for more than a decade I worked as an Oxford admissions tutor.

I wish to address those parts of the White Paper that are concerned with access. It states that: We must do everything that can be done to make sure that everyone who has the potential to benefit from a university education has the opportunity to do so". That is a sentiment which everyone, both inside and outside the university world, would wholeheartedly endorse.

The White Paper points out that young people from the three lower socio-economic groups in the UK are significantly less likely to go to university than their counterparts from other groups. However, and most significantly, it notes that among students who have achieved good A-levels, there is no difference between the groups. The success gap therefore largely reflects disparities in our schools. The White Paper recognises that.

However, the White Paper goes on to conclude that universities should first identify and admit poorly prepared but able students and then, by providing special help, make up for inadequate schooling. Many universities have been doing that for years where they thought it would work, but in many cases it simply will not work. Furthermore, those universities that wish to charge an additional fee are singled out for special attention. They can charge such a fee if, and only if, their admissions arrangements are approved by a new admissions regulator.

The most difficult aspect of the admission of students from deprived backgrounds is actually getting them to apply. If they do not apply, then they cannot be admitted. I can say categorically that every institution in which I have worked, both in this country and overseas, has tried hard to attract the most able students, whatever their background—and that is not a new phenomenon. Some 30 years ago, my noble friend Lady Warnock and I were despatched to the north of England by the Oxford Colleges' Admissions Office in a small and nasty hired car. We were to visit schools that had little tradition of sending their pupils to Oxford, tell them more about the university and encourage them to apply. I have to confess that I recall casting an aspersion on my noble friend's map reading. It was a mistake.

What influences young people's thinking about university? The main influences are teachers, friends and family culture. Families with weak educational roots tend not to favour higher education, but that varies significantly between different ethnic groups. Affordability and the very idea of a student grant, by comparison with the relative affluence of friends who are enjoying their first wages, can weigh heavy. To be frank, if anybody can do anything about those influences, it is the school, which knows the circumstances and potential of each of its pupils.

When it comes to choosing a university, the same influences apply, but now prospectuses, campus visits, websites and a plethora of guides—both official and unofficial—all come into play. In my experience, however, students from first-time university families often contemplate the prospect with some trepidation. The attraction of going to university near home is strong. They may know people who are there already, they can keep up with friends who are not going to university and, if things do not work out, they feel that they can slip back into normal life without too much disruption or loss of face.

Universities can and do encourage such students to take the larger step of moving away from home. I believe, however, that this must be done with great caution. Removing students from the security of their home environment, with the confidence and support that that may bring, and making them face new social challenges at a time when they are also taking on tough new academic challenges, is not an obvious recipe for success.

I would ask the Government to approach this matter with a light touch so that perverse incentives do not make a situation which is already difficult even worse. I ask also that institutions such as Imperial College, my former institution, should not be distracted from its long-term strenuous efforts to attract more women into science and engineering. If there are real concerns, by all means conduct an inquiry into university admissions procedures to establish what is going on. However, I believe that the Government will be surprised at the time and trouble those who are doing the job I did some 30 years ago take to encourage applicants from non-traditional backgrounds, and the efforts they make to allow for the deficiencies in their preparation. But please think very hard before adding the bureaucratic burden of another regulator to an already over-regulated sector of our society.

7.8 p.m.

Lord Sewel

My Lords, first I should declare an interest as the Senior Vice-Principal of the University of Aberdeen. But I should make it clear that in no way do I speak for the university in this debate. However, I speak with some trepidation this evening, sandwiched as I am between my Chancellor, the noble Lord, Lord Wilson of Tillyorn, and the most distinguished graduate of my university, the noble Lord. Lord Sutherland of Houndwood.

I also wish to congratulate the noble Baroness, Lady Howe, on her very deft drafting of the title of the debate because it raises the issue of whether there is a British higher education system. I believe that there is, and of course that issue has some resonance for those noble Lords who participated in the endless debates conducted on the Scotland Bill. In saying that, I look across to my friend but opponent, the noble Baroness, Lady Carnegy of Lour.

The paradox is that higher education is devolved. It is the responsibility of the Scottish Parliament. In passing, it might be worth pointing out that in the 1979 proposals higher education was a reserved matter. However, that it is devolved does not necessarily mean that it is prudent to develop major divergences in policy north and south of the Border. I think that that is especially the case in higher education, because in terms of staff appointments it is quite simply a single market and increasingly in terms of student choice it is becoming much more a single market.

If there were to be major policy divergences, the inevitable consequence would be a destructive destabilisation in the system as a whole. One worrying divergence which will eventually have an impact on student choice is the issue of the funding of research. There have been criticisms of how research will be funded in England. However, I believe that the Government have addressed that issue seriously. They have tried to find a solution, the objective of which will be that a funding system will be put in place which will enable high quality research to be supported at an adequate level. Perhaps I might add that I wish that the Government had gone along the route of the graduate tax rather than top-up fees.

The worry is that in Scotland perhaps other elements of the higher education agenda have dominated and the securing of high quality research has slipped lower down the list of priorities in Scotland than is the case in England. Indeed, there is the disaster scenario that in the not too distant future we shall be faced with the prospect of the coach containing prospective students travelling north from England seeking cheaper degrees in Scotland colliding with the coach travelling south from Scotland containing our highly qualified and best academics seeking better paid and better supported jobs in England. That would be a disaster.

In the whole of this debate on the future of higher education there has been a worrying conflation of two concepts. One is that it has been equating intellectual elitism with social elitism. That is a fundamental mistake. One is good and one is bad. We must ensure that we do not have a system built around—or which makes worse—social elitism. Ultimately, to a significant extent, higher education must be about intellectual elitism. It is through that that we make progress as a society.

I seek from the Minister an assurance, not in policy terms but in relation to the machinery of government. When significant policies are being developed, either in England or in the devolved administrations, hard work should be done to ensure that both administrations are aware of the implications of their policy on the other administration. In my brief experience of government, that is asking quite a lot. However, it is something that needs to be done and work needs to be done on it. If it is not, we shall slip almost in an unnoticed way to a situation where we shall have that dangerous destabilisation which will not be to the benefit of either system and will be a major disbenefit to the whole of British higher education.

7.14 p.m.

Baroness Warnock

My Lords, I am grateful to my noble friend Lady Howe for introducing this debate. I want to make some rather simple points. My first is that universities are very different from schools. That is obvious. One way in which they are different is that university is not compulsory and school is. I had great sympathy with my noble friend Lord Palmer when he said that probably too many people go to university who do not really want to and who do not benefit from it. Another difference is that in the background, from the undergraduate's point of view of university, there should be the ongoing stimulation and the knowledge that there is proper, original research—not just in the sciences but in the arts too. However. just as important is another difference, which is that universities. unlike schools, do not have a common curriculum or common examinations. Therefore, it matters crucially to a potential undergraduate which university or she actually aspires to attend.

Whatever we may say about the defects of the schools system in this country, there still are emerging from the sixth forms of maintained schools and independent schools extraordinarily clever, dedicated and enthusiastic students who know what they want to do and know which university they want to attend.

I must declare an interest. I know that there are these students because I set and examine a yearly inter-school essay prize offered by the Girls Day School Trust. The competition is open only to scholars of the trust schools, many of whom are in receipt both of scholarships and of bursaries and whose parents would never be able to afford to send them to an independent school without that support. The degree of academic ambition and precise knowledge of how those students want to pursue their studies shines through these essays and never fails, year after year. to move me.

If students—perhaps especially girls, who are, on the whole, sensitive to their own financial problems and those of their family—feel compelled to attend their local university so that they may live at home and perhaps continue with a part-time job that they worked at while they were at school, the crucial factor of choice of university to which they aspire to go is in danger of being removed.

One of the good points about the White Paper—and many noble Lords have noticed it—is that it is now officially, and without shame, acknowledged that all universities are not the same. All are not equally academically inspirational. Therefore, there are students whose aim is not to go to just any university and get just any degree, but to go specifically to Imperial College or Warwick or Cambridge or Oxford to follow courses which are not exactly to be found elsewhere.

I think that to bring it about that this choice is no longer realistically available to students will starve the academic world of probably the most original minds. The students will not get what they deserve and will not get what they are capable of achieving and the country as a whole will thus be impoverished immeasurably. Above all, what we need—again, this point has been made by many noble Lords—is a way of supporting, through government funding and through new endowments, not just those students who are poor but those who are poor and properly are already to be considered members of the intellectual elite. The distinction between the intellectual and the social elite seems to me to be of the greatest possible importance in this debate about how students may be admitted to the universities that they really want to go to.

7.19 p.m.

Baroness O'Neill of Bengarve

My Lords, I, too, congratulate the noble Baroness, Lady Howe, on securing the debate on this important topic, which has been of so much public concern since the publication of the White Paper on The Future of Higher Education The links between student funding and student choice are issues which concern all of us but perhaps, above all, parents whose children may go to university in the next few years.

Unfortunately, I believe that so far media discussion of these links has served us poorly by over-emphasising an over-simplified relationship between choice and funding. Much discussion has centred on a scenario in which Russell Group universities raise fees to £3,000 a year, but others do not, and there are no bursaries or fee rebates. That scenario is supposed to lead to the famous "two tier" system. I have no idea why people think that it would lead to two tiers, but it is meant to be a scenario in which students from poorer homes cannot go to certain universities.

There has been extraordinarily little consideration, so far, of the factors that might influence universities in setting fees. It is simply assumed that Russell Group universities will set the higher fees. But let me note that those who compete for the very small pool of very keen and able young scientists are highly unlikely to set a fee that deters those people from attending their universities. Let me note also that in the US much of the most prestigious undergraduate education is provided by institutions which concentrate on teaching. We can take nothing for granted about who will set which level of fee.

Thinking about worst-case scenarios produces shock-horror copy, but I am sure that it hides many of the real issues. I believe that the White Paper deserves more serious attention. Like other noble Lords, I, too, welcome that individuals will pay only after graduation and then on an income contingent basis, ensuring that those who choose walks of life and vocations where their pay is low never repay the loan.

Secondly, the White paper does not propose fee levels. It permits variation within a capped fee structure. We have had serious arguments that possibly the cap is set too low. But let us note that at present no variation is permitted. The richest students receive nearly as much subsidy as the poorest: where parental income is below £20,000 per annum, students receive a tuition contribution from public funds of £1,100 a year and the right to borrow a bit more. Under the new proposals, those with parental income below £10,000 per annum would receive an additional £1,000 a year. Therefore, the debts for the very poorest students at universities charging the maximum fee would rise by £900 per annum, or £2,700 for a three-year degree course. For others, it would rise by £1,900 per annum, or £5,700 for a three-year degree course.

The proposed threshold for the new subsidy is unrealistically low, the cut-off being fixed by a joint parental income of £10,000. I understand that there have been further conversations and I wonder whether the Minister will tell the House what consideration is being given to setting a more realistic income threshold for this payment to students from poorer families.

The White Paper also mentions student bursaries and states that universities will be permitted, indeed encouraged, to established a charging structure and then to provide bursaries for those least able to pay. At present, many universities do not have the funds to do so. Charging a fee of £3,000 might enable them to divert some of that money to fund some bursaries for the poorest. Bursaries are the most concrete and effective action that universities can take to improve access and I declare an interest and some experience as the head of a Cambridge college where almost one third of home undergraduates currently receive a bursary under the intercollegiate Newton Bursary Scheme. I am glad to say that the University of Cambridge has already made a commitment to needs blind admissions.

The White Paper has encouraging things to say about endowment raising and its importance to university autonomy. Endowment is vital for building bursary schemes and I wonder whether the Minister would agree that those of us who were at university before 1995, largely or wholly at public expense, ought to help to fund bursaries? Would she be able to comment on how the Government will promote or incentivise endowment building for bursaries?

Let us also remember that students choose; they choose courses and universities. It used to be said that they wanted to go about 100 miles from home— allowing for home visits but not for parents dropping in. The picture has changed. Many students, particularly mature students, prefer a local over a residential university. Others prefer urban or rural, a large or a small institution, or a university towns with low rents. Those choices belong to students. But if they are to be left to students, admissions must be a matter of fair process and not of social quotas. Rural and small town universities cannot attract students who seek big city life; city universities cannot attract those for whom sport and country activities are important. Does the Minister accept that respect for student choice means that we must welcome and accept diversity in the social composition of students in different universities?

Some will say that an access regulator is needed even so. I believe it is not. Admissions tutors and officers are not stupid people. In my experience at Essex and at Cambridge. they try to admit those who show promise, taking account of all evidence, including evidence of less-effective schooling. It is insulting and implausible to imagine that they are covertly working to discriminate unfairly— their colleagues would hardly thank them for admitting students of lower potential. Yet at present they are condemned if they rely solely on A-level evidence and condemned if they do not.

The serious debate that we must have is about providing the evidence for admissions tutors. We are not providing it at present. Noble Lords may know that head teachers' reports are sometimes blandly uninformative for fear, apparently, of disclosure and litigation. Personal statements have a boiler-plated feel to them. Universities have got into that position on the assumption that if they are allowed adequate evidence, they will use it unfairly. Meanwhile, most universities are not staffed to interview. Critics who urge exclusive reliance on A-levels have nothing to propose where A-levels do not discriminate. Critics who urge switching to new tests have not established their educational effect, their "coachability", or their predictive value. Does the Minister agree that a serious debate about university admissions criteria cannot begin until we set aside the fantasy that universities are neglecting or misusing evidence available to them?

7.26 p.m.

Lord Sutherland of Houndwood

My Lords, I thank my noble friend Lady Howe for introducing the debate with such clarity and insight. I want also at the outset to endorse the remarks of the noble Baroness, Lady Carnegy of Lour, about the impact of what happens here on other parts of the United Kingdom—and I deliberately put it in that way.

If your Lordships will indulge me, I would like to be facetious for a moment— just for a moment. If you were to go down to the Department for Education and Skills and search carefully in the building, I suspect that you would find somewhere a playroom. A new game has been devised for playing in the playroom and the three players are the Secretary of State, the Minister for higher education and the Higher Education Funding Council. The game is called "Quota Hokey-cokey". You put your quota in; you take your quota out; you put your quota in; and you shake it all about. Your Lordships know how the words go.

I am not being facetious just because it is late in the evening or because I enjoy it. I want to highlight the fact that at this stage in the debate, after the publication of a White Paper in January to which I paid tribute, three of the major players in the arena seem still to be undecided about the role of quotas. I hope—and I am sure that we will find reassurance today—that quotas are off the Government's agenda. It would be reassuring to know that they are off the agenda of the funding council, too. Such public disagreements are symptoms of something deeper: first, a significant degree of uncertainty about where to go; and, secondly, a wish none the less, a conviction, that something must be done and done quickly.

In the White Paper—its many positive points have been well-catalogued today—there is a major flaw. The major flaw is that two separate issues have been confused. One is the funding of universities—and good things are said about that—and the other is the need for access and opportunity for all our young people—and good things are said about that. But they are tied together in unhealthy ways. The difficulty is that there is a danger of a degree of tunnel vision.

In tunnel vision, one focuses on one aspect of one problem while perhaps out of the corner of one's eye seeing the reflection of another problem. I shall concentrate not on funding—others have covered it well—but on the issue of access.

As has been mentioned, university recruitment and admission systems are becoming increasingly sophisticated. It is not in the interests of universities to ignore students with huge potential, and they know it. But we face a common problem that certain areas of the country and certain parts of society are hiding individual talent. I warm to the vision of the noble Lord, Lord Judd, that access must be widely available to students with real potential.

However, the Government White Paper assumes that the way to deal with the issue is by a mixture of bribing and bullying universities and by putting in place yet more regulation through the access regulator. If there are no quotas, what criteria will the access regulator use when he assesses whether or not universities will be allowed to charge top-up fees? As I say, there is a danger of tunnel vision.

Let me give an example. I shall not name the local authority involved but the situation will have arisen many times throughout the country. One local authority has a failure of standards among 14 year-olds in the capacity to write. The standard required of these 14 year-olds is minimum, but 35 per cent of them fail to reach it. It is a minimum standard reached by many children before they leave primary school. So it is a real problem.

It is not a matter of universities trying a little harder and pulling in a few more of such students, the problem has to be tackled further down the system at a much earlier starting point. If in that authority 35 per cent fail a particular criterion, what about the next 35 per cent? Presumably we are meant to recruit those. Remedial help is available in universities—it has been for years—but it will not solve a problem of that dimension. It is a problem that has to be tackled in different ways.

If you look at the league tables of educational attainment you will find that certain areas of the country which contain a high proportion of people in social groups C2, D and E are at the bottom of those tables. Fine—but let us not restrict ourselves to that. If you look at other league tables for the same parts of the country and for the same groups, you will find that they are at the bottom of the league tables for health, diet, employment and housing. These matters are not irrelevant to the issue of education and a lack of aspiration.

If that is so, what is my message? I have one more minute so I cannot give the whole story, but I would strongly recommend, as did my noble friend Lord Oxburgh, that resources should be targeted further down the system. There should be projects and task forces—for example, I commend the work of the Sutton Trust and Peter Lampl who funds that trust—that enter into the community. Instead of saying to the universities, "You must deal with this problem", which is probably the worst thing to do, we should go to the schools and deal with the good head teachers— the ones who are achieving results in these areas—and ask them what resources they would find helpful. If we are to face up to the problem, targeting resources to schools would be a much more creative way of dealing with the problem than simply threatening the university system.

7.33 p.m.

Lord Harris of High Cross

My Lords, I join other noble Lords in thanking my noble friend Lady Howe for initiating the debate. I much admired her bold opening speech.

In place of a declaration of interest, I acknowledge my good fortune almost 60 years ago, as a working-class lad, in winning a free place from Tottenham Grammar School to Queens' College Cambridge, of which my noble friend Lord Oxburgh had the even better good fortune to become president some 20 years ago. He accepts no responsibility for my speech.

As experience among my family, acquaintances and friends demonstrates, there are many youngsters and many callings for which other forms of education, training or qualification offer a better preparation than a conventional degree. Many prosper—even becoming Prime Ministers or, better still, entrepreneurs—who would have been frustrated by a formal, protracted university course of the kind many of us have enjoyed.

My opposition to new Labour's dream of coralling half of all school-leavers into academic institutions has been confirmed by the rise in drop-out rates in some institutions to 30 to 40 per cent. I am not attracted by the lofty condescension of politicians, especially those from public schools, that youngsters who miss higher education are somehow doomed to fail in life. The noble Lord, Lord Palmer, put paid to that particular delusion.

The failure of many working-class school leavers to win a good university place surely owes something to old Labour's earlier dream of transforming education by abolishing grammar schools and imposing a comprehensive doctrine of non-selection, non-streaming, non-learning-by-rote, non-facing-the-front-of-the-class and other progressive nonsense preached by "professors of education".

It is now well over a century since our Victorian forebears invented universal, compulsory. free state education as a panacea for the elevation of their masters. One of its prophets, Professor Nassau Senior from Oxford, wrote in 1861: We may look forward to the time when the labouring population may be safely entrusted with the education of their own children". He continued: The assistance and superintendence of the Government [is] only a means of preparing the labouring classes for a better but remote state of things—in the latter part of the 20th century—when that assistance and superintendence shall no longer be necessary". It seems to me that Professor Senior's forecast and his confidence in our abilities have not been fulfilled.

Fortunately, you do not have to be an economist to grasp that, even at Christmas, free gifts come at the expense of free choice. The plain truth, in my view, is that only a customer who pays directly has the freedom to take his money to an alternative supplier if he is not satisfied. However, since the state enjoys a monopoly of so-called "public services", it can supply them inefficiently and make us pay for them through taxes, so depriving all but the well-off of the cash to pay privately.

The effect is that consumers are conscripted on a "like it or lump it basis" to these institutions where, if they are not satisfied. they can only lobby for more to be spent on free services. As we have heard, the state will never have enough money to supply free services in the quantity or quality consumers would choose for themselves. As universities are at last discovering, when the state pays the bill the party politicians call the tune.

It was a fear of a further constriction on the prized independence of universities that drove the late Lord Beloff and a group of bolder academic spirits to establish the private University of Buckingham in 1976, a matter to which my noble friend Lady Howe referred.

But the success of that institution has not weaned other dons from the comfortable enjoyment of their port and perks, to cut the umbilical cord and ascend the path to independence. No wonder Margaret Hodge thought that she could now get away with tightening the screw by imposing quotas for working-class places, to be filled by lowering entry standards. As it happens, Charles Clarke. as Secretary of State, has for the time being issued a soothing disclaimer, apparently on the instructions of the Prime Minister, whose civilising and moderating influence may not always be able to save us.

I conclude with two questions. First, why cannot the better universities see the writing on the wall before their backs are pressed further up against it? Secondly, why should not Cambridge—my university—give a lead in reclaiming independence by urging a mixed system of loans, bursaries, tax allowances and education vouchers? The aim should be to enable all qualified students to meet the fees and thereby enjoy equal choice, which can be guaranteed only by direct payment.

7.40 p.m.

Baroness Sharp of Guildford

My Lords, I, too, join others in thanking the noble Baroness, Lady Howe, for initiating this debate. It has proved to be wider ranging than I thought—I had assumed that we would concentrate on student finance. It fact, the debate has ranged across the whole of the White Paper. Like others, I find the White Paper something of a curate's egg. Some parts I welcome, particularly the emphasis on the importance of research, on extra funding to universities and on teaching.

Like others, I, too, welcome the recognition that, when we are moving towards a system of mass higher education, there is a diversity of institutions and of students to fit into those institutions and that we need this diversity of institutions to meet the students' wide range of needs. That said, I am slightly surprised that what I see as the central paradox of the White Paper has not received more attention. The central paradox is that the two main objectives seem to contradict each other. How is it possible to reconcile encouraging more young people, especially from low-income homes, to go into higher education, while at the same time seeking to fund the expansion in higher education and other needs in the sector by effectively imposing a tax on those same students?

Ever since the Government produced their post-Dearing report on the concept of tuition fees, we on these Benches have been warning them that they cannot have their cake and eat it too. They cannot simultaneously raise the price of higher education and expect demand to increase, particularly demand from lower-income participants.

Research recently published by the Centre for the Economics of Education at the department shows that during the 1990s, while participation in higher education increased rapidly, it was the middle classes who benefited. Professor Machin, who undertook the research, is quoted in The Times Higher Education Supplement as saying: As income gaps have widened, any positive link between education and family income will disproportionately benefit children from richer families and disadvantage children from poorer families". For all their efforts to increase the participation of lower-income groups in higher education, the figures for 2002–03 are little better than those for 1997–98. In Scotland, however, where no tuition fees have been introduced, there have been notable improvements.

We thought the Government had learned their lesson. Their manifesto at the 2001 election stated: We will not introduce 'top-up' fees and have legislated to prevent them". After a bruising election campaign in which he discovered how unpopular was the Government's regime of tuition fees and loans but no grants, the Prime Minister promised reform. The loans, in particular, have proved difficult for students.

Margaret Hodge, the Minister responsible for higher education, said in the House of Commons as recently as January this year: We accept that both large up-front payments and fear of debt are factors that inhibit some young people from lower-income backgrounds from attending university".—[Official Report, Commons, 9/1/03; col. 307.] Fear of debt is the big issue here. Then what do the Government do? They introduce top-up fees up to £3,000, with the extra £1,900 on top of the basic £1,100 not means tested but added to student loans, with grants of a maximum of £1,000 a year, but only for those whose parents' incomes are less than £10,000. That applies only to some 7 per cent of students. Why are the Government introducing grants which are less than the educational maintenance allowance that they are paying to further education and sixth-form students?

Needless to say, this has proved a doubly unpopular package for students. The £3,000 top-up fee, which it is clear from what many of your Lordships were saying most universities intend to charge, means that the average student loan debt on graduation will rise from the present £12,000 or so to about £21,000. Many students have overdrafts as well. While the repayment threshold rises from £10,000 to £15,000, which we are very pleased about, it is still below the average graduate starting pay of £18,000 and takes, at that level, a swingeing 9 per cent from earnings. That means that a young graduate starting work at £18,000, say, will be paying an effective marginal rate of tax higher than anyone else. As the Daily Mail remarked on the day following the White Paper's publication, why are we expecting our young graduates to pay a marginal rate of tax which is higher than we are charging millionaires?

Even at that rate, those on low earnings in occupations such as charities, nursing, teaching, and women who work part time while bringing up children will find that the process of debt repayment is a continuing commitment over their lifetime. Effectively, it will hang round their necks. These young people are, here in the South-East, looking at an average house price of £200,000 and are seeking mortgages often close to that sum. It is no wonder that we have so much trouble recruiting for occupations such as radiographers and physiotherapists, let alone nurses, teachers and, of course, university teachers. The Government talk about golden hellos for the public sector, but I wonder how far they will be prepared to write off this amount of debt.

Even more extraordinary is that, while acknowledging that fear of debt is real for lower-income students, the Government introduce a package which increases debts for students and simultaneously announce that access— the term that has become the euphemism for increasing the proportion of students from low-income homes—is a key objective. Universities are to be set tough targets, to be monitored by an "access regulator" and punished, if they do not succeed, by not being allowed to charge top-up fees. So much for the independence of our universities. The Government are saying that they need foundation hospitals because a centralised NHS cannot run everything, but they cannot keep their fingers out of the education pie.

If ever there were a mad and bad idea, it is this. It is unnecessary, because the HEFCE already monitors access and brings pressure to bear through present funding procedures. It is offensive because it interferes with the rights of universities to set their own admissions procedures and leads to the sort of silly rows we are seeing over Bristol. A-level, by itself, has never been and will never be an adequate measure of ability. Universities have always considered school references and the student's account of his or her wider interests and activities alongside A-level results when considering academic potential—which is what they are looking for. They want high quality students, and if we are to have a high quality university sector, it is vital that we trust them to make their own judgments and to be measured by results.

The Government's package has pleased neither students nor universities. Indeed, increasingly, the whole package shows all the signs of a compromise which is all too easily becoming unstitched. Universities wanted freedom to raise extra money. Some knew they could raise that by charging top-up fees, and they got the £3,000 cap, which now looks like being accepted by everyone. The Chancellor was worried about the disincentive effect of the extra loans and argued for a graduate tax, but compromised on the access tsar, a post which is universally unpopular.

Only today we hear the Russell Group arguing that it will not raise sufficient money for their needs. In a radio broadcast soon after the publication of the White Paper, the Secretary of State admitted that by the time the additional costs of mounting loans had been taken into account, top-up fees will bring in only an extra £400 to £500 million for the sector—far short of the £1.5 billion a year needed by the universities.

That brings me to the core issue that lies behind the exercise. As we rehearsed in the debate in early February, universities have been starved of funds for 25 years. That point was made by the noble Lord, Lord Wilson. During that time, student numbers have doubled and so has the number of students to each member of staff, but salaries and infrastructure have not kept pace. A huge backlog of maintenance and renewal is needed for the physical infrastructure. The permanent workforce in the sector is ageing and failing to renew itself. Increasingly, the sector is relying for both teaching and research on non-permanent contract staff. As the Prime Minister said in the House of Commons in December: In the long run it is going to be difficult to maintain a really strong university sector … unless we are sure that we are able to attract and recruit people on decent salaries". That is the root of it. We need more money in the sector to renew the physical and human infrastructure. The money is not forthcoming from the Government. The HEFCE settlement is bringing in new money. The 6 per cent a year sounds splendid, but by the time we allow for the money going to research and other special initiatives—I am very pleased to see money going to research—there is very little for salaries and very little increase in the unit funding per student if the science budget is taken out. The new money is still three years away. It is still jam tomorrow, not jam today.

Since 1981, the proportion of GDP going to higher education has fallen from 1.33 per cent to 1.1 per cent. It is time we restored that proportion.

7.51 p.m.

Baroness Blatch

My Lords, I, too, thank the noble Baroness, Lady Howe of Idlicote, for introducing the debate. It was clear when the White Paper was produced on 22nd January that there was an air of real frustration around the Chamber, some of which has been displayed today. However, the noble Baroness has created this opportunity for further discussion on higher education, for which we thank her most warmly. We also congratulate her on the powerful support she has secured from her Benches in the debate.

Sir Colin Lucas, the Vice-Chancellor of Oxford, wrote in his foreword to the university's annual report for the past year: Much has been said, by many people, about the difficulties that this country's universities face. These are fundamentally twofold: first, the uncertainties about the Government policy and second, the issues of funding". He ended: We look forward to the White Paper with the greatest of interest". We now have the White Paper and there remains much confusion—some of it, I am afraid, created by Ministers making statements and counter-statements about aspects of the policy set out in the White Paper. For example, referring to widening access to achieve the 50 per cent target, Mrs Hodge, the Minister for Higher Education, said. not in the most elegant language: I am going to do a target on closing the gap. I'm actually going to set a target where we want to get to by 2010". She went on: It would probably take two or three months to decide exactly what form a target would take". However, we understand that the Secretary of State, Mr Clarke, moved swiftly, by forcing Mrs Hodge to perform a U-turn. Within a very short time she was quoted as saying: setting a target would be inappropriate and therefore there are no plans to introduce one". However, I must ask the Minister whether anyone has told HEFCE about this. Its press release issued on 14th March states: all institutions will be expected to contribute to achieving national objectives in this area", the area in question being the widening of access. That has been interpreted as setting targets. We all know that such judgments on whether institutions are meeting national participation objectives will be linked to additional funding or, worse, financial penalties. Where is the academic freedom in that approach? Does it not breach the Further and Higher Education Act 1992?

Then there is the growing evidence of bias against talented and academically able students who just happen to live in a socially desirable postcode area, or whose parents just happen to have attended university. Private schools, and even the best performing state schools, also suffer from the same prejudice.

I am not arguing against widening access or against seeking ways of testing for potential in addition to taking into account A-levels. David Thomas, wrote in the Sunday Telegraph on 26th January: There is to be a new access regulator, as if access needed regulating by anything other than the results of an honest examination system". Further on, he wrote: Last week's policy announcements belong to the same ignoble tradition. They are profoundly condescending to working class students, since they imply that they cannot succeed on their merits alone". At Question Time in another place on 26th February, the Prime Minister did not follow the policy of the Secretary of State for Education when my honourable friend Chris Grayling, MP, asked him: There are increasing reports of pupils of high ability and achievement being turned down by universities because of their social background. How would the Prime Minister justify that to the people who are losing out? The Prime Minister replied: The simple point is that I would not. If universities are doing that. they are wrong. What is more, people should go to university based on their merit, whatever their class background. That is what should happen".—[Official Report, Commons, 26/2/03; cols. 256–57.] I agree with the Prime Minister.

Will the M mister tell the House why parental income, parental address, parental educational qualifications or the type of school should be a factor in determining access? There is no point in denying that it is happening, because the evidence is mounting. Instead of social gerrymandering, improving secondary education and exploring ways of engaging and monitoring young people to consider higher education should be pursued. Distorting entry qualifications by lowering standards for students from low-income and non-traditional families is patronising and smacks of the worst kind of social engineering. As the Prime Minister agreed, higher education should be available to the most talented and academically able students, irrespective of colour, creed, background or postcode area, or their parents' income and education.

All this is to be overseen by an access tsar. We do not know what criteria will be used, what the legal basis of such a post will be or to what extent the 1992 Act will protect institutions from the activities of an access tsar. In an Answer to an Oral Question recently in this House, the Minister said that the tsar will have powers to levy fines on universities. What does that mean?

Under the proposals in the White Paper it appears that the application of a university that wishes to charge top-up fees will be judged not on the need to meet the costs of expensive courses, but on whether it is providing sufficient places for students from disadvantaged postcode areas or low income families. That puzzles me. Can the Minister clarify what criteria will be used to allow top-up fees to be charged" I very much agree with everything that the noble Baroness, Lady O'Neill, said about the different ways in which universities will react to the policy.

Funding for universities and support for students cannot be divorced from the 50 per cent target set by the Government. There are to be an additional 35,000 students each year until 2010, plus the thousands of additional lecturers who will be required to meet that expansion. What is the real-terms increase in unit funding per student expected to be by 2006? Where will the additional buildings and equipment come from? As the noble Baroness, Lady Sharp, pointed out, the additional expenditure so far announced will be more than absorbed by this expansion programme.

Addressing pay and conditions in higher education properly will make serious inroads into the so-called extra funding. How much funding is being taken from the higher education budget to fund the University for Industry, access arrangements and any other activity outside university core funding? It would also be helpful to know how the considerable gap in funding for universities between the ending of the up-front fees paid by the students and the coming on stream of loan repayments will be made good. What guarantees will the Minister give the House that fee income will truly be additional money to the universities'? For the record, although the original tuition fees were paid directly to universities, their introduction did not result in a commensurate increase in overall funding. In fact, the unit funding per student remained static.

I am attracted to much of what was said by the noble Baroness, Lady Howe, the noble Lord, Lord Butler, and others, especially about the aim of more independence for universities. However, under the White Paper proposals, the prospect of a massive increase in post-university debt—apart from acting as a deterrent to many students—must be considered alongside higher national insurance, ever increasing property prices, higher council taxes, much higher pension contributions and congestion charges, all at a time when students are setting out on a career and perhaps even marriage. Therefore, a system of endowments and alumni-giving controlled by the universities must be developed.

It is still an irony that a Labour government introduced a system of student support that left those from the poorest families with the greatest level of debt. I remain of the view that, over the long term, the distortion of university access and the introduction of an access tzar will affect the standing of our universities. Thirty five years ago, a higher percentage of students from state schools went to our universities than do now. Why? It was not because university admissions were rigged but because there were greater opportunities for bright children from poorer homes. Direct grants, grammar schools and selection on the grounds of academic ability were all part of the system. Such opportunities have almost disappeared. In fact, such is the Government's hatred of selection on the grounds of academic ability that they have banished it by law. That has been an act of political malice.

My noble friend Lady Carnegy mentioned the Scottish dimension. I wonder whether the Minister can tell us what it was that the Scottish Parliament said in the discussions.

The way forward would be to replace the rungs in the ladder of opportunity for bright children from disadvantaged backgrounds; provide more choice post-16 by increasing the provision of high-quality vocational education; improve education in our schools; provide a fairer system of student support; to ask Ministers at the department to be more open-minded to the ideas expressed in our debates in this place on student funding; abandon the appointment of an access tsar; abolish the 50 per cent target; encourage universities to publish their admissions criteria; rule out social engineering in access procedures; and, finally, remove central control and bureaucracy and reduce ministerial and departmental interference in our institutions.

8.2 p.m.

The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland)

My Lords, I, too, am grateful to the noble Baroness, Lady Howe, for raising this important issue. I pay to tribute to her in the many guises in which I have had the good fortune to know her over the years. I keenly note that she was the only Member of your Lordships' House to mention the relevance of early years education. As the responsible Minister, I was particularly delighted by that. I was, however, a bit concerned that she described us as central planners; that is not traditionally a role in which I see myself.

I am grateful to all noble Lords who contributed to this far-reaching debate. I shall endeavour to answer as many of the questions raised as possible within the allotted time. I say now, however, that the noble Lord, Lord Sutherland, has perhaps given me a new song to sing as I go into the department tomorrow. How well it will received by my colleagues, I do not know.

The Government believe that education must be a force for opportunity and social justice. We must ensure that the opportunities that higher education brings are available to all those who have the potential to benefit from them, regardless of their background. That is why, as noble Lords from all parties have said, it is important to focus on raising the aspirations of schools and young people, encouraging universities to work with schools and communities to encourage young people to take up higher education opportunities, and investing in initiatives to widen participation.

At the same time, we have the responsibility to ensure that our higher education institutions continue to deliver world-class teaching and research. To deliver that, we believe that we must make changes and improvements to the sector, including the way in which it is funded. We believe that the higher education White Paper sets out a fair balance of funding between the taxpayer, the higher education sector and students and their families. It also sets out the levels of funding provided by the taxpayer to the higher education sector for the next three years.

I agree wholeheartedly with the right reverend Prelate the Bishop of Chester on the role of endowments within the sector. We shall ensure that the sector is less dependent on a single source of funding. We will be setting up a task force to encourage higher education institutions and potential donors to promote existing incentives for donation. The task force will include corporate donors and financial and fundraising experts in the public, private and voluntary sectors and in the higher education sector itself. We believe that that will enable us to take forward some of the very interesting ideas that were raised also by the noble Lord, Lord Wilson. I am pleased, too, that the noble Baroness, Lady Sharp, likes part, if not all, of our funding.

I deal immediately with the unit funding issues raised by the noble Baronesses, Lady Howe and Lady Blatch. I shall also give a couple of comparisons so that the points are very clear and on the record. For 2005–06, unit funding will be £5,390. That is an increase on the 2002–03 figure of £5,050 and on the 2000–01 figure of £4,980. Unit funding is moving in the right direction. I cannot give the noble Baroness the figure for 2006; as she will appreciate, it will be in the next spending review. When I have those figures, I shall of course bring them to the House.

I should like to focus for a moment or two on the arrangements for the funding of full-time and of part-time students so that we can be clear about them. We have a means-tested grant to cover the contribution of full-time students to tuition costs. More than 40 per cent of students receive a grant to cover the whole cost. As noble Lords will know, there is a loan to help with living costs—his year it is worth up to £4,700 per year; a grant to help to cover the costs of looking after children, such as the childcare grant which covers up to 85 per cent of the costs of formal childcare; and grants to cover the additional costs of taking a course for those with disabilities.

I know that the noble Baroness, Lady Howe, as vice-chair of the Open University, takes a keen interest in creating opportunities and incentives for people to take up part-time study. I am proud to say that the Labour Government were the first to provide any financial support to part-time students, including those studying through the Open University. Part-time students on low incomes can be eligible for grants to meet tuition costs, loans to help with the cost of taking a higher education course, and financial support from hardship funds towards living costs.

However, we recognise that those funds are not always easy to access. For that reason, we set out in the White Paper our intention to introduce a new grant for full-time students from low-income families, worth up to £1,000; to simplify and improve the way in which we provide additional finance to both full-time and part-time students; and to provide guaranteed fee support to part-time students on low incomes, along with a new grant of £250 to meet the cost of books, travel and other course expenditure to replace the existing fee remission and loans system.

The noble Baroness, Lady O'Neill, raised the issue of the £10.000 threshold, and other matters which she felt were important. Since we gave that indication in the White Paper, we have had more up-to-date data which indicate that we may be able to raise the threshold within the 30 per cent of students to be supported. The revised data are currently being checked. I shall, of course, come your Lordships' House when I have further information, but I wanted to give that information now to the noble Baroness and to other noble Lords who are interested. I hope that I will be able to bring good news on that.

I say to the noble Baroness, Lady Prashar, that in order to help ease the immediate financial costs for students and parents from 2006 no student will have to pay fees up front. I believe—I think that the noble Baroness, Lady O'Neill, welcomed this—that that is a critical factor in ensuring that students from disadvantaged backgrounds are able to go to university. Students will, of course, pay back the money through the graduate contribution scheme, with repayments set to commence when a student begins to earn £15,000.

I say to the noble Lord, Lord Butler, that I have made a note on my brief to be bolder. I take on board what he said. I believe that in setting out our proposals on tuition fees we have indeed gone some way towards being bolder. It was not easy to work out how best to configure the way in which we support our higher education sector. I am pleased that the noble Baroness, Lady Howe. welcomed our proposal for higher education funding. I believe that it will constitute a significant contribution. But I also believe that it is a very necessary element. I say to my noble friend Lady Lockwood that we have to look at a combination of funding. We believe that although the bulk of funding will continue to be provided by government—it will reach almost £10 billion a year by 2005–06—it is important to have other funding sources and to recognise the contribution that those who benefit from universities should make.

We want to ensure that the change does not deter potential students from going to university. I believe that the deferred payment will make a substantial contribution to that aim. The noble Baroness, Lady Carnegy, the noble Lords, Lord Wilson and Lord Sewel, and other noble Lords referred to the devolved administrations. I cannot give the precise details of the relevant conversations as I do not have them. The noble Lord, Lord Sewel, was concerned that the hard work should go on. It has gone on and will continue. Discussions took place during the deliberations on the White Paper and continue. At present there is no evidence of any buses crashing anywhere. We are mindful of the need to work closely with the devolved administrations to ensure that we have in place what devolution gives us; namely, differences in policies, but ways of working together to ensure that we are conscious of the effects of those policy differences. I assure noble Lords that that has occurred.

We do not believe that debt is a deterrent for the great majority of students.The Student Living Report 2003 reveals that students continue to find their time at university worth while. Nearly nine out of 10 students consider that the money they are spending is a good investment. I say to the noble Lord, Lord Palmer, that students now accept that working part-time is the norm. Indeed, it can have great advantages.

The right reverend Prelate the Bishop of Chester and the noble Baroness, Lady Prashar, were concerned about graduate repayments. I repeat that those earning less than £15,000 pay nothing. The latest figures I have seen—today—show that many graduates begin work on a salary of about £14,000. A graduate earning £18,000 would pay £270 per year, which is £22.50 per month. It is important to put the repayments in that context. It is not like any form of commercial repayment arrangement. That is an important point.

Noble Lords focused on student choice and the issue of widening participation. If we are to get the most from the pool of talent that we have, it is essential that the opportunities offered by higher education are available to all those with the potential to benefit from them. We shall encourage universities to offer more flexible routes into and through higher education to help those for whom a more traditional route would be impossible, as well as creating better benchmarks to help institutions to judge their progress, and reform the access premium.

We are helping to ensure that those opportunities are offered to all students through the unification of the programme now called the National Aim Higher Programme. It seeks to raise aspirations, to raise the attainment of young people, and to build better links between schools, universities and colleges.

I say to the noble Lord, Lord Palmer, that we have introduced a foundation degree designed to appeal to people of all ages who perhaps would not have considered entering higher education, by reducing the practical barriers to learning with delivery arrangements through work, through local further education colleges, and web-based learning. These courses are designed to appeal to people already in work and to provide specialist technical knowledge, employability skills and broader understanding. Noble Lords will remember that I mentioned in your Lordships' House that I launched the foundation degree for those involved in childcare and was delighted to see people involved in childcare coming forward to take that next step in their education.

The noble Lord, Lord Palmer, made the important point that we need to ensure that for our young people there is a breadth of opportunity. We want to make sure that by 2004 about a quarter of our young people enter a modern apprenticeship scheme. We now have a group led by the chief executive of Centrica who will ensure that our modern apprenticeships take account of the views of employers. We believe that that is extremely important.

We state specifically in the White Paper that we are not choosing between more plumbers and more graduates. As noble Lords have said on many occasions, we need both. Evidence, though, shows that education increases productivity and that higher education is most important for economic growth in developed countries. We believe that it is important that we offer the opportunity of higher education if we are to operate in a competitive world and to make sure that we offer those opportunities to all young people capable of taking them up. That should be within the context of recognising that skills gained in other ways are as appropriate for some young people as a university education is for others.

I was interested that the noble Baroness, Lady Howe, raised the excellent contribution of Nicholas Barr. I read the summary of the evidence that he gave to the Select Committee, which is very interesting. Of course we are looking in terms of raising the cap, and at the context between raising fees and ensuring that we do not make courses so expensive that students can no longer apply or take part in them. Those are really important issues for the future and will be looked at by my right honourable friend the Secretary of State and my honourable friend the Minister with responsibility for higher education in their further deliberations.

Every noble Lord who spoke rightly referred to the issue of access, and I want to spend some time trying to deal with the specific points raised. I recognise the commitment of universities and colleges to fair access for students from all backgrounds. We are certain that schools are committed to encouraging our students to aim higher and to go into higher education. However, 30 years ago, students from middle-class backgrounds were three times more likely to go to university than those from poorer backgrounds. The numbers going to university have more than trebled, but the gulf remains the same. At present, only 28 per cent of graduates come from disadvantaged backgrounds. We believe that there is work to do.

The new access regulator, who is a regulator and not a tsar, will ensure that universities that want to raise their fees make plans to safeguard and promote widening access through bursaries—those have been mentioned by a number of noble Lords, especially the noble Baroness, Lady O'Neill—other financial support, and by direct work with schools and colleges to promote the aspiration to a university education.

The noble Baroness, Lady Blatch, pointed out that the access regulator could, as a last resort, withdraw the power of universities to charge those extra fees if they were not upholding their access agreement. I am well aware that she mentioned fines. In the next two or three weeks we will publish the paper setting out in more detail the proposals on how the access regulator will work. I will ensure that the issue is covered fully, and that the noble Baroness has the detail of it. I say to all noble Lords, but to the noble Baroness in particular because she raised the subject, that I believe that my colleagues listen carefully to all issues raised by such eminent individuals in this House, who bring huge experience and knowledge to them.

The noble Lords, Lord Sutherland and Lord Oxburgh, and the right reverend Prelate the Bishop of Chester talked about raising standards in schools. The "Excellence Challenge", which of course involves our schools, higher education institutions and FE colleges, is an important and complementary part of our commitment to do that. I agree that schools have an important part to play. We must make sure that our schools offer every young person the opportunity to reach their highest possible attainment. I accept that, but that is not the end of the story: it is important that students also get the opportunity to talk to universities, particularly those students for whom a university education is not part of their social or cultural background, so that they begin to understand it. All noble Lords would accept that that is very important.

I want to pick up on something that was said, I think, by the noble Lord, Lord Oxburgh, about universities and the part that they are striving to play. I accept that, but we still have a gap. I shall take Oxford as an example without any criticism, because I know what good work it does. Some 53 per cent of entrants to Oxford are from the state sector, but the benchmark is 68 per cent. We need to work carefully to ensure that students are able, and want, to apply to Oxford, Cambridge and other universities. As I say, I have no criticism of the fantastic work that is going on within such universities, but I recognise that we all need to engage in that process. I am delighted at the work going on to achieve that.

A number of noble Lords, particularly my noble friend Lord Judd and the noble Baronesses, Lady Warnock and Lady Prashar, talked about the two-tier system on research. Not all universities want to focus on research. In the White Paper, we have set out the three areas that we think are of great importance. Noble Lords will know that they are research, teaching, and knowledge transfer. We need to create more opportunities for recognition and excellence in all three of those areas.

It is also true to say that 75 per cent of funding under the RAE from HEFCE goes to the top 25 institutions anyway, so we already have a concentration on research. That is why I am pleased that we now have the funds to enable us to focus on emerging research in non-research-led universities, if I might call them that.

Noble Lords, especially the noble Lord, Lord Palmer, talked about the opportunity for collaboration between universities, so that students get the experiences appropriately described by noble Lords in terms of research capacity. I argue that we can do that in more creative ways.

The noble Baroness, Lady Howe, discussed quotas and the amount of funding provided by HEFCE to institutions. She will know that in 2002 we removed controls on the maximum number of students. Institutions can now bid for more funding under the additional student numbers scheme. Flexibility is there, but it may not be all that the noble Baroness wishes.

The noble Baroness, Lady Prashar, discussed poor students going only to poor universities. We want all students to go to the universities that best suit their needs and potential. That is why it is important that through access agreements we encourage the use of bursaries and other forms of financial support and ensure that best practice is spread to give opportunities to young people.

I have discussed the access regulator and the fact that we will come forward with details on that. We look forward to discussing it in your Lordships' House. I wholeheartedly agree with everyone—the noble Baronesses, Lady Sharp and Lady Blatch, in particular—who said that admissions must be on the basis of merit. I state categorically that admissions are the responsibility of universities. I believe that that will be reflected in the views of the noble Baroness and others of the proposals that we will produce.

In conclusion, it is important that universities have the opportunity to select the candidates who will make the best success of their university careers. Universities of course look to A-levels but they also look to other measures, particularly those universities—many of them are represented here —that are oversubscribed. We are interested in ensuring that we spread the best practice of that basket of measures, if I may call it that, to ensure that we have students with both the greatest achievements and the greatest potential to go forward to university. The university sector has risen to that challenge and will continue to do so.

We have a higher education sector of which we should be truly proud. The Government are responsible for ensuring that it meets the long-term challenge to maintain and improve high standards, to expand and widen access, to strengthen links with business and to compete at an international level in today's global economy. Those are challenging objectives and I believe that the reforms that we have announced in terms of student funding and institutional funding will help us, with the education institutions, to make our ambitions a reality.

8.22 p.m.

Baroness Howe of Idlicote

My Lords, I thank the Minister for the usual comprehensive way in which she answered so many of the points raised in this debate. As always, one will have to read an awful lot of what has been said because much information was presented. There is still some doubt, shall we say, about the access regulator but we look forward to reading those remarks.

I also thank in particular the noble Baronesses, Lady Sharp and Lady Blatch. Theirs is the responsibility from the Opposition Front Benches, and it can sometimes be "yet another day", so I extend particular thanks to them.

I also thank all noble Lords who participated in the debate and echo the comments of the noble Baroness, Lady Blatch. I am particularly grateful that so many of my noble friends took part in this debate. I found it a fascinating two-and-a-half hours. I need not have worried about it being the third such debate in four months. Clearly, we could do with many more debates on the subject. I am sure that that will happen. In the mean time, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.