Higher Education Bill

HL Deb 19 April 2004 vol 660 cc39-144

4.50 p.m.

Second Reading debate resumed.

Baroness Warwick of Undercliffe

My Lords, I begin by declaring an interest as chief executive of Universities UK, which has been closely involved in discussions during the development of the Higher Education Bill.

The Bill we now have before us is, I believe, a good piece of legislation. As noble Lords will know, I am a passionate advocate of the principles enshrined in this Bill. I believe that it is a landmark Bill. Its passage is essential, in my view, for the future health and strength of our universities. I also believe that future generations of students will benefit enormously from its passage. Not only will full-time undergraduate home and EU students be released from immediate payment of fees, but a graduate earning £20,000 will repay half as much each year as he or she does under the current arrangements. They will further benefit from the package of measures designed to protect them from some of the uncertainties of life. If you stop earning, you stop paying graduate contributions. If your income falls below £15,000, you do not pay. If you have not finished repaying your loan within 25 years, perhaps because you take a job with a low salary, your loan will be written off.

But there are two further reasons why future students will be better off as a result of this Bill. The first is that many more people will have the opportunity to go to university than would be the case if the Government took no steps to address the funding crisis in higher education.

Universities cannot expand unless there is extra money to pay them to do it. Some argue, of course, that universities should not expand and that there are already enough people going to university, or even perhaps too many people going to university. I do not agree. Even without a government target, demographic trends and the increase in young people who gain the qualifications to go to university will mean that there are more and more qualified young people knocking on the doors of the universities.

The Higher Education Policy Institute estimates that even without any growth at all towards the well established government target, demand by qualified students for university places will rise by up to 150,000. If you add to that the continued increase in better school performance and the efforts that institutions are making to widen participation, somewhere between 180,000 and 250,000 extra places will be needed. Without those places we will have to turn well qualified students away. But this country needs these students. They are the young people who will go on to drive our economy, shape our national life, push forward our cultural and scientific boundaries. This human capital is our most valuable asset and we must invest in it and nurture it.

The second reason why students will benefit is perhaps the more important. All students will benefit from the fact that universities will have more money to spend on teaching them. Noble Lords will know that in the past two decades university finances have been squeezed and squeezed and squeezed. In cash terms universities received nearly £8,000 to teach each student in 1989 compared with just over £5,000 today. The Bill now before us will begin to reverse that trend. It will increase the amount that universities have to spend on teaching and bursaries by about 30 per cent per UK and EU full-time undergraduate.

Of course—this has been mentioned already by noble Lords—this calculation assumes that the Government will not use the extra fee income to replace existing public expenditure on higher education. Students must be assured that the higher fees they pay will go to the universities that teach them and not to the Treasury. We have received repeated assurances from the Secretary of State, the Minister responsible for higher education and the Chancellor himself that the Government intend the income from fees to be truly additional. This House must do all it can to hold this and future governments to that promise.

I should like to touch on one aspect of the Bill that I am sure will be the subject of intense debate in this House. The Government will, with this Bill, create an Office for Fair Access. This office will regulate universities' efforts to widen participation. I suspect that it will come as no surprise to noble Lords that university vice-chancellors are not wholly enthusiastic about this idea. But it may come as a surprise if I say that they have on the whole accepted the Government's plans. Indeed, Universities UK has worked closely with the Government to develop the detail of the plans. We have sought and received—and, indeed, have received again in this House today— important reassurances that OFFA will be light touch, non-bureaucratic, and, crucially, that it will not have any remit with regard to admissions.

During the passage of the Bill through the House I hope to extract further assurances from Ministers and I hope that I shall be able to count on the support of noble Lords. Yes, universities have a role to play in helping to widen the social mix of students within higher education. But the Minister knows that universities cannot be held responsible for the social background of those leaving school and college with an adequate preparation for higher education. That responsibility lies elsewhere in the education system.

Universities will, of course, continue to work hard, and in innovative ways, to seek out the best talent and potential wherever it occurs to encourage applicants from diverse backgrounds. But responsibility for giving young people from social classes C, D and E a fair start in life begins much earlier than the university admissions process.

That said, of course, most vice-chancellors will support the creation of OFFA provided that the Government will rule out any possibility of interference by OFFA in universities' admissions policies, procedures, standards and decisions. I understand that many are concerned that higher fees will discourage applications by poor students. I do not believe that will be the case, and I know that universities are willing to work with OFFA to ensure that it is not.

This is an important Bill. A year ago it was no more than a gleam in the eye of the Secretary of State. It has certainly come a long way since then. We have the responsibility of taking it through its final steps towards the statute books. I consider that a grave responsibility but I look forward to it also as a privilege.

4.57 p.m.

The Lord Bishop of Portsmouth

My Lords, I begin by apologising for the fact that I was not in my place at the start of the debate. It may sound a little limp to say that my train was late but that is something of an understatement and it is frustratingly true.

The Church of England is deeply involved with people and institutions committed to ensuring that high quality higher education is delivered in this country. The Church is itself a higher education provider through the Church colleges and universities which have a particularly good track record at widening participation. Chaplaincies also serve the majority of universities in the land. Experience of the lives and aspirations of students and vice-chancellors, academics and support staff, and of those within our communities who aspire to enter higher education, all lead the Church strongly to support the Government's stated intentions to fund a world-class education system and to widen participation that are broadly expressed in the proposals before us. However, we have not been uncritical of the Government's plans. There remain in many quarters real concerns that new arrangements for funding students will militate against good intentions.

It was, of course, helpful and good to hear the Minister's acknowledgement, following the ministerial Statement in January, that communication is critical, and that there is a mountain to climb, not least because of some of the language that is often used about debt. People who need to be attracted into higher education may well be put off by the prospect of graduating owing substantial amounts of money. If this is the road we must go down, perhaps people need to be educated for debt.

The perception by some of a widening gap between the haves and the have-nots must therefore be addressed. So, too, must the fear expressed by some that employers of the future will look at the cost of a course rather than a graduate's ability when assessing potential employees. Clearly, some concessions have been made in the draft Bill and it has become more acceptable. I support the Government for having responded to the national debate so far, but there are real concerns, three of which I wish to mention.

First, the details of the bursary scheme. Even if the proportion of fee income that universities put into bursaries is capped, will not the proportion of income paid by a university with many students who qualify for fee remission be much greater than that paid by one with fewer such students? Secondly, what about those who just miss qualifying for financial help on grounds of hardship? The third is arrangements for part-time students. We welcome the Government's commitment to lifelong learning, but is there not need for a proper package of support for those studying on part-time courses? None the less, the case for increased funding seems clear. Our universities must have more money in order to deliver and to retain staff, and students need a better financial package if they are to fulfil their potential as students.

I do not want to say much about OFFA, except a little facetiousness. There was a Saint Offa, who is not the patron saint of anyone. Another Offa built a dyke that is argued by some to be an agreed boundary and by others a defensive structure. It may be even more significant that King Offa established the use of the penny as the standard monetary unit in England.

I wish to end with perhaps the most important point of all. As all eyes are on the nuts and bolts of the business today, we need to hold on to a vision for the future. We can make decisions about the future of higher education now only if we have a strong sense of the purpose of higher education now and in the future. What are the values that we hold dear? What is higher education for?

In his recent Higher Education Policy Institute lecture, referred to by the noble Baroness, Lady Sharp, Professor Robert Reich, professor of social and economic policy and a labour secretary in Clinton's administration, warned of the adverse consequences of the marketisation of higher education in the United States. He spoke of the social stratification that has resulted in terms of access, and of a retreat from the concept of public mission, which has resulted in a potential loss of universities as centres of basic learning. That is research, inquiry and learning that does not translate easily into economic value. He urged the British to use market incentives but to use them for public purposes and to avoid taking things to excess—in other words, what might be called the doctrine of restraint, which sometimes sits uneasily with the culture that says, "I can therefore I must". Moreover, a right and proper emphasis on expansion and diversity should not cause us to lose sight of what is precious in the idea of a university.

Will the Government therefore consider adding something about the role of higher education and its value? As I was not present at the beginning of the debate, the Minister kindly let me have sight of her opening speech. At the end, she mentions that there are values of higher education; perhaps we could spell out what they are. For example, the role of higher education is to inspire and enable individuals to develop their capabilities to the highest potential levels throughout life so that they grow intellectually, are well equipped for work and can contribute effectively to society; to promote the spiritual, moral and cultural wellbeing of individuals and of society; to increase knowledge and understanding for their own sake and to foster their application to the benefit of the economy and society; to serve the needs of the economy at local, regional and national levels; and to shape a democratic, civilised, inclusive society.

We are liable to fail the students of tomorrow if we forget that the higher purposes of higher education include promoting the common good, and if we fail to remember that, in the words of the poet W.B. Yeats: Education is not the filling of a pail, but the lighting of a fire".

5.4 p.m.

Lord Wakeham

My Lords, I am extremely pleased that the right reverend Prelate the Bishop of Portsmouth fought his way up from Portsmouth to make his contribution today. We always enjoy listening to him, and today was no exception. I declare an interest as the chancellor of Brunel University, but the views that I express are mine and not necessarily those of the university. I did not go to university and was lucky enough to get my first honorary degree just before my eldest son got his first real degree, which kept a certain amount of peace in the family.

I spoke at some length during the debate on the Queen's Speech in favour of the principle of top-up fees; I shall not repeat those arguments. The two major things wrong with our universities are, first, that they are short of money; and, secondly, that too much of it comes from the Government. There is a lot wrong with the Bill, as I thought my noble friend Lord Forsyth hinted at in some of his remarks earlier. However, so far as I am concerned, it is the only show in town, so despite its imperfections it would be better on the statute book than not. My own university will be some £30 million a year better off when the scheme is fully in operation.

I hope that noble Lords will not take it amiss if I concentrate my few remarks on what I believe to be the shortcomings of the Bill. First, there is a clear division among vice-chancellors and universities on the principle of top-up fees. Some want nothing to do with them; some can live with the proposals in the Bill but do not relish them; and some would like the Bill to go much further and give universities the real freedom to charge higher fees if they think it best for the university and its future. I favour the more flexible approach, but I would advocate as much freedom as possible for each institution. The Bill does not go far enough in creating a market. Some new universities object to variable fees. They are concerned that older universities may be able to charge more than they do. Exactly how it helps new universities to keep the old ones poor is not at all clear to me. The problems with a fixed fee are that there can be no discounts even when universities want to provide them; that there will be no price signals by which students can trade off cost against quality; and that the Bill will charge students of new universities too much and Oxbridge students too little.

The second problem is that few like the Office of Fair Access. I would much prefer to see universities set up their own system of self-regulation. Everyone wants a fair system of admission; that is not controversial. The problem arises as to what is fair. It arises equally whether the system is statutory or, as I would prefer, self-regulatory. The main principles that I would expect to see in any system are that the Government should have no part in the admission of students, and that each student must be looked upon as an individual and not as some sort of representative of a social group. Although academic success is obviously a key indicator, it cannot be the only one. A brilliant student who becomes very ill before the year of applying or a young person who loses his or her parents at that crucial time are obvious cases, but it is not hard to think of others. Some say that a university should not know the school of an applicant; I am not sure that that is fair. A slightly lower performance by a student from a poor school is at least as likely to be on a par with a slightly better performance from a student from a very good school. So long as those matters are dealt with on an individual basis and not on a social group basis, those are factors that I would like taken into account.

However, there is another way of looking at these matters. Students will pay more for their education and are entitled, in simple terms, to better service from universities. I am in favour of universities having autonomy, but with that comes accountability. They should make their admission policies explicit and clear. They should provide a feedback service, particularly to unsuccessful candidates. But, more than that, universities should tell prospective students what they want to know—the range of marks that are acceptable, the dropout rate on different courses and the job prospects after graduating. University admission tutors should be properly trained in interview techniques. I am told that some are good but that others have no training and look on the job as a chore. Universities need to give some serious thought to the reliability and validation of interview procedures.

That does not apply only to admission policies, however. Some universities have special entrance exams. Those and related matters incur a cost, which may well be a disadvantage to a poor student. Universities collectively might look at that problem. Those matters are important and the basis of why I would prefer a system of self-regulation based on a code of conduct which is clearly published and available for all to see.

I would very much like to see the Bill on the statute book, but there are one or two things that could be improved.

5.11 p.m.

Earl Russell

My Lords, I would like to begin by offering an apology to my noble friend Lady Sharp of Guildford for an intervention that proved to be ill judged. When I referred to protests beginning when tax reached 9 per cent of GDP, I wanted to draw attention to the aptitude of taxpayers to crying wolf. I was not suggesting that the burden was crippling at that level; it clearly was not. We need to look at the level of taxation compared with what is paid by our competitors, and there we come very low in the list indeed. The figures can be calculated in more than one way but, in those that I have before me, out of a list of 13 countries only two come below us. We are certainly not in the top half.

The noble Lord, Lord Hurd of Westwell, made an important intervention. It is true that one cannot predict absolutely what a future Chancellor of the Exchequer may do. However, if money becomes short, one should—indeed, one must—be prepared to consider whether it is the quality or the quantity of university education that takes the strain. At the moment, it is assumed automatically that one lets the numbers go up no matter how much one debases the quality by doing it. In the end, that is not giving more people higher education; it is giving more people the show of higher education.

The other really big criticism of the Bill, which we have heard already from my noble friend and the noble Lord, Lord Forsyth of Drumlean, is that it is not enough to close the funding gap. Esau sold his birthright for a mess of pottage. That was his right, and Augustine would have said to him, "Verily, verily, he has his reward". But, according to my noble friend, if one sells one's birthright for half a mess of pottage— it is very difficult to calculate—or a tenth of a mess of pottage according to the AUT's figures, or a seventh of a mess of pottage according to the figures current in Oxford, that is not a very good bargain. If one is going to sell one's birthright, one ought to get the whole mess of pottage, and we are not.

I need to declare several interests, none of them any more pecuniary. As a former professor of King's College, London—now a visiting professor—a life member of King's College students' union, a visiting fellow of my undergraduate college, Merton College, Oxford, and as one who last month became a grandfather, I have already set aside a considerable sum of money for my granddaughter's fees for higher education, assuming that we do not succeed in stopping the Bill; it is always as well to be pessimistic and then fight like the devil. I admit that that will put her at an advantage. I would much rather have contributed to taxation to improve everyone's chances of higher education. The right reverend Prelate was quite right about OFFA's dyke. The Bill will be seen as OFFA's dyke because of the extent to which it impedes people coming in and following the practice that it recommends. It will do more to make the job of the regulator impossible than anything else.

The Bill will produce some very profound changes in the culture of our society. When I first arrived to teach in the United States, I got the New York Times and read Russell Baker, whom the Americans think is their answer to Matthew Parris. He described a man going to his son's graduation ceremony and bursting into heart-rending floods of tears, and it was discovered that that was because his son had told him that he wanted to go to graduate school. That is not a world in which I want to live. The next night, I went to a party and listened to two members of Yale Law School telling me that, if I were accused of any crime carrying less than a six-month prison sentence of which I was not guilty, I should plead guilty because the punishment would be more bearable than the cost of defence. That also is a world in which I do not wish to live. The effect will be a profound change in the behaviour in the job market of those who need to raise the money to repay their loans.

Before that, there will be a very severe effect on what happens inside the universities—on the education that people actually get. One can see that the policy is working like a pilot, and that at present the loan is about £2,000 below what is necessary. The NUS/Barclays Bank survey shows debt of those entering their final year last October already at £8,000 and likely to clear £10,000 before they graduate. That entirely confirms my own experience and a number of very powerful letters that I have received. Inevitably, it diminishes the quality of the education that people get. Stories of undergraduates working in nightclubs to raise the money to keep going and pay their debts are by no means all apocryphal. Incidentally, that is an area where men are at a disadvantage, because they have no comparable way of easily making money.

The problem is inevitably reducing the amount of work that students do and lowering the quality of our degrees. It is like the effect of a competitive devaluation. In the end, it is going to mean that our degrees are not worth having. That, as a reward for expansion, does not sound like increasing higher education. The noble Baroness may shake her head, but that is what is actually happening. She says that it is not, but she does not face it every day; I have. I am afraid that she is simply wrong about that.

Then there is the effect on the choice of jobs. That has been picked up so far by Mary Dejevsky in the Independent, who pointed out that the man who goes the length of the West Indies defending those who face death sentences is constantly handicapped by his juniors saying, "I'm sorry, but I've got to go back into corporate law. I've got to pay off my loans". However, what frightens me most of all is the effect of the variable fee between subjects. Inevitably there will be an incentive on universities to take people in the subjects with low overheads and large numbers of applicants. It will give physics a very large advantage over chemistry, and English a very large advantage over Tibetan or Catalan.

Whatever Mr Charles Clarke may say, one cannot dismiss subjects as purely ornamental, because we simply do not know what will be needed in future. Who foresaw the level of demand for microbiologists before AIDS? Who foresaw the demand for Russian speakers before 1989? When the Afghan war broke out, the CIA was employing one Pushto speaker.

One does not obtain one's wishes unless one is prepared to have things done because people want to do them. We will end up with an enshrinement of the stale, flaccid orthodoxies of 30 years ago. That is not what I wish to see.

5.20 p.m.

Lord Rix

My Lords, before I speak at Second Reading I must declare my own interests as Chancellor of the University of East London, as President of Mencap and with a close family member who is a lecturer with the Open University. All three interests ensure that supporting widening participation in higher education is an objective close to my heart—and that is very close at the moment, having had a pacemaker fitted only last week.

While at most universities a quarter of all students come from working class backgrounds, at UEL the proportion is almost half. For over 100 years our West Ham site has been called "a people's university". While at most universities over an eighth of all students come from black and other ethnic minority backgrounds, at UEL the proportion is over half. So I can approach this Bill from a very particular viewpoint. Is it likely to promote the interests of students from hard-pressed backgrounds and—the tightly-related question—could UEL, which works hard for such students, thrive if this legislation is passed?

With a range of initiatives, from supporting rebuilding the Barking library so that it can better uphold the local needs of further and higher education students, to working with Mencap in the use of modern technology and the field of learning disabilities, UEL is committed to the widening participation agenda. When we debated the gracious Speech I reverted to an assessment of the Government, to which, regrettably my old teachers had used of me: "could try harder". Of course, these days educators are only supposed to make positive references to those in their charge and I find that the old-fashioned approach still has its uses. Since the gracious Speech, the Government have been trying very hard indeed to make their proposals acceptable to the legislators.

As has already been mentioned by the noble Baroness, Lady Warwick, the re-introduced student grant is now going to be at a level of £1,500 a year, while the maximum loan for students living away from home in London is to be raised to a shade over £6,000 a year. During the debate on the gracious Speech the Government conceded that student loans would be written off on death. In February, the Government announced that this extreme step was no longer necessary and now all unpaid loans will be written off after 25 years, unless you have cause to trouble the mortician at an earlier date. These are all welcome improvements. However, these welcome improvements carry their own warnings. The Government have responded to various critiques of their legislative aim, not by changing the Bill but rather by changing their own financial arrangements. If carried, I suspect that the essential features of this Bill will remain intact for rather longer than the essential features of the Teaching and Higher Education Act 1998, which it seeks to replace.

There are a number of paradoxes associated with the Bill. We are legislating for variable fees, but the likely outcome is a new uniform fee of £3,000. We are legislating for a new apparatus of state power in the form of a Director of Fair Access to Higher Education, but with instructions, according to the Minister's opening statement, to operate such a light touch that no student may be aware of its existence. Like a racing dinghy and its crew skimming over the sea in a strong breeze, the legislation is keeling over in one direction, but is being balanced by the weight of the Government leaning out in the other. What is to happen when the crew changes? Like the noble Baroness, Lady Warwick, I, too, will be seeking clarification on that issue.

I propose to subject the Government's proposals to my own personal tripos. Is this system of differential fees the best a world-wide search reveals? Is this system of bursaries the best a world-wide search reveals? Do the Government's proposals safeguard those universities whose Mission is to serve the poorer parts of our country? If the answer to any of those questions is in the negative, then I fear that the Government's senior wranglers are sitting on three-legged stools, each with one leg shorter than the other, which could lead—not to an elegant disputation—but to a particularly inelegant pratfall.

The social pressure in comfortable middle class homes to go to university is so strong that no government policy on fees could dampen it. Across the world, demand for higher education is growing. Whether fees are fixed, variable or non-existent, whether student support is by grant, loan or is nonexistent, demand for higher education is growing. They do not need a Director of Fair Access to get them in and no government policy could keep them out. Look at Malaysia—when its government attempted to give priority to the Bumiputra, their indigenous people, the result was a flourishing of private colleges catering largely for its Chinese population. Only in New Zealand, where fees vary by institution, is there serious concern that growth has come to an end. However, it seems to me that this policy has been narrowly but decisively accepted in another place and we should concentrate our attention on other aspects of this legislation.

As well as variable fees, the Government are proposing variable bursary arrangements. The threshold expectation is that the minimum bursary will be £300. However, as the Secretary of State put in his letter to Universities UK, the Government are cognisant of the variable contribution that institutions have made to achieve wider participation and the Government are expecting the new director to take account of this track record when bursary levels are determined. Echoing the right reverend Prelate the Bishop of Portsmouth, ironically our wealthiest universities are those with the lowest proportion of students likely to need bursaries. Real poverty is so rare in Cambridge that we are told that students whose parental income is less than £35,000 will be regarded as hardship cases. I have to tell noble Lords that for many in East London £35,000 a year is regarded not as a cause for hardship, but as an unrealistic aspiration. The universities which serve the poorest areas will be those least able to support extensive bursary schemes.

At the risk of sounding as though I am reading from the writings of Karl Marx, would not a single national bursary scheme be fairer? From each institution according to its means; to each student according to their needs. If, as I suspect, all universities will charge the new national higher fee rate, would it not be cheaper and less exposed to fraud for the funding councils to hand over £300 for each full time student to support higher student grants, than for each university to set up its own welfare bursary scheme?

Finally, I turn to the effect of these changes on those universities whose mission is to support the most hard-pressed corners of our island. In our dinghy battling through the waves, we see the sail pressed down by the wind in one direction and the crew leaning out to balance the craft in the other. What we do not see are the stresses and strains on the keel—or in this case the funding council. Brenda Gourlay, the vice-chancellor of the OU, writing in the Independent recently, asked about prospects for part-time students. How will the funding council's policies respond to this new situation? Recently it has changed years of policy to increase the assumed part-time fee, so that it is now at a rate that is pro-rata to that of the full-time fee. When everyone charges £3,000 for a full-time student, what fee can we expect a part-time student to pay? What support will be provided to part-time students?

Here, my interests as Chancellor of the University of East London and President of the Royal Mencap Society must again be stressed. Both our client groups could be adversely affected. Many mature students return to study by the part-time route. Over half of UEL's students are mature, while for years Mencap has worked with the Open University on distance learning courses for people with a learning disability, their parents and their carers. Are they all to be financially penalised? Part-time study is a key route to social mobility and advancement. Surely this Government believe that to be at the very heart of their catchphrase cliché, "Education, education, education".

Looking back on my old school reports, I came across another phrase which can be applied to this battle cry. The Government have "worked hard this last term, but should not slack, now that exams are so close".

5.29 p.m.

Baroness Blackstone

My Lords, I, too, declare an interest as the vice-chancellor designate of the University of Greenwich. I begin by welcoming the Bill, and I especially welcome the significant changes that have been made since the White Paper was introduced. The Government have listened and they have been responsive to criticism. However, I hope that they will continue in that spirit and listen a little longer. I very much agree with what the noble Lord, Lord Wakeham, said: I believe that a little further thinking about the implementation of this legislation is still needed.

Before turning to the contentious aspects of the Bill, I want warmly to welcome Parts 1 and 2. Research in the arts and humanities enriches our civilisation. An AHRB is now overdue and will provide a more effective structure for research and scholarship in these areas. It is probably right that that should be with other research councils and the DTI, although it sits rather oddly there and raises the question of whether research policy and the research councils should not be returned to the Department for Education and Skills. Similarly, I support the modernising of the student complaints system. The visitor system that it replaces really belongs to the 19th and not the 21st century.

Turning to the subject of student fees, as the Minister said, the principle was established by the noble Lord, Lord Dearing, and his committee that both the taxpayer, who benefits indirectly, and the student, who benefits directly, should contribute to the cost of higher education. Regrettably, on the opposition Benches, that principle has still not been established, but at least I give the Liberal Democrats credit for consistency. They want the taxpayer to carry the whole burden and that is what they have always said.

However, I am afraid that the Tories keep changing their minds. In 1997, the shadow spokesman at that time denounced means-tested fees, but it was not long before a U-turn took place and the Conservatives supported them. Now they are opposing fees again. When asked about his policies, the noble Lord, Lord Forsyth, said that he did not consider it appropriate for him to respond in a debate of this kind. But, as I understand it, the Conservatives' policy is that they will make up the loss of income by stopping the expansion of our universities and restricting entry. In my view, that is not only opportunistic; it is also short-sighted and wrong. It is wrong for all the individuals who will be denied places and it is wrong for the nation because the nation needs more skilled and highly qualified people.

There are many different ways of obtaining student contributions, such as up-front fees in the United States and deferred fees in Australia. Those can be accompanied by different systems of loans or grants. I do not have time to go into all the pros and cons of the different systems, but I believe that the system proposed in the Bill is fair and likely to be broadly redistributive in its impact. But I want to put to the Minister questions which reflect reservations that I, and I believe others, have. Indeed, some of those questions follow on very much from what the noble Lord, Lord Rix, said, although he did so far more eloquently than I shall be able to do.

First, does the Minister agree that the simpler the scheme, the better it will be, both in keeping down administrative costs and allowing people to understand it? If she agrees with that position, perhaps I may ask her why the Government are hanging on to a requirement that low-income students must receive a bursary of £300, on top of the £2,700 grant, from universities that are charging £3,000 in fees? I simply cannot see why the Government do not consolidate that into a £3,000 grant and top-slice HEFCE's grant to cover the cost, along the lines suggested by my honourable friends Alan Whitehead and Peter Bradley. That would be simpler to administer and fairer to universities which have a very high proportion of low-income students.

Now that 40 per cent of students study part-time, like other speakers, I wonder why the Government have invented a new system that, yet again, does an insufficient amount to support part-time students and provide the funding needed by institutions such as the Open University—and, indeed, my old institution Birkbeck College but others, too—which have a high proportion of part-time students. I know that a study is taking place, but can I ask the Minister to talk to her right honourable friend the Secretary of State and ask him to be generous, whatever the outcome of the review might be? I am very happy to provide some suggestions about how the cost might be covered.

Can the Government also say how they are going to collect deferred fees from EU students? Unless a better answer can be found than sending debt collectors round 25 EU countries, I think that we are going down a very uncertain road here and storing up problems for the future. I foresee in five or six years' time a predictable newspaper-whipped- up campaign against EU students because it will have been found that a reasonably high proportion of them have not been paying back their fees. I believe that discussions with our opposite numbers in the European Union are now urgently needed.

I turn to the question of variable fees. Have the Government really considered the impact of variability, especially when the cap comes off, on universities that will, in the longer term, be unable to charge high fees? That is the same question that the noble Lord, Lord Rix, has just put. Does the Minister agree that the relative quality of facilities and standards of teaching between different universities should not widen, leaving students far worse off in some places than in others? What will the Government do to ensure that the unit of resource does not decline in the so-called modern universities? Can the Minister guarantee that that will not happen to the detriment of thousands of students who most need help and who benefit greatly from the value that high-quality higher education adds?

I come to my last question to the Minister. I support the requirement that universities should provide a plan on how they intend to widen access. I have no difficulty with that and I do not believe that most vice-chancellors will have a difficulty with it. However, given that OFFA's role is to be quite narrow and restricted, I am puzzled as to why that requires a new regulator when the Government are trying to reduce the number of regulators. Again, I believe that that needs to be considered. Surely it is a job that can be done perfectly well by the Higher Education Funding Council.

In conclusion, in spite of what our newspapers often say, the United Kingdom has one of the best systems of higher education in the world: we have high standards of teaching and pastoral care; we have a low drop-out rate; we have short, intensive courses; and we have a strong international reputation for teaching and research with many, many students from all over the world wanting to come to study here and indeed, fighting to get into our institutions. However, in order to retain and improve on that, resources are needed. We shall benefit from increased private contributions, which will certainly help, but those alone will not be enough. The Treasury must make the extra public contributions that are needed. In particular, it will need to find the funds for the institutions that are less able to maximise fee income in the medium to longer term. We need world-class research universities—of course we do. But we also need a world-class system of higher education in which all universities play their part.

5.39 p.m.

Baroness Perry of Southwark

My Lords, I too must declare an interest—what a higher education biased group we are—as pro-chancellor of the University of Surrey and as chair of Roehampton council.

There are several aspects of this Bill which I welcome, as well as one or two that I deplore. Like other noble Lords, I am pleased to see that the arts and humanities are to have proper recognition in the creation of a research council. I hope that adequate funding will follow the structural change.

A modest welcome can also be offered to the belated recognition of what is now a funding crisis in our national higher education. Sadly, the Bill does not offer an adequate solution to the crisis that we face. In many years of chairing the DTI's national committee responsible for co-ordinating education exports—a multi-billion pound contribution to the nation's export effort—I know at first hand how closely inward investment follows the quality of research and postgraduate training offered by universities.

Indeed, in the mid-1990s the Science and Technology Select Committee of this House, then chaired by the noble Lord, Lord Walton, conducted an inquiry into international investment in the UK science base. The committee received evidence from many multi-national companies about why they chose to place their research investment here in the UK. Their answers uniformly referred to the high quality of our PhD graduates, and the high reputation of our universities' research capacity. They also referred to the climate of freedom from over-regulation which the Conservative government had created for business, which is another story.

There is already evidence that we are losing that reputation for high quality, and so losing the investment we so badly need. Just as important, we are in danger of losing that spark of invention which flows from good curiosity-driven research and on which economic success is based. We simply cannot afford to slip out of the international league table of world-class universities. More money—far more than is currently on offer in this Bill—is urgently needed.

There are three themes that I wish to record, and which we shall no doubt debate in more detail in the next stages of the Bill. I am deeply unhappy about all of them. I feel most unhappy because through all of them runs the climate of mistrust and suspicion towards the universities in which this Government appear to indulge. There is the attack on academic freedom proposed by the appointment of an access regulator; the misplaced prejudice against elitism; and the creation of quangoes to replace what universities have been doing with a fair degree of success for many years.

The post of a director of fair access is a blatant attack on academic freedom. The position is not an independent one. The director will be appointed by the Secretary of State, will have to have regard to the Secretary of State's guidance in performing her or his functions, and universities will have to provide the director with separate plans for their use of the fee portion of their income—a very small part, in some universities less than 5 per cent—in addition to the existing requirement of submitting their strategic plans every three years to their funding councils.

We are promised—or perhaps threatened with— regulations that will lay on governing bodies of universities six new requirements to demonstrate how they are improving access and spending the money gained from the additional fees. The intrusive and alienating process of reading, approving and enforcing these plans—by financial penalties if deemed necessary—will keep the director and his ever-growing staff busy spending money which, in my view, could be put to better use in educating students and rewarding excellent staff.

This House has a proud record in defending academic freedom, and I hope that during the passage of the Bill we shall see the House ready to rise to its defence once again. No government should intrude into the right of universities to choose those students who can lit the courses they offer, and the nature of the community of scholars they wish to create.

I would like to reflect for a moment on the kind of factors that universities, quite rightly in my view, take into account in their recruitment and appointment processes. From my own experiences, I know as vice-chancellor of a 1992 university that I was concerned to offer opportunity to those in inner London who had been failed by years in an inadequate and uncaring school system. Often they had few if any educational qualifications, but their adult experience demonstrated that they had the potential to succeed if—and only if—they were nurtured and led through the early stages of their course. The community we created was one that had expert knowledge of how to help such students, and was one where they felt at home.

As head of a Cambridge college, I knew we were looking for something different. Cambridge is a university looking to maintain a community of the brightest and best of their generation, and the pace of learning reflects that community. Regardless of background, parents, school or postcode, the admissions team look for those who will feel at home, and able to succeed in such a community. Those are two very different but valuable kinds of community, and I believe passionately that such diversity is essential, not only to a successful higher education system, but also to the welfare of our society. Governments should keep out of any attempt to mould the system into one mediocre pattern where neither the educationally damaged nor the outstandingly gifted can find a home.

Furthermore, I see no reason for this new apparatus. There are undoubtedly failures in the present system of recruitment and admissions, as well as some excellent practice that could be well shared more widely. The appointment of a small team within the funding councils of England and Wales responsible for advising on good practice in access-related as well as general admission procedures, providing training where necessary, would be a positive step, and no doubt would be welcomed and approved by universities. The strategic plan that universities already submit every three years to their funding councils could be expanded to include their admissions procedures, the out-reach recruitment measures and the financial assistance offered to students. Those matters could be considered by the team within the funding councils, who could offer advice on improving those felt to be inadequate, based on the successful strategies that they had observed and had seen reported in other institutions.

The current annual review of universities' progress against their annual operating statements would also ensure that there was a close annual monitoring of their access-related performance. How different that would be from what is proposed and how much money would be saved. I shall be tabling amendments to try to persuade the Government to this course, which both preserves academic freedom and achieves a far more satisfactory result.

Then there is the closely allied theme of elitism, which needs only a brief and simple statement. Elitism, when it is based on a search for excellence, is a good thing not a bad thing. It has become a pejorative term because of its old-fashioned class flavour. It is correctly used to mean the choosing of those best fitted for success in a particular activity. My noble friend mentioned the analogy of the rugby team. I think of an Olympic team. No one suggests that the English Olympic team should consist of those who have been badly taught at school in a particular athletic discipline and that they should be given an immediate opportunity to perform against the world's top athletes. Talent needs to be sought out, wherever it is, and then trained exhaustively to bring out the very best performance. National Olympic teams are chosen from those who have both innate talent and been through the rigorous coaching needed to enable them to win. They are a sporting elite, and we are proud of them.

It is not so different in higher education. The time to identify talent and develop it to its full potential is not at the point of entry to universities, but far, far earlier when the young person starts school. The access specialist universities try to put right the failures of the education system, often with amazing success, but the academically elite universities, which must produce graduates who can win the international race, should not be expected to risk losing that race, and cruelly disappointing the individuals concerned, when 10 or 12 years of education have failed to put it right. It is to our schools the Government should be turning their attention in righting the imbalance in the student population.

Finally, I refer to what the right reverend Prelate said. I wonder where and why we have lost any sense of the true purpose of universities. Where in all these provisions, based as I said on suspicion and mistrust followed by intrusive regulation, is there any recognition of the universities' historic role as the guardians of the freedom of thought, the critics of and innovators within society, the preservers of society's values and the stirrers of minds and hearts in the young of each generation? The Bill treats the universities as social engineers who cannot be trusted to run their own affairs without government regulation and regulators at their shoulders. What a dangerous path we are treading, and where will it end?

5.50 p.m.

Lord Holme of Cheltenham

My Lords, we are discussing simultaneously the demand for extra funding in higher education and the sources of supply for that extra funding. Perhaps I may start with the demand side of the equation. I think it is perfectly clear, and probably universally agreed in your Lordships' House, that British universities are seriously and chronically underfunded; at best are in danger of losing their international competitive edge; that many of the rest are struggling financially; and that academic researchers and teachers are overextended and underpaid. I do not think that there can be any serious disagreement that substantial extra funds must be found and found quickly.

So, from whence should that funding come? We have the Government's proposals in front of us. I should like to press them on that in a moment. We have a Conservative position that is—I have to say—shrouded in some mystery: a riddle wrapped in an enigma. Perhaps when the noble Baroness, Lady Seccombe, winds up she will be able to enlighten us on what is the alternative policy of the Conservative Party. I look forward to that because I do not think that many of us understand what it is.

As for my own party—and my noble friend Lady Sharp's admirable opening speech reflected its policy today—the Liberal Democrats have an honourable and consistent position of saying that the extra funding should be found from taxation and that a 50 per cent rate on the income tax of higher earners could fund that.

However, now that tax terror has gripped the political leadership of largely bourgeois middle-class countries such as our own, I cannot believe that that possibility, however desirable it may be—and I believe it is desirable—is likely.

I should confess, in deviating from my strict party line, to a belief that it is reasonable that those whose prospects and lifelong earnings are so much enhanced by a university education should pick up at least part of the tab, and also that a greater degree of independence from government on the part of universities would altogether be a good thing.

So, it seems to me at least that the Government may have arrived at the least bad practical way forward. I should have said that more confidently before the Bill was mangled into some strange shapes in the debate in the Commons and the hasty political concessions that were made in order to get the Government a small majority there.

I speak as the Chancellor of the University of Greenwich, which combines a historic campus with all the pressures of a new university, and which has a record of social inclusion second to none—possibly competing for that prize with the University of East London.

I have several questions to put to the Government, but I think it might be appropriate if I were first to welcome my vice-chancellor designate across the Floor of the House and to say that I seem to agree with her on almost, but not quite, everything, which is possibly the most desirable relationship between a chancellor and a vice-chancellor.

Perhaps I may therefore put one or two questions to the noble Baroness. First, are the Government satisfied that the London maintenance grants for less well-off students are adequate, given the very high cost of living in London? In fact a survey last week showed that London is now the most expensive city in the world in which to live.

Secondly, and crucially, there is the issue of part-time students, which has been raised by the right reverend Prelate, the Bishop of Portsmouth, the noble Lord, Lord Rix, and by the noble Baroness, Lady Blackstone. Part-time students are absolutely crucial to our developing educational ecology. They are part of what any sensible expansion of higher education should be built on. I do not believe that the Government have thought sufficiently—although I think that a review is promised about how to ensure that part-time students are positively motivated to go to university. I shall be interested to hear the Minister's views on that.

Thirdly, I should like to reiterate the point about bursaries for universities which have no endowments and a high proportion of relatively poor students. What can the Government do to equalise the situation to make it possible for the universities which most need to give bursaries to do so?

Fourthly, what are the estimated carrying costs for interest-free loans? Interest-free loans—this is really quite remarkable—over 25 years and write-offable at the end is really one of the most striking decisions made by a fiscally prudent Chancellor that I have ever heard. I can only imagine that the financial advisers of every affluent household in the country will be busy telling families that little Jeremy or Jemima should take out the maximum possible student loans on an interest-free basis to be backed up by Papa, back-to-back I really find that difficult to understand. As a matter of information, I should certainly like to know what the carrying costs of the loans are going to be.

Fifthly, perhaps more importantly than the financial manipulations of those able to afford good advice, will the Chancellor be deducting the cost of carrying this money free from the quantum available for higher education? Of course even after we have introduced student fees, the Government will remain by far the most important funder of higher education. What the whole House really wants to hear from the noble Baroness is what constancy of support we can expect from the Chancellor in the years to come for the major part of education which will not be paid for by student fees.

Sixthly, will not the £3,000 ceiling rapidly become a floor? About a month ago there was a survey, which the noble Baroness will have seen, showing that at the time of asking 61 per cent of universities proposed immediately to go up to the £3,000 limit. At that point, £3,000 becomes the new floor. I think that if the Government really want variability of fees, and I gather that that is an important principle, if they want the ability for differentials between universities and within courses, then I think that they need to look very hard at the conditions under which that corset can be relaxed.

Finally, perhaps I may dare to make a creative suggestion to the Government. One of the problems that British universities have is that unlike their American equivalents they do not have endowments. One reason they do not have endowments is that there is no strong tradition of alumnus giving in this country of the sort that there is in the United States. That applies to the Russell group, as much as it applies in new universities. Would it not be possible for some small element of the repayment, for instance, to be paid to the university with perhaps a matching donation from the alumnus of the university, so that there is an alignment between the interests of those who have graduated and are grateful for the university education they have had and their own university, rather than simply the national university system? Could the Government not make some creative attempt to encourage alumnus giving in that way?

5.57 p.m.

Lord Butler of Brockwell

My Lords, in view of the scars which the Government bear in bringing this Bill from another place, scars which I regard as honourable, it would be very pleasant to congratulate the Government and to give wholehearted support to the Bill. I do indeed congratulate the Government on the way they have maintained their principles in another place. I mean to support the Bill and I hope that it goes through. But, like many other speakers—and I declare an interest as the head of an Oxford college—I cannot give wholehearted support to the Bill.

The most that can be said for the Bill is that it is the best Bill we have. Indeed, it is better than anything the other two main parties are currently offering. But it would be wrong to say that it solves—or even goes very far towards solving—the serious problems facing higher education. Many other speakers have made that point.

I want to concentrate my limited time today on the two most controversial provisions of the Bill—student finance and the access regulator. It is common ground—the debate has shown—that higher education in Britain is in great need of additional funding. As the Minister has said, there are three sources of those funds. One is taxation; the second is philanthropy; and the third is students and their families. I leave aside corporate funding of research, not because it is unimportant—indeed, opportunities for harnessing intellectual advances to commercial application have rarely been better—but because corporate contributions to research must be expected to be precisely that: they will not fund universities in their teaching role.

The main difficulty about solving universities' problems from general taxation is that, again as other speakers have said, it will not happen. The Government have been honest in acknowledging that. The noble Baroness, Lady Sharp of Guildford, described the policy of the Liberal Democrat Party in supporting free tuition as idealistic. I am sorry to say that a better description might be that it is ingenuous. For the reasons given by the noble Lords, Lord Hurd and Lord Holme, this is not something that realistically we can expect to happen.

Earl Russell

My Lords, with respect to the noble Lord, at a time when we find many more university graduates returning to live free at home in their 30s to repay their loan, does he not think that many parents may realise that taxation is comparatively the cheaper option?

Lord Butler of Brockwell

My Lords, my experience tells me that parents—and, indeed, all other taxpayers—have a remarkable capacity for wanting the best possible public service without drawing the conclusion that they should be willing to pay for it.

The second source is philanthropy. I welcome the section in the White Paper on increasing endowment. More could be made of that and one thing that worries me about the proposal for long-term repayment of funds is that it may interfere with that. We are making great progress in getting greater alumnus support but I fear that alumni will begin to feel that when they have paid back over many years, they have done their bit and expunged their obligation. In any case, that will not solve the problem in the short term.

That leaves students and their families. Again, the Government have been courageous in recognising that a greater contribution must come from them. I differ from the Government in believing that a larger contribution should be made from students from wealthier families and that students from poorer families should be fully supported. Only in that way can the disincentive to students from poorer families be entirely removed.

However, the main objection to the Government's proposal, as other noble Lords have said, is that it does not solve the current financing problem. The yield from student contributions of even £3,000 a year is insufficient to remove today's deficit, let alone to meet the urgent need to raise academic salaries to a more internationally competitive level.

An upper limit of £3,000 is too low. If the Government tie their hands, as does the amendment to the Bill made in another place, to not raising the fees in real terms without primary legislation until 2010, higher education will suffer a further period of atrophy that will do much harm. I would like to see that constraint on the Government's freedom to take ameliorating action between now and 2010 removed from the Bill.

Secondly, and briefly, I turn to the director of fair access. No reasonable person could complain about the stated purpose of the director in the Bill, which is, to promote and safeguard fair access to higher education", or, indeed, to the purpose that the Minister formulated in her speech today. The danger lies in the next paragraph of Clause 31, which states, in the performance of those functions, have regard to any guidance given to him by the Secretary of State". The draft guidance issued by the Secretary of State greatly enhances those dangers.

If fair access means equal opportunities for students to have access to the courses of their choice on the basis of their ability, there can be no grounds for objection and nothing for universities to fear. Of course, every teacher wants the students with the greatest potential, who are the most rewarding to teach. There are no grounds for a teacher to select students on the basis of their financial background or social class. I know from my experience—the noble Baroness, Lady Perry, made this point—that teachers make great efforts to attract and admit students with the highest capacity without regard to their background.

In other words, if the purpose of the director of fair access is to provide fair opportunities for students on the grounds of their ability, and that is all it is, the role is, frankly, unnecessary. If the director is to be an instrument of selection for grounds other than ability, the role is wrong. In either case, this is a highly regrettable further infringement on academic freedom.

I find it difficult to see how the Minister could make a great deal of giving an assurance to the House, as she did today, that access plans will belong entirely to the universities. How can that be if they have to be formulated precisely in order to gain the approval of the director? In those circumstances, they cannot belong wholly to the universities. As other noble Lords have said, the punitive powers over the director under the Bill to apply financial penalties without any machinery of appeal are also unacceptable.

I hope that your Lordships will do your best to persuade the Government that this further intervention on academic freedom is a bad idea. If that cannot be done, I hope that the power of the Secretary of State to direct will be constrained by amendments to the Bill to the only criterion which is truly fair: ensuring access on grounds of ability regardless of financial means or educational background and not in order to produce a prejudged social result.

6.5 p.m.

Baroness Dean of Thornton-le-Fylde

My Lords, I dip my toe into this debate without any interest to declare—indeed, without any university education— but I welcome the Bill. I hope that it passes through the House and enters the statute book, if for no other reason than our universities deserve some kind of stability for the funding that they need for the future. It is due credit to them that they maintain the high standards of their education for which we in this country are known throughout the world, despite their reduced funding.

Much of the Bill draws on what became known as the Dearing report. I was privileged to be a member of that committee. I welcome Part 1, on research into the arts and humanities; and the introduction of the maintenance grant—something that we suggested but which was never picked up by this Government, or the previous one.

I also welcome the right of students to expect a quality of service from their universities and to have the right of complaint to an independent adjudicator. Like the noble Lord, Lord Wakeham, I agree that that degree of transparency and service to students may need to go broader than is provided for in the Bill. Indeed, the Dearing report identified several areas in which universities need to modernise and give better value to their students.

The Dearing report called for an increase in participation in higher education. There is no doubt that participation has increased, but when we then considered where that increase had come from, we discovered that it had come from the traditional areas in the country, not from the areas in which families traditionally had not taken part. The Bill will help to rectify that. It will help because there is no upfront fee to pay—poorer families are certainly afraid of debt and, if they cannot obtain the money immediately, the easiest way out is to say no. It will help by the introduction of the maintenance grant. It will certainly help the 30 per cent of poorer students financially. There is also the 25 year cut-off, if the fee has not been paid: if you do not earn more than £15,000, you do not pay. That is all a considerable help. Also, for most of them, the payments will be less than students are paying today.

So that will help to increase participation. I accept that the variable fees issue has been controversial. Indeed, for such a small Bill, extensive time has been spent on it in another place and I suspect that that will be the case in this House as well. But, as my noble friend Lady Warwick of Undercliffe said, we already have variable fees. That was an issue that came before the Dearing committee. Part-time students, mature students, as well as postgraduate and international students, have to pay fees. I suggest that many part-time students and considerable numbers of mature students are in a far worse financial position than younger, traditional full-time students. That is an area in which I have concern about the Bill and would welcome a response from my noble friend.

Part-time students have to pay up front. They are not in the same position as full-time students. They may be single parents who want to study to help their families by getting a degree, yet they are in an inferior position. The Bill does not go far enough in that regard. That is also true for mature students.

The noble Lord, Lord Holme of Cheltenham, rightly said that our economic future in Britain depends on having a skilled workforce. It also depends on many of us working longer than the traditional retirement age. We will have to do that. Yet, the grant to mature students is given up to 54 years of age, and no further. It is also dependent on a written undertaking to your local authority that you will seek employment after you have completed your student period. Apparently, we have no database to say how successful, or not, that has been. We should spend a little time in our debates discussing that issue.

Part 2 of the Bill deals with student complaints. The pre-1992 universities have the visitor system; the post-1992 do not. Although we now have a welcome statutory independent adjudicator available for students, that service will not be available for staff. I cannot help but think that all too often in debates on higher education the staff are the tail-end Charlies who are all too often forgotten. Their salaries are appalling; they are encouraged more to do research than to teach, because it pays better. That cannot be the right balance. They have been forgotten again. Certainly, we need to address that issue in our discussions.

The noble Lord, Lord Forsyth, danced—I almost said skillfully—around the question asked by the noble Lord, Lord Holme of Cheltenham, about what the Conservative policy is. He did not answer the question; he said that we were debating this Bill. If those are the ground rules that he wants to debate on—fine. Let us look at the record, because it is here in the Dearing report, in chapter 17, paragraph 17.3. The Higher Education Funding Council warned us in 1996 that in three years 55 per cent of the total universities in this country would be in deficit because of lack of funding. It also told us that the planned cuts of 6.5 per cent over the following two years would be impossible to apply, because in the previous 20 years the funding per unit in higher education had been reduced by 40 per cent. That is a serious cut of funding in unit cost. If that is the kind of policy that any future Conservative government will follow, the universities should be severely worried.

I do not know if it is true, but there is talk that 50 per cent is too high a target to aim for, that we do not need that many people in higher education. In chapter 6.47 of our report, the CBI said, referring to the Conservative government, The Government's current 'cap' on student numbers in higher education is against the national interest". I do not know what the Conservative policy is on higher education, but I know what has happened in the past—

Lord Forsyth of Drumlean

My Lords, I am most grateful to the noble Baroness for giving way. I do not want to banter statistics with her, but the unit of funding was higher in every year of the Conservative government than under the present Government in any year. Will she acknowledge that the introduction of fees by this Government did not result in the unit of funding per student going up? It has remained broadly the same, because the Treasury clawed the money back. Why does the noble Baroness think that this Bill will be any different?

Baroness Dean of Thornton-le-Fylde

My Lords, I think that this Bill will be different because the Chancellor of the Exchequer made clear in his Budget Statement that the Government accepted that public funding for higher education would need to continue. I accept that we do not need to banter figures. The figure of an over-40-per-cent reduction in funding is in the report; it was submitted by the universities.

The noble Baroness, Lady Sharp, talked about being opposed to fees. I agreed with her entirely when I joined the committee chaired by the noble Lord, Lord Dearing. I was wrong. I was wrong because it was clear, first, that substantial numbers of students—part-time, mature and so on—were already paying; secondly, that the funding needed for higher education would not be forthcoming from the taxpayer; and, thirdly, that universities rightly guard their independence seriously. The more you rely on the Chancellor of the Exchequer for your future funding, the clearer the dichotomy becomes. On the one hand, you want to be independent, but, on the other, you are relying on the Government. I was wrong. I went on that committee determined that there would be no charging of fees. I had to change my mind, because of the evidence reviewed over months and months while we worked on the report.

As the noble Lord, Lord Wakeham, said, this is the only show in town at the moment. It would be irresponsible for this Bill not to go through. There are parts that we do not like, and there are parts that we can debate. At the end of the day, it is essential for the future economy of this country—never mind the higher education sector—and for the well-being of this nation that the Bill goes through. I hope that it does.

6.15 p.m.

Lord MacGregor of Pulham Market

My Lords, I want first to comment on the process by which this Bill went through the other House. As my noble friend Lord Forsyth reminded us, it has reached this House only because a considerable number of Scottish MPs— whose constituents are not affected and who will have their own, different system, without any English interference— delivered the crucial, deciding vote on the English proposals. Like my noble friend Lord Forsyth, I am a proud Scot, but that is indefensible as part of our democratic system. It is confirmation that the devolution arrangements still leave much to be desired, that the West Lothian question is still alive and unresolved, and that somehow we will have to have a different constitutional arrangement in the House of Commons.

I will begin by commenting first on student financing of tuition fees. I am not against that principle; I am in favour of it for three reasons. First, as many speakers have pointed out, universities are substantially under-funded, and this Bill will help. The noble Baroness, Lady Warwick, gave the figure of about £8,000 per student in 1990, compared with the last available figure of about £5,000 in 2002. I recognise that this is partly because of the considerable additional numbers coming into universities. Those pressures have improved the efficiency of universities. Nevertheless, we must acknowledge that that is a substantial drop and that universities now face many additional costs, not least because of government regulations; because of the need for recruitment and retention of academic staff, which is still a serious problem; because of under-funding of maintenance and therefore crumbling infrastructures for the 21st century; and because of the costs of IT systems for e-mailing, which mean that many universities will have to incur extra costs simply to stay in the game.

I recognise that there is under-funding and I am particularly concerned about the maintenance of the position of the Russell group of universities as world-class centres of excellence. However, I do not agree with those who say that those universities will be the main, or only, beneficiaries of the additional tuition fees of £3,000 or more. The university that I am most closely associated with, in my constituency in Norfolk, where I live, is the University of East Anglia. I am clear from discussions with staff there that they feel they will face severe pressures to cut out activities, and many other things, if this Bill does not go through to provide the additional tuition fees. In that case, it will take them back to roughly the funding per student of 1992.

Secondly, it is important to have other income streams providing an increasing source of funding. Overdependence on state funding is unhealthy for our university system. Dependence on the Treasury is unlikely to solve the under-funding problem. I agree with the noble Lord, Lord Butler. I speak as a former Chief Secretary to the Treasury. Universities are being realistic in saying that when governments are faced with pressures for additional funding in health, other aspects of education, transport and so on, the universities' bid for much higher funding from that source is unlikely to come top of the queue.

On the question of clawback, I know that we will debate in Committee whether the additional funding that comes through tuition fees can be preserved somehow in a legislative fashion. We will have to rely on the good will of Chancellors and Chief Secretaries. I cannot see how you can enshrine in legislation something that commits a future Parliament—we are talking about this coming into effect in 2006—to legislation passed in this Parliament.

Thirdly, graduates should make a contribution through repayment of loans as the third, or perhaps fourth, element of university funding. There is the state, industry, parents and graduates. I have to say that, because I introduced the Education (Student Loans) Bill, which introduced the first principle of graduates contributing through loans. I used all the arguments that I hear the Government using now in favour of tuition fees, which the Labour Party deeply opposed at that time. So, I am not going to change my position, as it has done. I acknowledge that. Those are the reasons why I accept the general principle.

I am also in favour of variable fees. They give greater flexibility and control to universities in deciding their priorities and dispositions and in taking into account questions such as where they play to their strengths and how they perceive local needs. They have done so, to the great benefit of all concerned, in respect of overseas students. I do not share the objections of those who oppose variable fees on the ground that, somehow or other, they bring the market into the process. I see the merits.

I am, however, concerned at various parts of the proposals in the Bill. In view of the shortness of time, I shall concentrate on two matters, and I hope that the Minister will respond to them in her winding-up speech. The first matter is the cost of the concessions— in other words, the costs that the Government have had to sustain in order to get the Bill through the other place and some of the costs that they incurred in framing the proposals even before the Bill got to the other place. How much extra Treasury funding has been incurred as a result of the introduction of the measure?

The universities will get another £900 million directly. I think that it is £900 million, not more, as my noble friend Lord Forsyth of Drumlean pointed out. If, to be fair to the Government, we ignore the additional £450 million coming from the provision of maintenance grants, what is the figure for the extra money coming into the system? What will be the extra benefit to the system from the proposals? I believe that it will be something like £250 million. The cost of all the other concessions means that the additional amount coming in will be about £250 million over and above what there would have been originally. To get the additional £250 million, the Treasury will have to stump up so much more. Are the particular proposals on tuition fees the best way of getting an additional £250 million into the system?

The second question that I wanted to raise was raised by the noble Baroness, Lady Blackstone, so I can deal with it briefly. There is now more emphasis on loans and the importance of repaying them. I suspect that, with the entry of the new member states into the EU, we will see many more students from the entrant countries coming here to get the benefit of an English education. How will the Government ensure that loan repayments are made?

Finally, I turn to OFFA. I agree with those who see it as a political sop to get the measures through. It is unnecessary. The universities themselves had to accept it as a concession in order to get the tuition fee arrangement. Admissions should be the prerogative totally of the universities and should be based on talent, academic achievement and potential, not on social engineering. I have heard everything that the Government have said about dealing with applications, not admissions, and about a light touch. Like the noble Lord, Lord Butler of Brockwell, I am worried about how things might develop in practice.

The universities must beware of how regulators—that is what the director is—extend their dominion, however well intentioned they are at the outset. The regulator will be subject to all sorts of media and political pressure. The first time that it is found that a university's admissions do not match what the critics have been expecting, there will be immediate attempts to go beyond the remit. There is no right of appeal. We on the House's Constitution Committee have been considering the position of regulators recently. One of the biggest criticisms that we have heard is that there is no right of appeal.

I believe that it is a wrong move, and I am wholly opposed to it. So far, it has found few friends in this House. It is one of the areas that will need the greatest scrutiny at later stages. I am certainly not one of its few friends.

6.24 p.m.

Lord Wallace of Saltaire

My Lords, I was interested to hear the Minister restate the principle that the state was and should always remain the main funder of higher education. I invite her to visit the London School of Economics, where I am a member of staff. The state pays one fifth of the costs of our institution. I would like to hear what she has to say about that.

I shall talk about the international context of the Bill. I am struck by the extent to which the debate about fees—Part 3 of the Bill—has taken place almost on the assumption that we have a closed system. The noble Baroness, Lady Blackstone, and the noble Lord, Lord MacGregor of Pulliam Market, both touched on the European dimension. That dimension is important, but there is also a global dimension. Twenty-five years ago, I researched a book on foreign policy process in Britain. I looked around all the departments in Whitehall and was struck by the fact that what was then the Department of Education and Science was the most solidly domestic department that I visited. It was the one that cared least about the international dimension. I cannot believe that that is still the case.

The European dimension to higher education—the Bologna process, about which we have heard much too little in the British press—locks the debate on British higher education into a European context. The British Government claim to attach a great deal of importance to the Lisbon process and the commitment to make the European economy, the most competitive in the world". In that process, the role of universities in research and teaching is a key element. Last year, the Sapir report on the future of European economic governance laid even more emphasis on the need to develop European universities of world quality. The international context is important for all sorts of reasons, and I was struck by the fact that there was nothing about it in the Minister's speech.

I think that we all agree that university education should be international and that we want to see increasing numbers of students coming to this country to study and, at least as important, a larger number of British students spending some time studying abroad. It is highly relevant therefore to ask whether the pattern of fee imposition and collection will encourage or discourage student exchange.

The European dimension is, in many ways, the most important. I share the views held by the noble Baroness, Lady Blackstone, about the problems of collection and the potential for whipping up Daily Mail aggression, so to speak, against students from other parts of Europe who come here and do not repay their fees afterwards. The current situation is not sustainable in the long run. As I argued to the noble Baroness, Lady Blackstone, when she was Minister for higher education, without, at that stage, persuading her, we have no choice but to question the current European Union position.

I have read the European Court of Justice rulings that took us from a position in which training was part of European competence through one in which some aspects of higher education were part of European competence to one in which all aspects of higher education were part of European competence. I regard that series of judgments as being among the shakier decisions taken by the ECJ. They go against the principle of subsidiarity, to which Her Majesty's Government attach a good deal of importance, and against current practice in that highly developed federation, the United States, where a student from Illinois who studies in Michigan pays a higher fee than a student from Michigan because he comes from outside the state and does not pay taxes.

There are precedents for changing the treaties in order to reverse mistaken decisions of the ECJ or decisions taken by the ECJ that have not taken the full implications into account. The Barber case of 1988, which related to private occupational pensions, was reversed by the Maastricht Treaty in 1992. I encourage the Government to examine the matter before the current intergovernmental conference is completed. It is one way of avoiding the long-term implications in a European Union that is about to become 25 strong and will expand to 30 in the next 10 years. I would love to hear more from the Minister about how far the Bologna process, now under way with regard to closer links between European universities, feeds in and out of the question of the future funding of European universities.

My second question is about student visas, on which a number of questions have already been raised in the House. The Home Office wishes to tax foreign students coming into the country, and, in Committee, some of us will consider whether there is a possibility of adding that dimension to the Bill. If we are to charge students who come from abroad, the question of how and at what point we collect fees from such students is important.

My third question is about the impact of the fee arrangement on British students moving abroad. I declare a personal interest. I have been arguing with my son about if and when he will return from the United States when he leaves for graduate study with four years' rather generous funding currently provided. What incentives will the British higher education system provide for him and his fellows to come back? Forty per cent of scientists trained in European universities in higher degrees are currently working in the United States, as are 30 per cent of mathematicians who have reached that level. That is worrying for the future of European global competitiveness. We do not want to build in disincentives to the term.

Of course, it is also the case that many of the brightest people who graduate from British universities work in international careers and spend a great deal of their time living abroad. Do we wish to leave them with incentives to stay abroad for 25 years? Can we imagine that in the future there will be government programmes to write off accumulated student debt in order to attract people back from abroad? Those seem to be issues that cannot be left out of a debate on a Bill that concerns higher education, which is increasingly an international activity and which, for the best of all reasons, needs to be an international activity.

6.31 p.m.

Lord Dearing

My Lords, I guess that it was my fate to be remembered for ever with a certain green volume—I think that there were about 10 in all—and with the introduction of what are called tuition fees. In fact, our committee recommended that after graduation students should make income-contingent contributions to the cost of higher education and that those who came from poor homes should have maintenance grants. I like this Bill because it introduces all that. I welcome the Bill.

Because it is relevant, I shall give a little history on why we recommended graduate contributions. Higher education was in financial crisis. We thought that it was necessary to diversify the basis of funding because experience had shown that one could not rely on an Exchequer of whichever government. We thought that higher education is not like the National Health Service, which is available to all citizens as of right if they have a need. For young people of 18 and 19 years old, education is available to those who have a certain aptitude, potential and level of achievement in education. It confers on them very distinct benefits. It enriches life. It also gives young people the prospect of more secure employment at a higher income over life, which we put at 11 to 14 per cent.

There were no comparable state-funded advantages to those who were not so capable of benefiting from education and had not those levels of achievement. So it seemed to us equitable to ask those young people who benefit to make a contribution, independent of parental means. But, at the same time, we argued that for those who came from poorer homes, there should be support for maintenance from the state. That seemed a principled approach. I have to stand with that, and I do.

There were two respects in which what we said is not what the Government are saying: we said £1,000, and the Government say up to £3,000. On the need for extra funding, in its 2002 bid, Universities UK said that universities across the United Kingdom need an extra £8 billion. Lo and behold, it was promised £3.7 billion. In 2004, it produced another report on its needs. For England and Northern Ireland alone, in spite of having £3.7 billion for two years, it is asking for £8.8 billion.

It is right that most of that money should come from the Exchequer; that is, the taxpayer. However, given the scale of the problem, it seems reasonable to ask for some more from those who benefit most from the experience of higher education, provided that there is support for maintenance for students from poor homes. Something that I particularly like about the Government's thinking in broadening participation is the extra—or the new—£1,500 a year for such young people at 16 and 17 years old to encourage them to stay on at school so that they have a chance to get to university.

It is also important that since the Government published their February proposal last year, they have raised the initial contribution of £1,000 to £1,500, and lumped it with the £1,200 for tuition fees into an upfront cash-in-hand grant of £2,700. Then there are subsidised loans. That is very relevant to the issue of access, which we all care about.

The situation has improved. The ratio of those students coming from poorer homes compared with those from better-off homes over the past 30 years has changed from 7:1 to 3:1. But there is still a 30 percentage point difference between the higher social classes and the less well-off social classes in participation. We still have a problem. Unpopular though it is, that is why it is fair to ask the universities to accept OFFA as a spur to the sides of their good intent, provided that it has no role on admissions. That I would like to see more firmly enshrined than in a parenthetical sentence by the Secretary of State. I should like to see it hammered down that admissions are the business of universities, but there is a legitimate role for OFFA in access. It is tempting to argue that we do not need another body and that it should go with the Higher Education Funding Council. That was my first reaction.

I was chairman of that body for some time. While one does not like to see more regulatory bodies, one does bother about the concentration of power. I do not want to see excessive concentrations of power, however public spirited people may be. There is a conflict of interest. The Higher Education Funding Council is interested in financial wellbeing, but OFFA may have to say, "No, we do not like what you are doing. You can't have this money". I think that it should be separate.

I think that we all feel for students facing the prospect of obligations to make payments. But I cannot escape the rationality that it is equitable to ask them to make a contribution when they are having something that is not available to all young people as

of right. It is for those students and not for all. Therefore, it is fair, provided that it is income-contingent and spread, and so forth. For those reasons, I think that we are on the right track.

I think that it was R A Butler, when introducing the Education Act 1944, who quoted Disraeli, who in 1874 said: Upon the education of the people of this country the fate of this country depends". I am not one of those who think that, in facing the awesome challenge that is emerging over the next 20 years from China, India and South America, if we invest sufficiently in higher education, the problem will be solved. But I do see it as a necessary condition—not a sufficient condition, but a very necessary condition— of enabling us to sustain the wellbeing of our people in the decade ahead.

I hope we shall see that our interest is very much that universities and other institutions of higher education are adequately funded to serve the nation well. Perhaps I may change the Disraeli quotation: upon the wellbeing of the universities, the future of this nation depends. I hope that this House will welcome the Bill. Yes, we have reservations. I want to see admissions very clearly not part of the role of OFFA. If it is possible in the Bill, I should like to see some mechanism that will stop the Chancellor snitching part of it. We would all want to see that protection.

Like my noble friend Lady Boothroyd, I want to hear what more will be done for part-time students. We need to engage in learning for life. We need to help those who need help. I welcome the Bill. It is the best show in town. It is the only show in town, and we had better take it.

6.40 p.m.

Lord Desai

My Lords, it is a privilege to speak after the noble Lord, Lord Dearing, who is perhaps the only person who can be acquitted of any charge of being responsible for the mess that higher education is in today, or has been in over the past 20 years. He tried his best. The fact that his advice was not taken is not his fault.

For a long time, since the summer of 1987, I have been a partisan of income-contingent loans for higher education; everyone should pay. My colleagues Nicholas Barr and lain Crawford, who sadly died recently, have been arguing patiently and methodically for such a scheme through Select Committees of Parliament, in articles in journals and so forth. I have never been in any doubt that the ideal way to finance universities is to leave them to charge whatever they like. People should sign contracts to pay the fees out of their future income. Moreover, whatever support we currently provide for tuition should be put into a national bursary scheme. All that money should be distributed through a national bursary, thus meeting the need for help with higher education fees of, I think, around one in four students.

Although I do not think that governments will like it, I still believe that instead of maintenance grants, all full-time students should be eligible for income support. In that way the whole question of maintenance grants would be removed and there would be no means testing. I am a partisan of citizens' income, so if I can get citizens' income by stealth, I will have it. That would be the ideal situation.

I welcome the Bill. In December 1997 we took the first little bite out of the Dearing cherry, as it were. I recall saying that it would not solve all the problems and that within four years the Government would be back, asking for more money. I say the same now; this will not solve all our problems and in another four years we will be back here again. But that is how things happen in politics. The ideal answer is not reached immediately.

The case for a congestion tax was passionately argued by economists in 1965. It took only another 35 years to deliver, but that is all right because we economists are patient. We know we are right. We have thought it through, we know we are correct and the fact that people do not agree with us never bothers us. It proves that we are right. I am immensely cheered when people do not agree with me.

The problem is that people around the country, and especially those in another place, mistake uniformity for equity. They believe that if a service is available then, first, one ought to charge for it so that the poorest person can afford to use it. That means that everyone who is not poor has a free ride on the state. The higher education system in this country has been the biggest robbery the middle classes have perpetrated on the welfare state. But the middle classes of this country are subtle. The poor have to claim benefits; such assistance has to be paid out and it is visible. However, the middle classes benefit by not paying for something, so that it never appears in government budgets. The subsidy for higher education enjoyed by the middle classes is one of the biggest regressive transfers this country has ever produced. Yet people in another place believe that equity demands that we go on providing free education.

The party on the Benches oblique to me wants to perpetuate and compound that transfer by imposing an extra income tax. It thinks that that is progressive, but what it does not know is that the bottom 20 per cent of the population of this country pay a higher proportion of their income in tax than the top 20 per cent. as does the next 20 per cent. Unfortunately that is a 1 per cent income tax which is going to be spent again and again by the party oblique to me. First, it will not solve the problem and, secondly, it will not cure the inequity of the system.

As the noble Lord, Lord Dearing, said, equity demands that those students who benefit from higher education—and they do benefit from it, mostly on a private basis, although that is not to deny that there is also some public good—should be charged fully out of their future income. People may have poor parents, and we should completely disregard parental income. Students should be charged on their future income. If the fees are income-contingent, that would sort out our problems. That, I believe, is the ideal way forward.

This Bill takes another small step towards that goal. Let us welcome it. I hope that my party will continue in power. We certainly cannot let the party opposite come back in charge of higher education—or anything else, for that matter—given the mess it made. Over the next four years, I hope that my noble friend, like Oliver Twist, will be back asking for more, please. In that way perhaps we shall reach the right level of fees—that which foreign students pay; that is, around £10,000 per year. That is the reality of the cost of higher education for a social science degree; I am not talking about a degree in the natural sciences. Eventually it will happen and we shall wait for it.

I want to say a few words about European Union students, a matter raised by my noble friend Lady Blackstone, and the noble Lords, Lord MacGregor of Pulham Market and Lord Wallace of Saltaire. I really do not know if it could be done, but I wonder whether we could estimate the subsidy provided for students coming here from EU countries and take that sum off what we owe the EU. We should calculate that the subsidy is worth so many thousands of pounds per student and take it off what we owe. First we should subtract it and then negotiate. We should not negotiate first; we should behave like the French. We should take the money away, saying that until the European Court of Justice corrects its judgments on the matter discussed by the noble Lord, Lord Wallace of Saltaire, we do not agree with them and we will keep X million pounds in reserve. We could keep it tucked away nicely in a fund and if it were required, it would be there. Money is findable so it makes no difference. That proposition would have my strong support. Moreover, if we did that, the Government would also win the referendum. It is not a bad idea.

Lastly, I want to respond to what was said by the right reverend Prelate the Bishop of Portsmouth. He asked what education is about. I have taught for 38 years and I think that it is about only one thing: universities teach people how to think for themselves. It is the most difficult thing to do, and everything else is extra and unintended. You can teach people useful crafts and skills and so forth, but you cannot teach people how to think unless they are in a university. To be able to think for yourself is the most important asset, on which depends not only our economic growth, but also the quality of our spiritual and cultural life. That is why we ought to preserve our universities.

6.47 p.m.

Lord Waldegrave of North Hill

My Lords, it would be most attractive to add the rebate proposed by the noble Lord, Lord Desai, to that of my noble friend Lady Thatcher. He wields a mean handbag and I hope that his suggestion is taken up seriously.

It has not been my custom to make speeches attacking my own Front Bench. I did so once in 1981 and was punished by being made Minister for the universities. That shut me up for the next 20 years. I shall endeavour on this occasion not to attack my Front Bench in case of another frightful penalty, but I am grateful to my noble friend for passing over my own party's policy in silence on this occasion.

It is quite impossible to make party points on this subject. The noble Baroness, Lady Dean, had a go at it, but when I became Minister for the universities, I would travel around the country using the speeches made by the noble Baroness, Lady Williams of Crosby, who had been the education Secretary in the previous Labour government. She said that the universities were a dreadful, overfunded lot. Since that point the unit of resource started to reduce. It has gone down ever since and I stand right alongside my noble friend Lord MacGregor who, as a member of the former Chief Secretaries club, to say that this is not the highest priority of Chancellors of the Exchequer or Chief Secretaries when money is short. If we need to go on for another 20 years conducting experiments to prove that fact, not much will be left of our universities at the end.

I want to add one or two points to the great eloquence of the speech of the noble Lord, Lord Dearing. I agree with almost every word that he said. The status quo, or something like it, is now not an option. We can see what is happening, for example, at the great university of which the noble Lord, Lord Desai, is such a distinguished ornament; namely, the London School of Economics. I believe that some 60 per cent and rising of its students now come from overseas—not including the EU—paying full fees. This will happen to the great international universities in our country if we do not provide them with more resourcing. They will sell their services to those who can pay.

They will do it first by moving away from undergraduate teaching to graduate teaching, where there is an international market and full fees. There are some indications of this happening in my own university of Oxford. We will find the paradoxical situation in a few years' time that the famous universities of this country are fundamentally serving an international overseas market and not the market here. That was not the objective of those who, hundreds of years ago—nearly 1,000 years ago in the case of the old universities—built those great institutions.

Two experiments have been conducted. One was to trust the Treasury as the only source of funding. That was not much good. The other was to see what would happen if we centralised the whole system. The net result has been an over-centralised, under-funded system, with a dreadful uniformity beginning to creep into our university system.

We tried to do away with the snobberies by saying that everyone could pretend to be the same. We never went down the productive route, for example, of California, of a quite explicit tripartite system of community colleges, teaching universities and great research universities with different missions, knowing very well that it is easier to move the people than the institutions. We have centralised and under-funded the whole system. If you allow responsibility to rest with the Treasury you will certainly get under-funding, which will always come with centralisation. Every time there is a little money to spend it will be offered with strings attached, and so the centralisation will grow alongside and in parallel with the under-funding.

That is why, in spite of honourable exceptions such as Birkbeck's and the Open University's part-time students—issues which need further work—slowly but surely we are beginning to edge towards a system where we believe there is only one model of university, and that must be mad. So we will either get them escaping or we will have an under-funded, uniform mediocrity.

Endowment will not achieve improvements in my lifetime, I fear. There are only two universities with significant endowments—Oxford and Cambridge—in the British university system. If you add those two and all the others together you would get about half the endowments of Harvard University. Let us do more to encourage people to give, but let us not imagine that it will solve the situation in the foreseeable future.

We therefore have to widen and pluralise not only the source of funding but the hope that a more plural source of funding will produce the additional vital benefit of more pluralistic institutions with different, genuine missions. Why should there not be "Caltechs", which are very small and incredibly highly funded? Why also should there not be great colleges and universities which have teaching as their principal mission and have a lower unit of resource?

You can never plan to achieve this in our system because there will always be the populist argument that nothing can be different one from the other. So you will have to allow people to develop their own separate sources of decision taking. By far the best way of doing that is to allow the students to choose. They can do so if they are backed and allowed to take their resource with them across a wide spectrum of competing offers, from the LSE to the Caltech at the other end. That surely means that the original direction in which we went in the days of Lloyd George of funding the universities and the institutions rather than the student is fundamentally wrong.

Of course this cannot be changed all at once—it will have to be a very slow transition—but if we were able to move away, not from public funding of these institutions but to a position where that public funding goes via the students through national bursary schemes and national scholarship schemes, in the end we will develop a far wider range of student-responsive institutions.

Some institutions may offer such high fees that they will be out of anyone's reach. Then they will be punished for it or become like the Ivy League used to be in the old days, as kinds of social clubs. But no one wants to teach in such institutions for long and they will correct themselves and come back; or they will go out and collect lots of money for bursaries, get good people in and transform themselves as the Ivy League partly has done.

There is also a pragmatic argument as to the safety of funds. I believe profoundly that the funds will be safer if they go to help people into admirable, excellent institutions. It is far easier to get money as a Minister to say to your colleagues, "Look, we must get access for people to these excellent institutions which are offering wonderful things" than it is to say, "Can I have more money to make many mediocre institutions better?". In that situation, the Treasury always has the knock down argument, "Well, they are mediocre, so they should not be given any more money, should they?".

A world in which there are excellent, varied institutions offering a variety of the things that people want will find students lobbying to get the money to go there and they will be a powerful force. So, in addition to the good old Conservative argument of pluralism, variety and choice, I am making a pragmatic realpolitik argument that if we can put the flow of money through the students they will be, in the long term, far stronger defenders and a much more powerful constituency in defence of the universities.

The Bill is a very small step. It has many imperfections but it is potentially a turning point towards that kind of changed future. That is why I support it. That is why I hope—with all its imperfections, some of which we have heard today—it goes on to the statute book.

6.56 p.m.

Lord Phillips of Sudbury

My Lords, I declare an interest as Chancellor of Essex University. That is particularly relevant because Ivor Crewe is an incredibly effective vice-chancellor of that university and chairman of Universities UK, so I had better watch what I say.

This is a vital Bill. It deals not only with hard financial practicalities but also with educational philosophy. It is perhaps ironic that a Labour government have brought the Bill forward, particularly as in so doing they have turned their backs on increased funding via general taxation or a graduate tax. However, the fee plan they propose has received the strong backing of Universities UK precisely because the fees to be paid by students will be new or additional funding and thus, it is said, not subject to the uncertainties of general taxation policy, whichever administration is in power. The noble Lord, Lord MacGregor, expatiated on that point and spoke of his willingness to rely on what he called the good will of Chancellors and future administrations. I am not as sanguine as the noble Lord on that score.

Taking as an example Essex University, which in these respects is fairly typical, the overall impact of the Bill will leave us with an 8 per cent real increase in our total income—an increase of £6 million to £7 million a year on a turnover of £82 million. That is a highly significant sum. However, as I said, the whole Bill is posited on the Government being totally true to their word.

In the other place, the Secretary of State for Education, Charles Clarke, stated: I have made it clear, and I take the opportunity to do so again today, that we see the fee income that will be generated, however much it may be, as being additional to the commitment made by the state in the comprehensive spending review".—[Official Report, Commons, 4/12/03; col. 632.] That was a very straightforward and much reiterated statement. But if one looks at what happened with similar protestations of additionality vis-à-vis lottery funding, one can see the dangers and, some might think, the inevitabilities.

I suggest to the House—and I appreciate that this is an extremely difficult matter to cope with—that we should make some attempt to build into the fabric of the Bill the fact that funding will be additional and not, over time, subvertable. I suggest this way of going about it. First, we should put the principle of additionality on the face of the Bill. Secondly, Universities UK should be given the right to challenge an alleged breach of the principle. Only Universities UK should have that right in order to avoid a plethora of individual universities having a go.

Thirdly, the Bill could provide that, in the event of such a challenge, it would be referred to an ad hoc commission, comprising maybe two to five individuals, selected for their reputation and experience by, I suggest, the Secretary of State at the DCA. The commission would, in turn, have the right to organise and establish its own procedures, which might well involve public hearings, to call expert evidence and to reach conclusions. The conclusions would be either that Universities UK was correct and there had been a breach of the principle of additionality or that there had not. If the commission found that there had been a breach, it would give reasons. I suggest that the Government of the day would be hard put to ignore that finding. I suggest that the finding would not be legally binding, because when one enters that territory, one is dealing with a piece of legal and statutory machinery that is frankly incapable of human devising if it is not at the same time to be so complicated as to collapse in on itself.

I would be most grateful to know whether noble Lords think that something of this sort might have a chance of working. Additionality is a legal principle at the very heart of the European Union's machinery. It has a great deal of provision to ensure that national governments do not simply substitute EU funding for their own taxation expenditure. However, the EU has not got as far as making additionality a justiciable issue, because it is having to contend with a set of moving targets and very flexible, if not rubbery, concepts.

My second point concerns the potential effect of the Bill on the under-represented groups in society who are to be helped by the Director of Fair Access. It seems that student loans are not now available to students from the EU who come to our universities, but fee loans will be available to them from 2006. That, in turn, will have a significant impact on the numbers who will apply to come here.

Secondly, students from the EU's new members seem very likely to apply here given the new fee arrangements and the repayment levels. Students from, for example, Poland, may well not have to start repaying anything for very many years down the track. At the moment, Germany has a disproportionate number of EU students at its universities because it charges no student fees. However, I understand that Germany and the other countries in the same position are in the process of changing that so that the relative advantage of German and other universities over British universities will, by 2006, have been largely eliminated, resulting in a further substantial increase in the numbers of EU students coming here.

There are also the issues of English as the lingua franca, the internationalisation of the workplace and the pull of the City. I believe that all those will lead to greater numbers of EU students applying to our universities, also leading to pressure on places here.

Obtaining a first degree in this country takes three years, compared with four to six years in continental universities. That is another reason for coming here. If we add to that the hunt for non-EU overseas students that will intensify—an overseas student is worth considerable extra funding to a university—that puts increased pressure on places for UK students, especially given the demographic tendencies up to 2010 which I understand will mean a substantial increase in the numbers of UK students of university age.

I commend to the Government the need to look carefully at all those influences to make sure that their goal of a 50 per cent university attendance is not put into reverse. In particular, I draw the Minister's attention to Clauses 30 and 31. It is unclear whether the Director of Fair Access and the fee plans that are so much a part of the Bill are to apply to UK students, EU students or other students. The reference in Clause 31 to "qualifying persons", which one might think would clarify the point, complicates it instead. I hope the Minister will be able to shed light on that. If she cannot when she winds up, I hope that she will do so soon thereafter.

7.5 p.m.

Baroness Warnock

My Lords, I join other noble Lords in greatly welcoming the first two parts of the Bill—the establishment of an Arts and Humanities Research Council and the designation of an independent operator to deal with student complaints. The latter is especially welcome to me since I, like many of your Lordships, have acted as a visitor to a university and a college within a university, and I found it time-consuming and unsatisfactory. The complainants—though most of them were, in my experience, at least temporarily clinically insane— were, rightly, not satisfied of the independence or indeed the competence of the visitor. I, for my part, did not feel myself to be either independent or competent. I therefore believe that this part of the Bill is sensible and timely.

I am also in broad agreement with the proposition that students should pay in some manner for their university education, even though I entirely agree with the noble Earl, Lord Russell, that their being subject to a loan has already altered the quality of the time they can spend on their academic studies, and of course I regret that. But, like other noble Lords, I believe that top-up fees capped at £3,000 are merely scratching the surface. For one thing, the cap will soon go, and, in any case. they will do virtually nothing towards solving the fundamental financial problems of the universities.

In the rhetoric surrounding the introduction of top-up fees, there was a great deal of talk of restoring a considerable degree of the status of our greatest universities to world-class standard. Herein lies a good deal of confusion. World-class universities enjoy the status they do because of their research achievements, past and future, not because of the excellence of their teaching or the high performance of their undergraduate students. But it has been the particular glory of our great universities that they have combined first-class research with first-class teaching. I passionately believe that this is the best sort of institution that there can be in the world. However, it has to be agreed—and I think everybody does agree—that the combination of teaching and research is becoming more and more difficult to sustain for various reasons, not all of them financial.

Secondly, and more relevantly here, the proposed top-up fees will go, it is to be hoped, on resources for undergraduate study, bursaries and help for the poorer undergraduates. This collection of money will be long exhausted before having any impact whatever on research facilities. Without far greater government support for research, the thought of our retaining world-class status among universities is fantasy. It is to be sincerely hoped that the Government recognise this, and I hope that the Minister will address this briefly in her reply.

Of course our universities need endowments, but, as has already been pointed out, only the oldest universities have endowments of any size. Of course a certain amount is achieved by collaboration between industry and the universities. However, strings are usually attached to this and for many reasons, which others will be better able to expound than I, it would be idle to rely on much more of such collaboration. Even if we could, it would leave much mathematical and scientific research and all philosophical, historical and linguistic research and scholarship trailing behind. If we do not have a high level of research and scholarship in non-industrial-related subjects, a great part of the purpose of universities will be lost, not least their mission for their undergraduate students.

Therefore, it is absolutely necessary for the Government to face these facts. It is essential to stop clouding the issue with talk about how bad it would be if we had a two-tier or multi-tier system of universities. Of course we have a multi-tier system of universities. That was made abundantly clear in the eloquent speech by the noble Lord, Lord Waldegrave, just now. Not every school leaver wants to go to a world-class university and not every school leaver should be encouraged to try to do so even if he wants to.

We must recognise and embrace the diversity that we now have in our universities. I used to blame myself and others for allowing the title of university to apply indiscriminately to all our institutions of higher education. However, I now think that it was a good thing, because it emphasises streams of diversity within the university system, some of which are more able than others to welcome part-time students, mature students and those who want to study vocational subjects or not to continue research.

All of these issues—including that of access, to which, I am sure that we will return many times and about which much has been said already—have been confused together and are in danger of distracting the Government from the real needs of the research departments of the great universities. I hope that nobody supposes that this Bill—good though it is in many ways—gets to the heart of the matter, which is the basic underfunding of the great universities.

7.12 p.m.

Baroness Lockwood

My Lords, this Bill must be considered in the context of the January 2003 White Paper, various policy documents that the Government have subsequently put forward and the recent injection of public funding now coming into the system through the triennial expense review, which was underlined by the Chancellor in the last Budget Statement. In that context I support the general thrust of the Bill, albeit with some reservations to which I will return later. I agree with many of the reservations made by other Members of your Lordships' House relating to part-time education and so forth. I declare an interest as Chancellor of the University of Bradford, which shares one of my major reservations.

As the Minister has indicated, there is an £8 billion shortfall in university funding, which has arisen largely through the expansion of student numbers over the past three decades without matching funding. That was something that the Dearing committee was set up to look at in 1997. We have already heard from the noble Lord, Lord Dearing, who chaired that committee, that the report indicated that state funding alone could not meet the growing demands of the higher education system. The report recommended that the individual beneficiary—the student—should make a contribution. Unlike some, I still support that principle. It is inequitable to expect those who in the past had no real opportunity to have a university education together with those who in the future will still not have a university education, to heavily subsidise those who are fortunate enough to have one.

The benefits are not just financial, considerable though those are with the type of jobs open to graduates. The CBI reckons that some 1.7 million new graduate jobs will be available by 2010. University education also opens doors to cultural and social values which remain with graduates for the whole of their lives and are often passed on to their children. It gives a quality of life which non-graduates who finished education early have difficulty in matching.

All universities desperately need the proposed £3,000 increase in fees if they are to continue to provide an educational experience worthy of the name and if they are to retain their position internationally. We are told that the lower income groups from whom we are looking to increase participation have a debt aversion and that they will be deterred from applying to universities by the new proposals. It is not debt that has been a deterrent in the past, but low expectations and aspirations that have been undermined by poor general education provision and parental attitude. Those attitudes are stubbornly resisting change even now. It would be helpful to potential students if more positive comments were made about the opportunities that are now available to young people instead of reinforcing those prejudices. The Council for Industry and Higher Education has said: We must all work to persuade students and those who advise them that learning is an investment and that to invest in higher education is to invest in your whole future". I fear that the current debate makes little contribution in that direction.

Arguing in a negative way has detracted attention from the fundamental change that the Bill proposes. No student or parent need pay for tuition fees up front. In effect, tuition is free at the point of entry. That, along with the new student support that is proposed, is a very positive move forward and will do much to encourage more students from working-class families to come into the system despite possible debt.

The support proposed is very generous, as many speakers in today's debate have indicated—the new maintenance grant for lower-income groups plus an interest-free loan available to all students. The package is part of the Government's approach to widening participation, which does not stop encouraging young people into universities. It also includes improvements to the general education system to help demand from that particular section of the community.

My own reservations relate to the variability principle. Advocates claim that it will bring healthy competition into the system, giving students better choice and giving vice-chancellors more freedom to manage their own institutions. I remain doubtful. Not all universities will be in the same position to impose the top-up fee and will therefore not get the increase, which is so badly needed for teaching and academic salaries in all universities.

I agree with the noble Baroness, Lady Warnock, that the system is already diverse; each university has its own strengths and weaknesses, and students have a wide choice of both institution and course. By and large, they exercise that choice wisely, using as their criteria the minutiae of courses and the provisions of one university compared to another. Those criteria are surely much better than looking at whether one university is cheaper or more expensive than another and deciding that it must be better. Price is now proposed to be added to the basis of student choice, which could override the validity of other criteria.

There is much movement of ideas and personnel both up and down the higher education system. There is competition but there is also collaboration, and institutions are equal in that collaboration. They are equal not in what they provide but in their status as universities. That should continue.

I hope that in the course of the debate, the Government might modify some of their views. However, despite my reservations, I shall give general support to the Bill, because of some of the excellent provisions included in it.

7.22 p.m.

Lord Taylor of Warwick

My Lords, it was Benjamin Franklin who said: An investment in knowledge always pays the best interest". A teacher at my Birmingham grammar school helped me to see that a university education might, in the long term, be better for me than playing soccer for Aston Villa. I am not sure that Villa would have gained much from my services as a footballer, but my life was certainly enhanced by university experience. I speak with the privilege of being the Chancellor of Bournemouth University, which has a good reputation for business-focused degrees. I declare that interest.

I was the first in my family to go to university. As a young student, my idea of a balanced meal was a biscuit in either hand, but I did have a local authority grant and was able to focus on getting my degree without too many financial worries. The situation is far more complex for today's university students. It is now accepted by many that our higher education is in crisis. Although student numbers have increased, funding has not. The ratio of staff to students has fallen, and so have the salaries of lecturers in comparative terms.

Today's students start their working lives in debt through no fault of their own. I am totally persuaded that it is only right and proper that a graduate must repay loans from future income, but I must admit to being somewhat concerned that we are introducing to students the tempting culture of "borrow now, pay later", before they have even started their working lives. The sadness of the Bill is that it will only increase the overall burden of student debt; there will still be a shortfall in the funding that higher education needs.

Perhaps there is a dilemma about what higher education is actually all about. It seems to me there are two educations. One should teach us how to make a living, obviously, but the other should teach us how to have a life—the quality of living. Getting the balance right is the challenge. There is also the dilemma of choosing between academic and practical courses. The Government appear to be obsessed with the 50 per cent target for under-30 year-olds in higher education. These days, it seems that good reliable plumbers and electricians are more difficult to find than unemployed graduates. Are we getting the balance right? The Government need to acknowledge that there are some brilliant students who have practical skills which do not require a university degree.

The main issue is not whether more funding is required, but how it will be achieved. If we must have top-up fees, they must be at a reasonable level. I am concerned about the variable nature and the circumstances under which the cap can be lifted. We do not want the situation in which students choose courses simply because they are cheaper. I am particularly concerned for ethnic minority students who come from the poorest sections of our community. Many noble Lords know Professor Gillian Slater, the excellent vice-chancellor of Bournemouth University. She has been clear in her opposition to variable fees, for the reasons that I have just outlined.

Because this Bill will still leave a funding gap, alternative methods of paying for higher education are needed. Both private endowments and commercial sponsorship need to be encouraged by tax concessions. The Lambert review last year stressed the need to raise levels of business spending on research and development, channelled through higher education. Lambert also highlighted the need to enhance the role of the regional development agencies, in forging partnerships between universities and local business. The red tape barriers which deter some small companies from forming that partnership with universities need to be tackled. Local employers, in return for investing in local universities, should have an input in the course content. Why not have a voluntary code of governance for university management to ensure that it is in tune with the needs of local business? A good model of university and business working together can actually be found at Bournemouth, where Professor Slater has made it a priority.

In conclusion, the funding gap which this Bill will still leave should not be met by simply punishing students, their families or the general taxpayer. Education is a journey, not a destination, and the challenges change with it. It is time for us to use more lateral thinking in our funding of higher education. The motto perhaps should be: Seek and ye shall fund".

7.27 p.m.

Baroness O'Neill of Bengarve

My Lords, I suppose that many of us may have thought that this Bill had been debated to death before it ever reached us, but this afternoon's debate has shown that many facets were not covered in public debate or in another place. We can of course all find some faults with the Bill, and I shall come to those in a moment, but let me declare first two interests. I have been employed in UK universities for more than 25 years and, God willing, I may even draw a UK universities pension. I am a trustee of the Newton Trust and took part in the construction of a bursary scheme after the passage of the 1998 legislation, so I have some experience of what difference that can make to students.

The background against which we should judge this legislation is not the best of all possible legislation, as it were, but the situation in which students and universities find themselves today. Throughout the 1990s, under both Conservative and Labour governments, the financial situation of students has become worse. Poorer students lost their grants; they lost, in today's terms, more than £4,000 a year, but they were subsidised against the impact of the small tuition contribution, which is now about £1,100. In the same period, richer students who never had grants did not lose grants. There is a certain tendency to imagine that there was a rosy past in which every student, regardless of family income, had a full grant. That was not the way it was. Richer students had to pay, or their families had to pay, the small tuition contribution, which is currently £1,100.

I would summarise the years from 1990 until today thus: the poor lost, on average, £4,400 per year, while the rich, after 1998, lost £1,100 per year. That is the real background against which we should judge the present proposals. As the noble Lord, Lord Dearing, said, if his recommendations had been accepted at the time, we would not be in that situation. What is key for poorer students is not just absolute levels of debt at the end, although we all know that less debt would be nicer. It is also security of funding as one goes through: food, rent and all the other necessities of student life have to be paid for "up front", as we now say, so the loan has to be taken out.

Now I turn to the impact of bursaries. At present, the maximum bursary that we provide through the Newton Trust is £1,100. With respect to the noble Lord, Lord Rix, our poverty cut-off is the same as the cut-off for paying the fee contribution; it is at present a family income of £20,000. Those with incomes below that get £1,100. We then taper it because it is important to avoid poverty traps in these matters and that will apply in the future.

We commissioned an independent survey on the effect of receiving bursaries on student life and experience. Not surprisingly, the feedback showed that even with a bursary of £1,100, students felt that they could live within the loan. That was very important because it meant that they could avoid more expensive commercial loans. They felt that they could afford to take out less loan: how much will dependent upon how much they have saved and so on. Importantly, they were also able to join more freely in student life. That was partly because they were able to cut their working hours during term time but it was also because they could afford the new sports kit or whatever. Realism demands that we judge the provisions for students against those that will continue if the Bill is not passed.

Similar things can be said about the actual university situation. The provision for variable fees amounts to a very small return of the prospect of university autonomy. We have already heard that de facto it is not likely to produce variable fees because £3,000 will not be enough for most universities. Most universities will be charging the same amount so I do not think that we can criticise the provision as likely to introduce a two-tier system. We already have a multi-tiered, gloriously variegated system and I do not believe that university life is that simple. However, it provides freedom for universities to decide how they will deal with some very awkward financial realities.

I shall mention just a few of the cost factors that are squeezing universities. Evidently, courses cost variable amounts to run and let us remember that some of the expensive courses are vocational ones. That does not mean that students have to be charged more but it means that we in the universities have to think about how we handle that. Secondly, universities have variable course mixes: the proportion of expensive courses differs hugely university by university. Thirdly, there is very variable demand from students for courses in different subjects. Fourthly, there is a variably sized pool of qualified applicants. No one is going to get very far by raising the tuition fee for aeronautical engineering: there are very few qualified students for the most expensive courses. Those are the realities.

The current reality in universities is that because of this situation courses are closing—there has been an enormous amount of closure in modern languages, for example—and there is skimping. There is also the non-replacement of retiring staff, when approaching massive retirements will reflect the increase in size of the university sector in the 1960s. So, at present, universities feel that they are being asked to make bricks without straw. They are unique in our economy in that the quality of their output is highly regulated—we may not allow it to sink. They receive insufficient public funding to provide at the level at which they are required to provide and they are also forbidden, with very severe penalties, to make any charge to cover actual costs.

University education is not a fancy good. It will not be priced simply by the Russell group being expensive and the others being cheap. Universities, like students, need to cover their actual costs. So although this is not the best of all possible Bills, it is a possible way forward and it is better than the status quo. I am sorry to say that I do not believe there will ever be a Chancellor of the Exchequer who hypothecates large amounts of money for non-front-line services. So, much as I would like to see the Liberal Democrat solution of raising taxation applied, I do not believe that it would have the desired effect and I look forward to hearing news from the Conservative Benches.

7.35 p.m.

Lord Eatwell

My Lords, I begin by declaring a number of interests: I am Professor of Financial Policy at Cambridge University and President of Queens' College. I also sit on the Court of the University of Luton. I therefore have experience of both ancient and modern universities. On the basis of that experience, it is my belief that most of what is in the Bill is good for both, and I happily support it.

However, some of the measures in the Bill, the debate over the Bill in another place and some of the so-called "concessions" offered during the debate suggest the survival of attitudes and opinions that have, over the past 30 years, done so much damage to the universities of this country, attitudes and opinions that have resulted in a combination of persistent underfunding and the imposition of ever more onerous layers of bureaucracy.

I would like to give some of this damage a human face. I do this because everyone who works in the universities has been struck by the apparent complete lack of understanding, or even concern, of what underfunding has done to the income of academics over the past 25 years. Let me give this a practical illustration. In 1980 the salary of a Parliamentary Under-Secretary of State in your Lordships' House, the position held by the Minister, was £12,500 a year. This was roughly the same as the salary at that time of a relatively senior university lecturer. Today, the university lecturer of the same grade earns around £36,000 a year. The noble Baroness's salary in April 2002 was £66,000. It would be a magnificent gesture of solidarity with Britain's academics if the noble Baroness would now declare that she is prepared to take a £30,000 pay cut. I am prepared to give way if she would like to make a statement now.

It is often argued that low salaries in the universities do not matter since there are plenty of applicants for every academic job, and anyhow, our universities have managed to maintain their international standing, so why worry? I suppose the same could be said about the noble Baroness's position. These excuses are an illusion. First, the high standing of the universities has been maintained predominantly by the large cohort of university teachers, referred to just now by the noble Baroness, Lady O'Neill, who entered the profession in the Robbins expansion and who, by the time that they realised that their financial prospects were much worse than they expected, were trapped. Secondly, it is no longer possible to attract and retain the quality of applicants that universities once did. I have just lost a talented young academic from my research group in Cambridge, because a Dutch university can pay him 20 per cent more than I can.

But of even greater importance than salaries has been the serious underfunding of research, especially research equipment in science and technology. If an academic cannot work with the best kit, then he or she inevitably falls behind in the profession, and to maintain professional standing there has been no alternative for many but to leave Britain. I am delighted that my right honourable friend the Chancellor of the Exchequer has committed the Government to repairing some of this damage to the research infrastructure.

The Bill has begun to address seriously the damage that has been done to teaching and research and therefore is to be applauded. Anyone who opposes the fees proposals in the Bill must declare how they would meet the funding gap. Of course, those who enjoyed a publicly funded higher education, as I did, must be uncomfortable with the introduction of fees. But we must also recognise that in the past public funding has been a massive subsidy to the relatively well off. Like the noble Lord, Lord Desai, I am bemused about why the Liberal Democrats wish to go on so heavily subsiding the middle classes. In fact, if properly handled, with appropriate bursary support, fees are a fair and efficient way of raising funds.

I should like to make two comments on fees. First, the opposition to variable fees is an economic nonsense. A moment's thought should convince anyone that maximising revenue does not always mean charging the maximum fee. The opportunity to charge a lower fee is sometimes economically rational.

Secondly, the Government have made clear that the index that is to be used to maintain the real value of fees is to be the retail price index. That is the wrong index and its use is contrary to the intentions of the Bill as explained by the Government. The reason is simple. The Government declare themselves committed to increasing the real value of university salaries—the main component of university costs—but indexing the fee level to the RPI will freeze fee income in real terms, so RPI indexing is another device for squeezing the real incomes of the universities. An appropriate index would be based not on prices but on salaries. Given the historical experience, I should like to propose an index based on the noble Baroness's salary.

I said just now that with appropriate bursary support fees are fair and efficient. However, the Government, perhaps lacking the courage of their own convictions, have decided to impose their own notion of fairness via the creation of the Office for Fair Access (OFFA). I am puzzled by what has been said about OFFA. The Government have asserted on several occasions—the noble Baroness said this in her speech this evening—that the purpose of OFFA is to increase the pool of applicants to universities, to raise qualifications and aspirations, not to interfere with university admissions policies. But that is not what the draft guidance from the Secretary of State to the head of OFFA says. The draft guidance does not refer to the pool of applicants but to broad-based intake; that is, it refers to admissions policy. The milestones referred to by the noble Baroness also refer to intake; that is, to admissions policy. In her summing up, the noble Baroness ought to come clean about that and tell us what the word "intake" in the guidance actually means.

I would like to conclude by offering a positive proposal on funding. The problem of any fees-based funding system with income-contingent repayment is that the Government receive the income only some years after the expenditure, hence increasing the overall cost to the Treasury.

To reduce this cost the Government should introduce education bonds that can be purchased in advance by parents, grandparents, such as the noble Earl, Lord Russell, who told us that he has made provision for his grandchild, or others who are committed to a young person's education. Simple financial incentives could be built into the bonds, which would be redeemable for cash if not used for educational purposes. The introduction of this pay in advance system could provide a significant extra stream of revenue for the Treasury that could further meet the funding needs of the universities. I would be grateful if, in summing up, the noble Baroness would tell the House whether a pre-payment scheme has been considered.

From what I have said it will be clear that there are a number of issues that I wish to raise in Committee. But these specific concerns do not diminish my belief that this is a good Bill—good for the universities, good for students, and good for this country. I am happy to support it.

7.43 p.m.

Lord Renfrew of Kaimsthorn

My Lords, as many noble Lords have remarked this evening, this is in many ways a courageous Bill because it grasps some of the nettles—some of them quite painfully. But sometimes it grasps the wrong nettles and there is one major nettle, to which the noble Lord, Lord Eatwell, referred, that it fails to grasp effectively.

This evening I should like to touch on three points: access, excellence and academic freedom. First, like the previous speaker I am a professor at Oxford, or rather Cambridge—I should keep my feet on the ground here. Oxford and Cambridge have a problem as regards access because we, like other universities, are trying to increase the number of our students who come from lower-income families. For that reason it was with consternation that I heard the noble Baroness, Lady Blackstone, propose in 1998—I am sorry that she is not present at the moment—the introduction of tuition fees for the first time in this country. There may be reasons for tuition fees today but they were proposed then—and, at the same time, there was the abolition of maintenance grants which were replaced by maintenance loans.

There may be a case for doing that for students from families with a substantial income but nothing could be more of a deterrent to potential students from low income families than the obligation to pay a tuition fee—even if they have a good loan with the option to pay it off in due course—and the obligation to pay maintenance as the maintenance grant has been abolished. I agree with many of the points that the noble Lord, Lord Butler of Brockwell, made; for example, that we should abolish tuition fees altogether for students from low income families and replace them with maintenance grants for such students.

In earlier years many of us had the good fortune to have state studentships which allowed us to go to university. Most noble Lords who are present today went to university without the payment of tuition in any form and with maintenance grants. There are complicated bursary schemes—many of them of great merit—but the simplest bursary scheme would be a national bursary scheme that required no tuition fees whatever from students from low-income families and awarded maintenance grants rather than maintenance loans. A lot more could be said about access but the Government miss the point with these very complicated counter-balancing adjustments.

Secondly, as regards excellence, there is an air of unreality about the debate this evening although many important points have been made, for example, by the previous speaker. The Government face a situation where the universities now have a funding crisis. The Government have introduced a scheme whereby about half the current deficit of universities will be paid. What is to happen about the other half? I ask the Minister for a clear indication of how the Government propose to meet the deficits of universities. Jobs are being frozen in many universities and many other unfortunate circumstances are occurring.

Our universities are suffering a general decline because of the funding problems. The noble Lord, Lord Eatwell, made some excellent points. Let me add to that. Take the case of a new university lecturer with a PhD who may expect to earn today something like £25,000 a year after three or four years' study for a first degree and certainly three or four years' study for a second degree. Under the schemes that are proposed that person would build up a significant level of debt. Compare that with an Underground train driver who will earn £30,000. An Underground train driver has many responsibilities and I do not wish to diminish in any way the respect in which we should hold that profession. However, I do not think that it takes seven years to train an Underground driver. There is a serious disparity of exactly the kind that the noble Lord, Lord Eatwell, presented so well. I do not see this Bill doing anything to rectify that serious disparity. In a couple of years' time, the universities—

Lord Winston

My Lords, I am very grateful to the noble Lord for giving way. Does he also agree that in the case of scientists on exactly the career track that he mentions there is also the very great added problem of insecurity of tenure of position as well as the low salary?

Lord Renfrew of Kaimsthorn

My Lords, that is an entirely valid point. I thank the noble Lord for the intervention. It is entirely true that short-term contracts in universities bring about insecurity of employment.

The main problem with this Bill is the nettle that is ungrasped—that is, the serious situation of the universities today. This Bill, if it goes through, may have its defects but will go about halfway to meeting the problem. What about the other half? My next point is part of the same question: what are the Government expecting to do about academic salaries because our universities are in decline?

My final point is about academic freedom. Access problems lie mainly in funding, although there are other problems—no doubt, presentation and encouragement—that deserve to be met. That is why I am sceptical about the role of the access regulator, who will not be able to do anything I am aware of for the funding of individual students—the points that I have just made. The access regulator, I predict, will have little impact on access because universities can do very little to dress up courses to make them more attractive. For example, how does one make Sanskrit more attractive? Universities might decide to charge a lesser tuition fee for physics, for example, as the Government proposed, but would be messing around with the system in a most deleterious manner. I predict that the access regulator will not succeed and will impose swingeing fines, as he is entitled to do, on those departments that, in his or her view, do not improve or get wider access. But that will not improve access.

That part of the Bill needs serious reassessment and amendment, as noble Lords have proposed; otherwise we will have legislation that essentially works against the system. I am entirely in favour of improving access, but it would be ridiculous to impose fines on departments that have found it difficult to meet the wishes of the regulator in their performance. If performance is poor, it is not necessarily the department's fault, and the aspirations of the access regulator would be very difficult to meet.

Although the Bill has a number of merits, it has very serious demerits. The main one is that it will not solve the problems of the decline of our universities.

7.52 p.m.

Lord Quirk

My Lords, clearly there is a great deal of agreement around the House about the merits and demerits of the Bill. So much has been said so excellently on both aspects that, noble Lords will be pleased to know, I can cut down what I was going to say much less adequately. I declare an interest as a fellow of University College London and a former vice-chancellor of the University of London.

I broadly welcome the Bill. Among the welcome features is the establishment of the Arts and Humanities Research Council, as welcomed also by the noble Baroness, Lady O'Neill, and others. I could barely dream of such a development when I was president of the British Academy 15 years ago. Another welcome feature is the much more widely discussed establishment of the principle of variable university fees—variable between institutions and between courses within institutions. I regard that as the prime achievement of the Bill. It is a principle that I regard as of inestimable importance to universities and to our chances of retaining in the UK, and indeed in Europe, higher education institutions that can hold their own in comparison with the rest of the world.

It is a great credit to the Government that, remarkably, despite the vociferous opposition of student bodies, unions such as the BMA and parliamentary colleagues, particularly at the other end of the Palace, the principle has been established along with a package that students and their families should welcome. Notably it includes the abolition of up-front fees and the provision of a well cushioned repayment scheme, not to mention immediate financial easement for the least well-off, which is equally welcome.

For universities the immediate financial easement is relatively modest—I echo the previous speaker in that respect. The huge hole in university finances, with concomitant building maintenance deferral and appalling salary levels, can in no way be filled by the permitted fee levels, as the noble Lord, Lord Eatwell, in particular, dramatically demonstrated. Moreover, the variability principle, important as it is, is only half introduced in the Bill. Fees can be varied only downwards. How much more challenging to university management and university enterprise if the cap of £3,000 were to be an average over each institution so fees could be up a bit on some subjects and down a bit on others.

More seriously, as many noble Lords have mentioned, too little has been said about part-time students and related problems. The Bill provides no assurance to satisfy many of the previous speakers that in the long term HEFCE will be able to support teaching costs at least at the same level in real terms as obtains at present. However successfully universities exercise their limited freedom over fees from 2006, and their less limited freedom—I hope—after 2010, they will still depend overwhelmingly on the taxpayer.

Perhaps the Minister in her winding-up speech can add to the assurances that she provided to some extent in her opening speech on the issue.

There is so much good in the Bill that it must surely pass. 13ut there is one provision on which I find it hard to say a good word: the emergence of OFFA. He was a fine Mercian king in the 8th century, no doubt, and was the first to call himself "the King of the English", but he must not be allowed to call himself "the King of English University Admissions". Again, I share the reservations of the noble Lord, Lord Eatwell.

It is not difficult to see why the new body has been set up. Universities UK and vice-chancellors in general have been very delicate about the Government's difficulties in setting it up. But half a million pounds a year—and surely that is an "at least" figure—could unquestionably be better spent than by adding a regulatory tier in pursuit of aspirations already universally embraced and actively pursued by every university in the land with a keenness, expertise and imagination that a Whitehall full of OFFAs could never surpass.

We all know, not least in the Minister's own department, that the main obstacle to wider participation lies in the state of secondary education, not in the lack of an Office for Fair Access, whose very name seems to hint that current access procedures are not.

Universities can be expected to be less than enthusiastic about OFFA and the extra administrative chores that come with it. They have reason to fear, too, that a new free-standing body rather than an extra remit, as suggested, for HEFCE, which has all the data already, will be tempted to indulge in "mission creep". I am not encouraged by the Secretary of State's draft letter urging the head of OFFA to be, robust in expecting more, in financial support and outreach activity, from institutions whose records suggest they have furthest to go in securing a broadly based intake of students". The Schwartz review, at section E12, discusses the need for fairness in relation to continental EU students. Of course; but do we want OFFA turning its attention to the social, educational and economic background of applicants from Poland, the Czech Republic, Slovakia and others? Might it come to pass that OFFA starts deeming it unfair for universities to admit what it regards as too many full-fee overseas students? If OFFA does not stick to the task urged on it by Universities UK of "widening the pool of applicants"—which means turning its attention to the schools—OFFA may have the unwelcome potential to jeopardise the academic freedom of universities, as some speakers have suggested. With "mission creep", the jeopardy might be more than potential. On that, too, I hope that the Minister will add to the reassurances that she offered in her opening speech.

8.1 p.m.

Lord Parekh

My Lords, our system of higher education has gone through so many different reforms over the years that it has almost become a patchwork based on no consistent set of principles. When I came across the Bill, I therefore asked myself three questions of the kind that one must ask about any education Bill that aims to rationalise our system of education. First, does it promote excellence—does it promote and protect our best universities and raise the quality of the rest? Secondly, does it increase the participation of social classes that have long been marginalised and not able to benefit from the system of higher education? Thirdly, does it respect the autonomy of the universities consistently with the responsibility that they have to society?

In other words, I judge the Bill by three criteria— promotion of excellence, access and responsible independence. Excellence obviously requires resources. The Bill provides them but, as earlier speakers have said, only about a quarter or a third of what the universities need. Therefore, the problem of resources remains. The Bill increases access but, as I shall point out, not as fully as it could and should. On the third criterion of responsible autonomy, much will depend on what OFFA does in years to come. All in all, before I set out my arguments, I give the Bill a good upper second, but not quite a first. As we say in academic jargon, it shows a lot of potential but could do better. It could do better in three respects.

I fully welcome the Government's target of 50 per cent of 18 to 30 year-olds going to universities. That target is both possible and desirable. It is possible without diluting standards because of demographic factors, and because of the better school performance of our pupils. It is desirable because our competitors are trying to reach that target, and because it raises the productivity and quality of life in this country. However, the questions are not about 50 per cent in the abstract, which is where the nub of the argument lies. Instead, the questions are, "From what social groups are the 50 per cent drawn? To which universities do they go? What courses do they do? In which sectors of our economy will they be employed?".

Take the United States. Of its 18 to 30 year-olds, 35 per cent go to university, but only 5 per cent of working classes make it to any of the Ivy League universities. In England, 20 per cent of the manual working classes manage to get into universities, but fewer than 6 per cent to our elite universities. In some of the important professional courses such as medicine, accountancy and dentistry, the working class representation is even less—somewhere around 5 per cent. For those and other reasons, while looking at the target of 50 per cent of 18 to 30 year-olds going to university, we should make sure that that increased participation takes place across the spectrum of universities, as well as across the spectrum of courses.

That can be rendered difficult by top-up fees and variable fees. For example, the figure of £3,000 may rise after 2010, and we might end up with a situation like that of the United States, where entry to Harvard or Yale might be extraordinarily difficult for working class children. I say that as someone who once taught at Harvard. It might deter students from poorer backgrounds and, equally importantly, ethnic minorities. We might end up creating a racial divide where the ethnic minority children, especially the Afro-Caribbeans, Pakistanis and Bangladeshis, might be channelled into newer universities or non-professional courses. We therefore might have certain professions filled only by the whites.

I am concerned with people from not only ethnic minorities, but poorer backgrounds in general. The debt of £ 15,000 to £20,000 that would be accumulated might deter some people. Although the economy is doing reasonably well, it is difficult to say what it will be like in or beyond 2010. If the uncertainty of employment were to loom over the horizon, the deterrent effect would be even greater.

I welcome the idea of the Government giving grants of about £2,700 and fee remission of about £300. That is helpful, but it is not likely to be enormously effective in increasing participation, for all kinds of reasons. I therefore suggest that it might be a good idea to have a national scheme of bursaries, especially for those who have no family history of going to university and whose parents earn less than £15,000 or thereabouts a year. It is vital that we should dig deep into our social structure and make sure that the first generation of those who have never been exposed to university is encouraged to go into them. Those are generally people who come from poorer backgrounds.

For example, if we assume that about 10,000 students fall into such a category, and that we were to pay them around £5,000 a year to make the education fully free, we would be talking of a sum of something like £50 million. For a government who are committed to social restructuring and some form of redistribution, that is a small amount to invest in the regeneration of our society. The amount could be contributed by the Government. We ought to remember that we spend far less than other OECD countries on higher education of our students. For example, we contribute only 0.7 per cent of GDP, compared to 1 per cent in other OECD countries.

Such a government contribution would have a redistributive effect, which I would expect to be consistent with the principles upon which the Labour Party is based, and would reverse past trends where the working classes have subsidised middle class education. But if that is too much for the Government to contribute, there is no reason why such a fund might not receive contributions from industries, businesses and big banks—who have made enormous amounts of money—and they would greatly benefit from graduates. We talk about graduates earning higher incomes. Why do we also not remember that banks and businesses benefit from graduates who have been funded by many other people?

As the Lambert report makes clear, our businesses and industries have a poor record of funding research and education. That is my first suggestion—for a national, well co-ordinated scheme, not one that is contingent, or varies from one university to another and makes it difficult for poorer universities to cope. I can recall several countries which have national funds of that kind. I will go further—the word "bursary" implies that fees are being charged and the Government should provide the money to pay for the fees. If fully free education were available, we would not have bursaries, but would be providing fully free education to people who have never before been to university.

My second suggestion relates to variable fees, which I see the need for and welcome. Not all courses cost the same. Not all qualifications generate the same income. Variable fees might also stimulate demand for new courses and might persuade universities to experiment with new and imaginative courses. But I am worried that variable fees would generate variable incomes for different universities and would lead to variable student facilities, variable conditions in libraries, variable research facilities, variable academic salaries and we might in the end create a situation where cheaper courses are meant only for the poor. Therefore, it is vital that institutions charging lower fees should be guaranteed a minimum level of state funding to ensure that the quality of their academic environment does not suffer. After all, we rightly believe that poor schools should receive more help to bring them up to scratch. I do not see why we should follow a different principle in relation to universities.

Finally, regarding OFFA, I am more inclined to agree with the noble Lord, Lord Dearing, who made a forceful case for it, than with some other noble Lords, who were either sceptical or downright dismissive. I welcome the proposal, because, in the light of my comments, it is vital that we guarantee equal participation across the spectrum of universities and courses. Who will do that, if not an office of that kind? I accept that there are concerns that OFFA might become too inquisitorial or begin to interfere with the universities. We need to be careful when we talk in those terms. We must distinguish between academic and non-academic decisions. Academic decisions—how to mark and grade students, who to admit or not—are entirely matters for a university, although there are some qualifications to that, which I would talk about later, if I had time. But there are non-academic areas where OFFA will have much to say. That relates to responsible independence.

Universities have a responsibility to society and we should ensure that that responsibility is duly exercised and should be the concern of OFFA. For example, universities might follow biased admissions policies, or they might manipulate variable fees in such a way that some courses would never be attractive to working class students. Therefore, OFFA should be separate from HEFCE. It should not just criticise and nag, but advise, promote good practice and channel universities in the right direction. It should be watchful but not inquisitorial and should respect the autonomy of universities, while holding them firmly accountable to society at large.

8.12 p.m.

Baroness Howe of Idlicote

My Lords, like many of your Lordships who have spoken encouragingly from all sides of the House, I, too, welcome the Bill. Indeed, I salute the Government's brave decision to go ahead with the 2003 White Paper—against a considerable challenge from members of their own party and, somewhat to my astonishment, from the Opposition Front Bench in this House, because I have always regarded the noble Lord, Lord Forsyth, as a keen marketeer. It is also politically brave, because, understandably, it will not be popular with potential students and no doubt that will have some influence on how they vote in the election that is, no doubt, fairly near.

Like other noble Lords I welcome a number of the uncontroversial proposals in the Bill: the Arts and Humanities Research Council and independent provision for student complaints. But I especially welcome the Government's determination for two principal reasons. The first is that I believe it will bring much-needed extra revenue to our universities. I agree that it will not be nearly enough hut, as I said when the Minister first presented the policy in this House, it is a first step in the right direction. My second reason for welcoming the Bill is that, once again, it is a step towards the creation of a more genuine market, responsive to student choice and offering the chance of greater and much-needed independence for British universities in running their own affairs.

At the start of one pre-Easter briefing session on the Bill, our chairman, my noble friend Lord Dearing—the expert par excellence on this question—asked: "Is there anyone in this room who doesn't think universities need more resources?". Unsurprisingly, answer came there none. The universities' funding position is dire.

The background has been gone over many times. I am afraid that the funding records reflect badly on all post-Robbins governments. Five per cent of school leavers went to university in the 1960s; 43 per cent do so today; and the Government's target remains at 50 per cent. which, in my view, is laudable. Yet, as we all know, funding for students has halved. In the past 10 years alone, the pupil/staff ratio has doubled from 9:1 to 18:1. No wonder! Academic salaries are now disgracefully low, as the noble Lord, Lord Eatwell, so graphically pointed out. They are so low that many of our top academics are emigrating to much better paid posts in the States. For those who remain, apparently retraining as a plumber is seen as producing a higher income stream.

Our universities' international standing has deteriorated as well. We spend a lower percentage of our GDP on higher education than any other OECD country. As the new vice-chancellor of Cambridge, Alison Richard, pointed out the other day, the list of 40 top global universities includes only four in the UK, while the US has 30. The situation in the rest of Europe is, if anything, worse, with only Sweden among those listed.

So, drastic action to reverse this decline is long overdue. We cannot go on putting off the necessary decisions—continuing to fiddle while Rome burns— just because the solutions are not perfect. But, frankly, given that students, who gain considerably, must now, rightly, pay a considerable proportion of their higher education costs, it is certainly fairer, as well as providing generous means-tested maintenance grants for disadvantaged students, to have a system where pay-back time for all is delayed until after graduation and, even then, is dependent on the graduate's earnings.

I turn to my second principal reason for welcoming the Bill: greater independence for universities and more choice for students. If the measure is approved, the possibility of universities charging up to £3,000 per course will, indeed, mean that considerable extra sums are available. The universities themselves will decide what they spend it on: teaching or other much-needed investment and, of course, bursaries. Once again, they can begin to have the chance to compete globally for students and academics.

But, sadly, that hoped-for independence is to be severely restricted. Costs are bound to rise. Even in inflation terms, universities' costs are almost certainly higher than the average. Yet the Government are committed to maintaining the cap at £3,000 through the next Parliament. I shall return to that fundamental point in a few minutes. But I want to say a quick word about two issues on which I hope the Minister will be able to offer comfort, especially as they have been raised by a number of speakers.

The first is the inequitable situation that these arrangements will apparently mean for part-time students and their institutions. Currently, incidentally, part-time students account for about one-third of the total student population. The OU is the obvious example, and I declare my interest as a former vice-chairman of its council. My noble friend Lady Boothroyd has already drawn attention to that, as have many others.

Given the crucially important role that the OU and other similar institutions played, and still play, in creating diversity of choice within higher education, not least for under-privileged students. I hope that the Minister will be able to give your Lordships an absolute assurance that funds will be available for part-time higher education institutions and their students on the same pro rata financial footing as for the rest. Frankly, nothing else makes any kind of sense—not least in the light of an increasing blurring of any clear distinction between full-time and part-time courses.

My second specific point also concerns the beneficial financial arrangements available under the Bill—in particular, the fact that students over the age of 56 will apparently not qualify either, as the noble Baroness, Lady Dean of Thornton-le-Fylde, has already mentioned. Apart from the probability that such arrangements will infringe the European age discrimination directive, that surely flies in the face of a life-long learning strategy and will certainly disadvantage those who wish to study after retirement, forced or otherwise, for a second or third career.

I return to my more substantial concerns. First, as many other noble Lords have, I restate my dismay at the proposed establishment of OFFA. Its role will be to see that each university makes sufficient efforts to attract candidates from disadvantaged backgrounds before it can charge variable fees. I believe that I am second to none in my enthusiastic support for all efforts to see that able students from poorer backgrounds receive every possible help to reach their full academic potential. The main challenge here is for schools, as the 2003 White Paper acknowledged, and many important government initiatives are aimed at that.

But the Bill does that too. As LSE's professor of public economics, Nicholas Barr, points out in a Financial Times article last month, the Government's proposals are deeply progressive. Higher education is largely free at the point of use. The strategy shifts resources from today's best off (who lose some of their tuition subsidies) to today's worst off (who receive a grant) and tomorrow's worst-off (who, with income-contingent repayments, do not repay their loan in full)". So the proposed subjection in this way of universities to yet another bureaucratic and far from independent institution is not only unnecessary, but it is also an insult to the integrity of universities. It can hardly be the right response to the central principle of the recent report of the Schwartz steering group, with its very clear view that, universities must retain autonomy over their own admissions policies, and the right to make their own judgements in assessing applicants". Clearly, we shall return to that during Committee stage. From my own experience at both LSE and the OU, it is clear that in their own best interests of attracting the best talent, today's universities are actively engaged within their communities in helping and encouraging just such disadvantaged pupils to aim high. One has only to study last year's Russell group's pamphlet, Widening Participation, to see the variety of activities undertaken.

But if the Government are determined—I very much hope they will not be—to insist on an OFFA-style contract, I have to ask, as others have, why it is necessary to set up yet another quango, rather than give the responsibility to HEFCE? The statutory bodies to which universities are already accountable cost taxpayers nearly £100 million and employ some 1,500 staff. Surely we can do without yet another quango in this area? Do we really have to pay the full OFFA price in order to secure the main, good objectives of the Bill?

I close by returning to that fundamental point. This brave Bill is no more than stage one of a possible lifesaving plan. It provides only a breathing space. Pressure must be maintained on the Government to be realistic about upping the £3,000 fee cap, and soon. Meanwhile the universities themselves have to be imaginative and energetic with their own fund-raising strategies. More can and should be done—as the White Paper points out—through mutually beneficial research and partnerships with industry. The United States pattern is clearly attractive, with relatively plentiful bursaries and alumni well coached in their duty to support their Alma Mater, both during and at the end of their lives, with generous results.

As Alison Richard, the Cambridge vice-chancellor, has also pointed out, if we are to reclaim our lost ground, this country has to travel in a very few years the fund-raising distance achieved over 30 years in the States. So, despite reservations about some aspects of the Bill, I wish it well tonight.

8.25 p.m.

Baroness Carnegy of Lour

My Lords, I should like to look at the issue from the other end of the telescope. I want to suggest that for many, if not all, universities the biggest problem about the Bill is that it may kill some of the geese that lay their golden eggs.

The Bill sets out a way to raise about one-eighth of the funding gap for universities. It does so by a system of variable student fees. Noble Lords have on the whole given encouragement to the Government's choice. It is a legitimate choice; it is one of a number of ways that this could be done.

The problem is how the scheme is carried out. In the name of public accountability, the Bill, particularly as it now stands, removes extremely important basic freedoms from what are legally autonomous institutions—freedoms on which, from my past experience on the governing bodies of several universities, the quality of their offerings greatly depends. It also imposes detailed parliamentary intervention—astonishing intervention to my mind—which will further inhibit those freedoms and distort those offerings.

The noble Baroness, Lady O'Neill, who is in her place and who spoke earlier, gave the Reith lectures in 2002. She entitled them, "A Question of Trust". I remember the Minister telling me that she had studied those lectures and had been impressed by them. But it seems to me that the Government have paid scant attention to what the noble Baroness, Lady O'Neill, said. Among other things, she spoke about the effect on the work of professional people of the growing expectation of formal public accountability.

As a philosopher and head of a Cambridge college, the noble Baroness described the negative effect in practice of a lack of trust that academics would do a good job in a university unless they were more regulated. Parts 3 and 4 of the Bill and the Secretary of State's accompanying decisions on student support will make matters a good deal worse than they were when the noble Baroness gave those lectures, and, in my view, quite unnecessarily. Currently, each university is free to design its own systems for matching students to courses and in so doing widening access as best it can. That freedom is now being removed on pain of massive fines. Whatever the Government may say about OFFA, the noble Lord, Lord Butler of Brockwell, explained how the freedom is being removed, and my noble friend Lord MacGregor spoke about it too.

At present universities are very well versed in setting their own variable fees for part-time and overseas students. There is a market; they meet that market; and they know how to do it. They are being denied freedom to set variable fees for full-time and European Union students, except within the very narrow limits which will be set by Parliament.

If variable fees are to be the order of the day, why not trust the universities, using their own experience and expertise and in collaboration with the funding council, to arrive at the best possible arrangements? I cannot see why that should not be done. The noble Lord, Lord Dearing, thought that that would be too much power for the funding council. I would have thought that it would be infinitely preferable to having the creature of the Secretary of State, which is OFFA, doing it, because one has only to look at the Bill to see that OFFA is not going to be a free agent at all.

The universities could surely find ways to avoid the many weaknesses that there are in the Bill; the unfairness between one full-time student and another; the unfairness to part-time students and mature students; the unfairness between universities; and the unfairness to Scots students who want to study in England, who will not be able to take advantage of this package and yet will meet the fees.

The universities would surely pay more attention to the implications for Wales and Welsh students. I am sure that we will go into that in Committee. They would pay attention, which the Government do not seem to have done, to the indirect implications for Scottish higher education. As this Bill takes effect, and as more money goes into universities from students, so the Barnett formula will be reduced and the Scottish system will have to change. I do not see how it will be able to fail to move towards this system, whether Scots want it or not—so much for devolution. The universities, with their colleagues north of the Border, surely have paid more attention to that.

With notable exceptions, the vice-chancellors have collectively stated that they warmly welcome the Bill. I find that strange in view of what many of them have been saying this evening. It seems that they so desperately need the £900 million, or whatever sum it is, that they are prepared to accept the risks brought by greater intrusion on their autonomy. I suggest that Parliament should not buckle under. As noble Lords scrutinise the Bill, let us find ways, if we can, to make more room for professional expertise, and to allow people on the ground the freedom to use their experience—which is so very great—in the best interests of their universities. It is indeed a matter of trust. A little of the quality of our universities is very much at risk in this Bill. I hope that we will not let that happen.

8.32 p.m.

Lord Layard

My Lords, time is passing. I will concentrate on the central feature of the Bill, which is the proposal for variable fees. The noble Baroness, Lady Sharp, and her colleagues have completely missed the fundamental point, which is the need for greater diversity in our system. We must decide whether we want that. We should be clear that that is a positive feature, not a ground for criticism. The system cannot flourish unless its leading institutions are flourishing and are producing the teachers for the rest of the system, and the ideas and the knowledge that are taught in the rest of the system. That is how a system works.

Thirty years ago, Britain had some of the leading universities in the world. We have lost that position. Today, it is doubtful whether any of the 10 best universities in the world are in Britain. If you want to ring up an expert on any subject, the first numbers that you dial are 001. That is a depressing and deeply unhealthy situation for our country to be in, and it is new-ish. It is bad for our economy, and it is bad for our culture. In my field of social science, we are almost entirely teaching knowledge generated in America, on the basis of research into American society, and based on the American system of values. That is not a good situation in a system of higher education in Europe.

As many noble Lords have said, the decline has come about entirely due to under-funding, principally through its effect on salaries. Until recently, university salaries were virtually static in real terms for 30 years. This is a completely abnormal situation. I have not been able to discover any other occupation that is remotely like it. Not even the low-paid people whom we worry about have experienced static real wages. We see the effect on quality, which was referred to earlier.

The problem affects all universities, and I am not saying that only the top institutions suffer. However, those that are particularly exposed to competition from abroad, from the City of London or from companies offering top positions in business will suffer particularly from the salary stasis. In 1999, the average professor in our top universities earned half of what his American equivalent earned.

Many people do not understand the pressures on many of our leading institutions. They were well explained by the noble Lord, Lord Waldegrave of North Hill, but I shall illustrate the situation from the point of view of the London School of Economics, where I work. In order for it to remain a world-class institution, the LSE is taking more and more overseas students, whom it can charge a fee adequate to pay the staff of world-class standard that it is trying to maintain. Even if the present Bill became law, with the £3,000 ceiling, we would not cover our costs in respect of home undergraduate students. The gap for a world-class institution teaching a home undergraduate student would still be something like £2,000. What would happen if the Bill did not pass because of some plot to hold it up? We would simply take in more and more overseas students and become an institution that served not the British higher education system but the world higher education system. That is not what we want to see.

If we want a good system, we must have variable fees, but I do not think that we could accept the substantially increased fees that would eventually be necessary in our leading institutions—£3,000 will not be the name of the game. We could not accept them, unless there were some guarantee that they would not lead to a decline in the number of able people coming to the institutions from a poor home. We require creative thinking about outreach, systems of financial support, and so on. Although I am a great fan of the lectures given by the noble Baroness, Lady O'Neill of Bengarve, I do not, in my heart of hearts, feel that I would trust every university to make the effort even to hold constant the number of bright working-class children in top institutions, let alone increase it.

Baroness O'Neill of Bengarve

My Lords, I have not spoken against accountability, only against stupid accountability and in favour of intelligent accountability, which supports trust.

Lord Layard

My Lords, I support that totally. It seems to me that the quid pro quo for liberating the institutions must involve some kind of guarantee. Obviously, we must work at the detail.

Normally, I find myself speaking for the underdog. In this situation, it is not only the underdogs who suffer; the leading institutions suffer as well. It is undesirable that all the best universities in the world should be in America. The reason is simple: the European universities rely exclusively on state funding. State funding is inevitably a leveller; it is in its nature to be that. In the Bill, we have a mechanism which tries to address that major problem. Unless noble Lords on other Benches can produce a better solution to that problem, they should support the solution on offer.

Baroness Boothroyd

My Lords, I welcome the attention that the Government are now giving to the funding of higher education. Although I have reservations, I support the Bill in principle. Over many years, the universities have sought to increase participation but have had to do so with diminishing resources. As the Minister pointed out in her opening remarks, student numbers have grown and they continue to grow, but the resources to support them have continually fallen in real terms. The task of increasing access from disadvantaged sections of the population requires that action now be taken about the financial crisis facing those who teach them and conduct the research that underpins that teaching. Poor universities cannot meet the demands of poor students.

However, it is necessary that the solution to the problem addresses the whole of the higher education sector. I declare an interest as chancellor of the Open University, which is a position that I have held for eight years. I speak tonight to express my concern that the Government's proposals deal with only three-fifths of the student population. The Higher Education Bill is concerned solely with full-time students. The permission it gives to increase fees to £3,000 per year relates only to full-time students. When the legislation is enacted, it is only full-time students who will be permitted to defer payment of their fees until after they have graduated and have begun to earn a proper income. The Bill makes no concessions. In fact, it discriminates against a sizeable body of those undertaking part-time studies.

I doubt that I need to remind the Minister and your Lordships that two-fifths of students in England and Wales are not full-time. Yet, in their haste to deal with the problem of university funding, the Government appear to have overlooked the needs of the increasing proportion of the student population that is studying part time.

The number of part-time students in higher education has increased enormously in recent times. In the most recent year for which I believe that figures are available—1998–99—the number of part-time students increased from 594,000 to 681,000. Those students involved in part-time studies now constitute 42 per cent of all students at our universities.

That sector of the student body comprises those who have most difficulty with the demands of conventional university education. Most are adults; but in the Open University our numbers are young men and women seeking to combine an education with the commencement of their careers or advancement in their career structure. Whether they are 18 years-old or more mature, those students deserve our full consideration.

I have read as carefully as I can the proceedings of the Bill in the other place. I have seen the admission of the Minister of State, Alan Johnson, when he said that the Government, have not paid sufficient attention to adult learners, which mainly means part-timers, or to part-time study".—[Official Report, Commons Standing Committee H, 2/3/04; col. 435.] That passage is worthy of remembrance. There can be no doubt that the omission admitted by the Minister in charge of the Bill in the other place will cause particular difficulties to those universities that specialise in part-time studies. During the past three decades, the Open University has made by far the greatest contribution to increasing access to higher education. We are the only university to have made the bold and brave move to ignore entry standards and to concentrate entirely on exit standards. This task we perform with excellence. We are by far the largest university in the country and, most important, we are among the top five for teaching quality.

I caution the Government that, as the new top-up fee regime impacts on less privileged students, the role of the Open University as a safety net for the entire system is likely to increase still further. Yet it is ignored in this Bill, and I wonder why. Why have institutes of education like the Open University not featured in this major item of legislation? In winding up the debate, perhaps the Minister will give us an explanation and indicate that there are likely to be amendments to the Bill in Committee. I always live in hope.

Students who enter the Open University are the real enthusiasts for learning. They are not going to university because it is the next thing to do after school; they are not going to university for a social life. They have a real commitment to the knowledge and skills upon which our economy and our society increasingly depend. While most of the students are adults, they are still young in their careers. The average age of an Open University student is just 33. They seek to combine work and learning, and family life and learning in ways which require immense commitment. Our current student body is precisely 180,438. I repeat: 180,438 students, yet only one student in seven is supported in any way by an employer. The vast majority have to make long-term personal sacrifices to gain a degree. I think they deserve our admiration and support. Instead of that accolade, I am sad to say that, by this Bill, they receive discrimination and neglect.

With this legislation the Government have created an unknown future. Noble Lords are expected to accept the Bill in the hope that it will be possible to charge full-time students higher fees and, at one and the same time, promote wider access to higher education. But of that we cannot be sure. A gamble has been taken and we now have to find ways of shortening the odds against failure.

At this time of uncertainty, the Open University becomes even more important in the higher education system. It becomes more important because it is the natural destination for students deterred by the prospect of commencing their careers with five-figure debts. The economy of this country and the flexibility of the mode of learning powered by the Open University should place it at the very centre of government thinking about university education. It would be a tragedy, not only for the staff and students, but for the system as a whole if it were neglected as it now seems to be.

The Government estimate that the measures they are introducing will bring an additional £1 billion to higher education. Those noble Lords who were in their places when the Minister made her opening remarks will recall that I intervened on this point. If noble Lords are not already aware of it, let me underline it: not one penny of that £1 billion will come to the Open University. Neither the university nor the students will gain any benefit from this legislation as it has been presented to us today. On the contrary, we shall be put at an increased disadvantage.

Traditional universities providing for full-time students will benefit, of course, from access to substantial new resources to invest in their programmes, in research facilities, in staff and in their students. I was fascinated by the comments of the noble Lord, Lord Wakeham, earlier, when he spoke as Chancellor of Brunel. He told the House that once the new fee system comes into effect an additional £30 million per year will benefit Brunel. All I can say is, "Well done, Brunel".

The Open University will be competing in the same market with its hands tied behind its hack, without access to equivalent resources. How will it be able to keep up in that competitive environment? Perhaps the Minister will enlighten me when she replies to the debate.

I accept that the Government recognise that something needs to be done about the problem they have created. On 8 January, the Secretary of State, Charles Clarke, said: We are keen to place part-timers at the centre of our consideration on the future of higher education and on the funding mechanism". Certainly there have been promises of a review of the financial needs of part-time students and the methods of funding their education. Lip service has, of course, been paid. But I have to tell your Lordships that there is no cash on the table as yet and 2006 is fast approaching.

I urge your Lordships—many of whom, I know, are friends and supporters of the Open University—to pay particular attention to the ensuing Committee stage. To sustain its position as a world leader in part-time education the university needs the same investment as the rest of higher education. An impoverished part-time sector is of benefit to no one.

The Government have a responsibility to ensure that the future of higher education is founded on a level playing field; that it is fair and that it is just. I look forward to the Minister's response and, I hope, to government amendments to the legislation which I can wholeheartedly urge my colleagues to support.

8.52 p.m.

Lord Winston

My Lords, it is a privilege to follow the previous speaker. Speaking at this stage in one of these debates is a little like performing in Haydn's "Farewell Symphony" with the hall gradually emptying. It is good to see some of the percussionists still present.

I declare an interest, first, as Chancellor of Hallam University, a new university in Sheffield, and, secondly, as an active scientist and an employee of Imperial College as a professor. Also, I work some of the time across the Atlantic at the California Institute of Technology, CalTech, to which reference has already been made by the noble Lord, Lord Waldegrave.

The Government have clearly pushed very hard the notion that science will drive our economy, and it is speaking as a scientist that I shall respond to some of the issues in the Bill, which, like so many other Members of the House, I broadly welcome. However, I have some very serious reservations which I hope to address during the Committee stage.

I regret to say to my noble friend that I am troubled by the complacent notion about British universities. She made an excellent speech about how wonderful they were, but the truth is that British universities are in dire trouble. There is no question about that. That trouble is getting worse. It will be slow deterioration, perhaps followed by rapid deterioration, unless we do something. The Bill goes only part of the way to dealing with the issue.

There is a clear under-valuing of university teachers, especially scientists. Coming from CalTech, as I do, half the scientists in the department in which I work in biological imaging are British. At CalTech University most of the astronomy department come from Cambridge or Manchester. Each department in that Nobel Prize-winning university, one of the leading universities in the United States, has been supported very largely by an influx of British scientists, because it is a science university. That trend, I am afraid, is continuing.

As for my own university, Sir Richard Sykes, the rector, has pointed out that Imperial College loses £5,000 for every home or EU student it currently educates. So whether for a top-rated university course or at a new university, the fees will be capped at the top level. We have the additional problem in some parts of the country—London is a notable example—that pretty well all the university buildings are in a dreadful state. I gather that if Imperial College were to put its buildings in order it would need to spend about £200 million. I believe that University College London is in a similar predicament.

The choice is to cut teaching standards or to take on more overseas students. Some 23 per cent of students at Imperial College currently come from overseas. This, in the short term, may be a very good solution, but in the long term it will be devastating. We will increasingly be training students who will eventually be our competitors, particularly in the Far East, in China. That is a very serious issue. If we really believe that science drives the economy and that a knowledge-based economy is important, we have to question whether this is a long-term strategy which is in Britain's best interests. Of course there are advantages in training overseas students from the Far East, not least by making very good academic links, but it is a high risk strategy.

A problem which has been referred to repeatedly is that there is a wrong climate for charitable giving. I should like to say something about commercial sponsorship, which has not been addressed much in the debate. I have a particular interest here, having just launched a spin-out company from Imperial College on a number of patents I hold. The truth is that of the three science projects in my laboratory, the spin-out company, which brings in the most money—about £3 million—is the least good science I am doing. It is not basic science, but it is diverting interest in my university department from where I probably should be focusing my real intellectual attention.

I am not convinced that this is good for the university. Spin-outs may be good for industry in the long term and it may be good, on occasion, to sell these companies on, but I do not think that they are the right answer. They are a very expensive way of spending money in the university. Does the Minister have any notion of how much the maintenance of intellectual property and the protection of patents currently costs university departments? I suspect that this is an expense which has not been accounted for. It is clear from what everybody has said that the universities must be funded realistically. At present, that is not the case, and this is a major issue for us.

A great deal has been said about the access regulator. That aside, universities need the people who are best for the course and whether the access regulator can do that is open to question. I will want to consider that extremely carefully in Committee. I hope that I am not at loggerheads with the Government on this issue, but I worry very much about the potential micro-management of the universities by government. The administration at CalTech is extremely small. It is remarkable how well that works and how it seems to get so many of the right people, offering a very large number of bursaries in the process to poor students who could not afford the fees otherwise.

Mention has been made of the cost of the access regulator. How much do the Government think that the access regulator will cost the universities in providing plans with milestones, targets and all the other information which will be needed? I am not sure that that has been costed. It may be considerably more than the £500,000 alone on the Government's side.

Surely the real reform that is needed for access to university is in secondary education in schools. That is where we have to concentrate. Unless we train pupils at school to be able to take up a university course, unless we encourage them that it is worth doing so and inspire them to believe that a university is a good thing to be involved with, education has failed.

Let me now put on my hat as Chancellor of Sheffield Hallam University. One of my great concerns is the poorer student access which may result from the Bill. I was interested to hear what the noble Baroness, Lady Boothroyd, said. At the moment, 39 per cent of students at Sheffield Hallam pay no fees at all and another 15 per cent are so disadvantaged that they pay a very reduced fee. That means that more than 50 per cent of the university is supported through other funds. In terms of the fees raised by Sheffield Hallam, it will have to spend a larger proportion of its budget on bursaries. That has to be at the cost of teaching unless the Government find a mechanism for providing more funding for disadvantaged students.

One of the most uplifting experiences in my career happened not at a top university such as Imperial College, but when I gave out certificates to people who would never have gone to university had they not gone to Sheffield Hallam. It has been a remarkable experience for me and has taught me a great deal about how much we can change people's lives for the better with these universities. The irony is that, as a result of access regulation, we may end up restricting rather than promoting access.

I have reached my eight minutes and I do not want to go over that time, but one thing that has not been mentioned is the plight of the medical schools. The most complex university course in this country is that of medicine. We are short of doctors and there is a genuine crisis. I hope that the noble Lord, Lord Walton, will deal with this issue so perhaps I can cut my comments short. However, a full economic costing is impossible in medical schools, which are requiring people to be both Albert Einsteins and Albert Schweitzers. We are expected to train—which is different from teaching—people to operate, practise and research, and the research has to be five star or six star to compete with the research assessment exercise. In the mean time, medical schools cannot afford to employ technical help to support their scientists because it cannot be costed within the research assessment exercise.

SIFT is not meeting the full cost of medical school activities and now medical academics are facing a cut in their salaries compared with consultants in the NHS. Currently, the shortfall is about £10 million. If the medical schools are to continue to be competitive, they must have a good mix of both clinical and academic staff, but we are tending to lay off the teachers and clinicians because we cannot afford to pay them. That is a disaster for medical education in the universities in Britain, and I fear that medicine will suffer increasingly in this country in consequence.

9.2 p.m.

Lord Lucas

My Lords, I am uncomfortable with a great deal of this Bill and the last two speeches have illustrated my sources of discomfort so perfectly that I do not need to say anything other than that I support everything said by both noble Lords. I particularly hope that my own Front Bench will find a way of supporting the noble Baroness, Lady Boothroyd, in what she said about the Open University, which seems to be so much along the right lines. We should be seeking to give particular support to those making their way through a university course in their own time and using their own resources.

The courses at our great universities—my daughter receives six hours' tuition a week—would scarcely qualify as a school day. Universities are places of enjoyment, and for learning and growing up. As places of tuition they do not compare with the Open University.

We face a Bill that has been so battered about in the other place that we must be realistic. We will not be able to change the bones of it. It came to such a close call, that it will not be easy to get any great compromises out of the other end, so I will concentrate my remarks on areas where I hope that we will be able to be persuasive.

One of my great beefs with the universities is how little information they provide to prospective students. They do not say what they will provide by way of a course. There is nothing that resembles a service-level agreement stating, "This is what we will provide you. These are the standards by which you can judge us". There is very little information about what a particular course leads to. What are the students doing two years, five years or 10 years after they have graduated? We are asking students to commit a great deal of money to a sort of South Sea Bubble of a prospectus. I find that deeply unsatisfactory, and I am glad to say that Professor Steven Schwartz finds it just as unsatisfactory. That is one of the things for which I applaud his report—his concentration on that deficiency.

When I read the current consultation report, the picture that I get is of OFFA reaching its cold hand into the vitals of the universities. There is so much detail, so much grip. I can just imagine what it would have been like if I had been on the Front Bench in the days of Lord Beloff and had proposed such a thing. My vitals would have been on the table very quickly! I am greatly saddened that Universities UK and universities individually have weakened to such an extent that they have to contemplate such an interference with their freedom.

I have a lot of sympathy with the Government. I have many quarrels with the universities, particularly with Oxford, my alma mater, and Cambridge, its cousin, on their access policies. Yes, they put a lot of effort into doing things, but they will not change the way they are to make themselves more accessible. My daughter and I went around Cambridge on an access day and had a look at the architecture course. A student cannot study architecture there unless he has read a huge pile of books. How many people in inner-city Manchester have ever got to that stage with architecture? They are excluding people who have not had access to that sort of thing through their families or through having had an expensive or liberal education in some leafy suburb.

In the curriculum that we looked at, some of the courses in modern languages did not go beyond the 18th century. How can one call that appealing to the entirety of the British population? They are appealing only to people who have been schooled in the glories of academia, who have been through grammar schools or the more academic public schools.

Meanwhile, the welcome was extraordinarily absent. There were no students on hand to tell us what the university was like. We went to a few lecturers, were talked to by a few academics, saw the beauties of the place, and that was it. There was nothing there for someone coming to this extraordinary city from a strange background, who might welcome him or say how lovely it was. There was no question, as far as I could discover, of any mentoring scheme. At the better schools, a kid who joins at 11 or 13 will be assigned someone who is older to hold his hand and see him through the first year or so. There seemed to be no trace of that. All the things that could be done to make our great universities more accessible to students from non-traditional backgrounds do not seem to be being done.

Most of all, I am distressed by the lack of engagement by the universities in the 14 to 18 curriculum. I really object to the attitude that Cambridge and Oxford took to AS-levels. They simply disregarded them. The students had put in all that work because the Government had asked them to go down that route and broaden their learning, but Cambridge and Oxford simply said, "It's nice you've done that, but actually we just want three A-levels". I find it very difficult to deal with that lack of involvement and engagement.

I see a need for a strong interface, by which the Government can converse with the universities and get a dialogue going on what the Government expect of them. Universities should expect to respond and to be part of the nation, rather than sitting in their careful isolation. For instance, I should like there to be evolution in foundation years. Yes, we ought to improve secondary schools, but a lot of kids will come out of secondary schools in the foreseeable future who have not done as well as they could have done. There should be places where they can go for foundation years, and the results of those foundation years should be accepted by the best universities. That would require their co-operation in that sort of access arrangement, which does not seem to be present.

There is a lot that I can see an organisation such as OFFA doing. However, I absolutely do not accept the idea that OFFA should be the creature that is envisaged in this Bill. I very much agree with what my noble friend Lady Perry and other noble Lords have said about embedding someone within HEFCE. It would have to be someone individual; I would not let him become anonymous. I would want to see a lot of publications and a lot of parliamentary interface from him. It would need to be someone who was one step back, who might persuade universities by talking publicly and shaming them in public, but without putting his fist around their purse-strings or heartstrings.

The other area that I would like to see strengthened is the review of student complaints. I recently took a student who I mentored through one of these procedures and it was a very miserable experience indeed. As soon as the student had been asked to leave the course she was presented with a document that stated her rights of appeal. But it had not been clear why she had been asked to leave the course. When she went to ask her tutors what she had done wrong they said that they were not allowed to talk to her until she had surrendered all her rights of appeal. It took us a couple of months and some pretty heavy lawyers' letters before we got a meeting with the institution. It did not produce anyone who had any experience of what she had actually done. But then it produced a collection of unsupported allegations from unnamed tutors as to what had happened and a letter from the university stating that, in view of what was being said, she should not pursue her appeal.

I found this enormously unsatisfactory so, when we come to that section, I shall want to ensure that we are dealing with an independent system that can look at the breadth of a complaint and that the phrase "academic judgment" does not extend to matters that are clearly discriminatory. That particular student has a lot of disabilities and other problems of background and the extent of the discrimination took my breath away. I want to see someone who disseminates good practice, who can help the universities to rid themselves of this complacency, this disregard of a student's right to a fair hearing, and who will give us a standard that a university ought to set itself.

So when we come to that section, I shall be very keen to ensure that it lives up to the standards that I would have expected. In justice, many Members of this House have said that such standards would apply in their own institutions. The only reason I do not name the institution is that things got so difficult and I am sure that if I did, it would take it out on the student concerned should she ever ask for a reference.

9.12 p.m.

Lord Walton of Detchant

My Lords, many years ago, before the introduction of student maintenance grants, my school teacher parents in Durham County supported me through medical school, then my brother and then my sister through the same medical school, supported only by county major exhibitions worth £80 a year each. At the time, I knew nothing of the financial and personal sacrifices involved. Since those years, working in universities and in the National Health Service, I have become increasingly conscious of the concerns of students in all faculties of the universities and I fully recognise the reasons why many student bodies are bitterly opposed to the Bill. Yet I support it because I can see no reasonable alternative in taking the first step towards improving the parlous financial position of our universities at present, which is a step that is long overdue.

Earlier this afternoon, during Questions, I mentioned that I had chaired the Hamlyn Foundation National Commission on Education that in the early 1990s undertook a major programme examining the state of our educational system across the board and receiving evidence from individuals and institutions. We recognized that in this country at that time we were dealing with a low skill economy and we soon became aware that the only way in which we were going to increase our national competitiveness was by increasing the intake of students into higher education. For that reason we recommended a progressive move towards 50 per cent of the population entering higher education, but at the same time we recommended a major restructuring of the 16 to 18 examination structure to take full account not only of academic excellence but also of the crucial importance of vocational courses in our higher education institutions so that across a broad field that particular examination structure could fulfil the needs of the country.

Happily, although it has taken 10 years, Stephen Tomlinson in his recent report has more or less taken on board what we recommended for that examination structure. We recommended that the country could no longer afford full maintenance grants and the payment of all fees for students across all sectors of higher education save for those coming from the poorest families. For that reason we recommended an upfront fee of £1,000 per annum and the replacement of maintenance grants by loans.

That report was debated in this House in an open debate on a Wednesday afternoon. When we suggested that that particular mechanism should be introduced but that loans and fees should be repaid through the tax system, the Front Bench members of the then Conservative government were vocal in their opposition. They said that the income tax system was not a method of debt collection and they wished to see any loans, like mortgages, repaid by the writing out of a cheque. Happily, when the present Government came into office, and after the noble Lord, Lord Dearing, made his excellent recommendations in his report, it became accepted that loans should be repaid through the tax system once the individuals, following graduation, had reached a certain level of income. That mechanism will continue with this Bill.

How I wish that it were possible not to introduce top-up fees, but what other alternative is there? Today we have heard so much about the gross underfunding of our universities. When I was Dean of Medicine at Newcastle from 1971–81, the student/staff ratio was agreed with the University Grants Committee as 8:1 in the pre-clinical sector and 10:1 in the rest of the university. Now, as my noble friend Lady Howe said, the figure in all faculties is approaching 20:1. The unit of resource has been gravely diminished and university funding has been cut in general by almost 20 per cent. That cannot be allowed to continue.

As my noble friend Lord Butler said, many universities would wish a higher figure than £3,000 for the fees that are to be repaid through the tax system. I am not a politician but I presume that politics is the art of the possible and that the Government felt they could not get away with anything more than £3,000; otherwise, they would have an even greater revolt from their Back-Benchers.

I say in passing how much I enjoyed the forceful and articulate speech of the noble Lord, Lord Forsyth, with whom I had an interesting discussion on this topic just over two weeks ago. For a few minutes I almost began to believe him, but the feeling soon wore off.

I am very much in support of this Bill. However, I also support very much what my noble friend Lady Warnock said about research. Happily, this Government have recognised the need to improve this country's science base. In the past few years much more money has gone into science, but one recognises that much of that has gone to the research councils; it has not as yet gone through the university system to improve the infrastructure which is so lacking. I refer to the importance of the well found laboratory, technical assistance and the equipment that is so essential for the pursuit of high quality research.

I hope that in her closing remarks the noble Baroness will now be able to assure us that the infrastructure funding will continue to increase, as the Government have said that it will, and that when the top-up fees are introduced they will go directly to the universities but that that will not have a detrimental effect upon the basic state funding of higher education which needs to be increased year upon year upon year.

I shall say a few words on OFFA. We are living in an over-regulated society. I greatly opposed the establishment of the Council for the Regulation of the Health Care Professionals, which was established to be a Big Brother looking over a series of reorganised and reconstituted Big Brothers already there to regulate the health professions. OFFA is a step too far, therefore I strongly urge the Government to reconsider its establishment, particularly in relation to admission policies and universities' decision-making powers, which must not and cannot be eroded. If it is simply there to improve access, that is well and good, but the guidance in the Secretary of State's letter is very alarming and has given rise to great concern among many noble Lords.

The noble Lord, Lord Winston, mentioned medicine. I am very concerned about the position of medical students. After all, they work 48 weeks a year and do not have the opportunity for any outside earnings during an extremely demanding and lengthy course. The level of their debt at the end of their course will be very substantial. The National Health Service has made a major contribution, not only to the funding of academic posts and the support of research in universities. I cannot help wondering whether there may not be a case for inviting the NHS to consider supporting medical students in their final year, during which the majority work in the NHS as assistant house physicians and house surgeons as a part of their clinical course. There may even be a case for offering a kind of cadetship such as the Government offered years ago to doctors prepared to enter the Armed Forces. Doctors were supported through their clinical training in return for which they were committed to serve for five years in the medical services of the Armed Forces.

Recent research has given rise to serious concern to the effect that a study of medical graduates of 1999 and 2000 showed that 25 per cent of those expensively educated young people were thinking of leaving the profession and 10 per cent were determined to do so. We cannot afford to lose those people. Their massive burden of debt, in addition to the pressures of clinical practice in our overburdened NHS, may be one factor in causing that concern.

With those provisions, I support the Bill, warts and all.

9.22 p.m.

Lord Puttnam

My Lords, it is probably fair to claim that a great deal of the legislation discussed and scrutinised in this House bears on issues whose principal impact is likely not to be felt in our lifetime. That is particularly true of this Bill. We have been privileged to listen to some remarkable contributions.

While declaring an interest as chancellor of the University of Sunderland, I express my judgment that the course set by the Bill will irreversibly shape this country's ability to play a significant role in the world of the 21st century. In that respect, I welcome it entirely. What that role might be in itself is an issue for another debate. Some believe it possible to create something similar to a fondly imagined golden age, with its sense of continuity, state scholarships and an aspiration for excellence in those few with the energy and ability to make crucial decisions on behalf of a truculent but fundamentally grateful workforce.

That would be a fair description of the world into which I was born, a world struggling to adjust to the social changes brought about by two catastrophic wars. Today's world, that addressed by the Bill, could hardly be more different. It is different in respect of the aspirations of young people and, most particularly, those of their parents. It is different in respect of the nature of employment and the opportunities on offer. It is very different in respect of the shape and future composition of the workforce. It could hardly be more different in respect of the depth, breadth, nature and quality of the competition that future generations in this country will be required to face. All those issues bear down hard on the likely outcomes, anticipated and unanticipated, of this legislation.

The new world that I have just described is the one that we at the University of Sunderland are attempting to ensure that our community—academic and regional—is equipped confidently to address.

On 4 December last year, during the debate on the Queen's Speech, I was pretty rough on the Government and their proposals. To their credit, the Government have significantly improved some aspects of the legislation, sufficient at least to have squeezed it through the other place. I suggested last year that the Government had to think big and dig deep. In response, they seem to have broadened but not really deepened their thinking.

Although some additional resources have been won, there is general consensus that the sector will very quickly prove under-resourced to do the job asked of it. My suggestion has been for consideration of a higher education bond. I continue to believe that at least £10 billion needs to be injected into the sector to put it on a sufficiently sound footing to address the changes and challenges that I set out a few moments ago, and possibly even to accommodate the entirely legitimate concerns for part-time students.

The benefit of my sketchy thinking is now with the DfES and the Treasury, but a far more detailed and informed approach is being taken by Alfred Morris, the vice-chancellor of the University of the West of England. Mr Morris and his colleagues, advised by KPMG, are developing proposals for what they term a student covenant scheme. The effect of their proposals would serve exactly the same ends as my own. I hope only that, between us, we have pointed a way forward for the department and those Treasury officials presently wrestling with the problem of additional funding. We look forward to hearing the results of their deliberations, because it is beyond doubt that more money than the Bill makes available will be needed. That is why I continue, along with my noble friend Lord Parekh, to argue that the Government need to dig deep.

In the time left to me, and taking a very specific cultural and regional approach, I would like to ask the Minister a couple of questions in the hope of clarifying what I see as ambiguities in the Government's position on the development of so-called access initiatives, and in the implementation of variability, the single issue over which so much blood has already been shed.

The Government have come a long way toward assuaging many of my earlier concerns on variability, but will the Minister make it crystal clear that, among the concessions already won, the commitment to a review means that there will be no change or breaking of the ranks permitted until a full assessment of that review has taken place, followed by a further vote in both Houses? In her opening statement, she referred to the former but not the latter. I further suggest that, for the sake of transparency, the Secretary of State commits to the inclusion of at least one representative of the modern universities on the review panel itself.

As I hope that I have made clear on a number of occasions in this House, my principal concerns are for a proper consideration of the very specific circumstances of the north-east of England, a region marked by an historic aversion to debt. It is a region in which just about every family, particularly those from the traditional working class, has a debt-driven horror story to tell, and a region that saw its economic livelihood stripped away during the deindustrialisation of the 1980s. It is only now beginning to struggle to its feet and imagine a brighter and more secure future, by and through access to further and higher education. I am desperately proud to be chancellor of the university in the region, which created and developed for its region access policies tailored to the potential of a remarkably resilient group of people—people for whom higher education had for ever been viewed as "just not for the likes of us". It is on the issue of debt aversion that I seek some specific reassurance from the Minister.

We are moving into what is probably a defensible but as yet unproven world of debt creation for many, principally young, people. The debate to date has been so much taken up with the entry of poorer students into elite universities that the longer-term impact of debt aversion on the modern universities has been all but ignored. Yet it is there that the problem will bear down the most. It is vital that the Minister carries back to her department a full realisation of the pivotal role that many of the modern universities now play in the economic regeneration of their entire regions.

To destabilise those regions by giving inadequate consideration to what are, in effect, massive cultural readjustments is unlikely to be either forgiven or forgotten. The cultural aspect of the issue was very well described by my noble friend Lady Lockwood, and I shall not dwell on it any further, but Wearside is not Cheshire or Sussex, and it does no one any good to pretend otherwise. That being the case, I hope that my noble friend will tell me that the Government have wholly thought through all the possible implications of debt imposition, most specifically on entry levels in areas that remain the most economically vulnerable in this country.

One of the many services that this House offers to the legislative process is its ability to highlight the possible unintended consequences of this or that legislation—to bring forward evidence of where things are likely to go wrong. The Secretary of State has clearly stated that, for him, social equity lies at the heart of these proposals for change. May I offer this insight, as someone who spends much of his life fretting over the frequently damaging side effects of market-dominated thinking? At a lecture in London, Robert Reich, the Secretary of Labour in the Clinton administration and now professor of social and economic policy at Brandeis University—whose ears must be burning because he has already been mentioned by the noble Baroness, Lady Sharp, and the right reverend Prelate the Bishop of Portsmouth—quoted a statistic to the effect that in 1979 a student from the upper quartile of wealth in the United States had four times the chance of entering higher education as a student from the bottom quartile. After 20 years that figure has risen to 10 times. That is the consequence of market forces, if they are allowed to dominate higher education.

My noble friend the Minister will surely agree with me that that is the type of unintended consequence that any party claiming to promote social equity would have an extremely difficult job to explain away. I wish that I had more time, because I would like to discuss the vexed issue of part-time students, but that situation reflects the case exactly—there is never enough time for them, the subject is always an "add-on", an afterthought, and that is why it never has the case made for it that it deserves so much.

9.31 p.m.

Baroness Brigstocke

My Lords, as the 37th speaker in this exhilarating debate, I shall be brief. Much of what I had intended to say has already been said so eloquently by academics, senior civil servants and those noble Lords who have distinguished themselves without the benefit of a university education.

However, I am loath to speak at all. After 50 years working in secondary schools in this country and the United States, in both the independent and the maintained sectors, I applaud the Government's aims to give more support and resources to universities, even if that is, as the noble Lord, Lord Butler of Brockwell, and others have said, a help only for the short term, and does not address the enormous problem of the long-term financial security of our treasured institutions.

The noble Lord, Lord Winston, dramatically described the dire problem facing medical schools. I have spent my life trying to encourage my school students to follow their own paths; not to be swayed either for or against academic courses, but to choose the best courses for themselves. Not all people benefit from an academic university course. Sometimes trying to force oneself into an academic mould can stunt and even prevent the creative, practical bent that would have led one to more suitable employment and greater self confidence and peace of mind.

I shall make a simple point. One size does not fit all. The case has already been made for maximum support and freedom for our elite, prestigious, world-class universities—we needs must love the highest when we see it—and also for the less well known universities, which cater for students who have been badly let down by their schools and have, indeed, special educational needs, many of them school-induced.

But we must not forget the young people who have little or no interest in academic or theoretical studies. They, too, deserve support and resources—ones that will encourage and develop their creative and practical skills. Those may range from cooking to nursing, carpentry, brick-laying, construction, electrical installation and—very much needed in today's world—plumbing.

I should like to see more thought given to the higher training of those who provide the practical basis for our so-called civilised lives today. I know, from the noble Baroness's Answer to my Starred Question earlier today, that she is determined to improve technical and vocational training in schools. Can she please take that a step further for the tertiary stage, increasing, as I think has already been mentioned in this debate, opportunities for apprenticeships, in particular? That, too, will need considerable funding.

In finishing, I have to say that I share the deep concern of so many noble Lords about the proposed access regulator of OFFA. Why are the Government preoccupied with a target magic figure of 50 per cent of young people under the age of 30 attending university? How do they come by that figure? I suspect that, of that hypothetical 50 per cent. quite a few would benefit more from the vocational pathway—not according to their social class or type of school attended—which eventually might even propel them on to the Sunday Times rich list.

9.37 p.m.

Lord Wilson of Dinton

My Lords, it is an honour to follow the noble Baroness, whose understanding of what makes for excellence in sixth-form and secondary education must be unparalleled.

Like so many other speakers today, I declare an interest in this debate. I am Master of Emmanuel College, Cambridge—a college with an outstanding record in teaching as well as in research. I can say that because it is not something in which I have played a great part myself; it is a cumulative effort over many years and it has resulted in the college being top of the league table for academic achievement by undergraduates. Therefore, it is a home of real teaching skills.

I must also say that I am a relative newcomer. I realise that I have far less experience than many other speakers in this debate. But, as a recent denizen of Whitehall, I come with an unusual perspective of the contrast between life in government departments and life in Cambridge. I shall not dwell on all the differences. There are, for example, no Ministers in Cambridge—at least, not so far. I can always come to this House if I feel that the deprivation is becoming acute.

However, as a newcomer at a great university, a number of different things strike one very strongly. One is the commitment to excellence. In many large corporations, top management teams spend much time discussing how they can generate a terrific sense of motivation across everyone who works in the institution. I believe that the university which I now have the privilege to have joined certainly already, unselfconsciously, has that kind of commitment. It is, interestingly and unexpectedly for me, an entrepreneurial environment where people are motivated and driven by a real passion for their own areas of interest and for the pursuit of teaching and research in those areas. It works. That is the best test of any institution.

I am also surprised to find none of the snobbishness and bias that those who criticise great universities allege. I find a strong commitment to selection of students for admission to the college on the basis of merit, regardless of background. The decisions are extraordinarily painful; the choices are very difficult; but the commitment to merit is unchallenged. As I come from a background of public service, where merit is the basis of selection, that is something with which I feel very comfortable and I am happy to find it.

However, I find some matters less encouraging. Under-funding, mentioned by every noble Lord today, came as a great surprise to me. I should have known it, as people have been talking of it, but it is only when one comes face to face with it that one discovers how serious it is. It is very severe.

Like the noble Baroness, Lady Warnock, I too am worried by the pressures to drive apart research and teaching, which is a worrying trend because the two must be united and must learn from each other. The pressures of research assessment exercises—I understand why they are there—have the effect of creating tensions that are hard for people in the institutions to resolve.

The third matter that I am dismayed to find—the noble Lords, Lord Eatwell and Lord Renfrew, referred to it—is the poor level of academic salaries or the level of reward for teachers and people who work in universities. The noble Lord, Lord Lamont, said in a debate on 5 February last year (at col. 264 of Hansard) that over the past 20 years average earnings in the economy have risen by 45 per cent in real terms whereas academic pay has risen by 4 per cent in real terms over that same period. I believe those figures are right. The signal of low esteem is unmistakable. I can think of few groups that would have accepted that kind of decline with such good grace. I certainly do not believe that civil servants or Ministers or Members of Parliament would have let such a situation arise without more protest and action to put the position right.

In my own college we employ a number of teaching officers who provide undergraduate teaching in specific subjects in order to meet a shortfall in the teaching available from the university. That is another reflection of the strain that the shortage of funding has placed on the university. We pay salaries in the range of roughly £20,000 to £26,000 per annum, and that is after a very recent substantial pay increase which was agreed for the teaching officers. They may be able to earn another £2,000 by directing studies or by acting as tutors, but that is it.

Those are talented people, some with reputations far beyond Cambridge. If they worked in the Civil Service they could earn two or three times as much as they earn now. I just hope that they do not read Hansard because we depend on them heavily. I do not go around telling them that when I am in Cambridge.

That is a small example of a big problem. The university is gravely under-funded by an estimated £24 million for undergraduate teaching. The decline in funding has been relentless. One way in which universities have coped with the decline in funding has been subsidy by academics themselves in holding down their salaries. That is a most extraordinary example of efficiency. When I hear, as I occasionally do, people from other institutions questioning the efficiency of Cambridge I want to say to them, "Do you have staff who would finance your institutions by holding down their salaries?"

The trouble is that the situation cannot continue like that. There are issues concerning the retention of people. While the performance is good now, it will not continue at that level. So where is the money to come from? The debate has made it clear that one source is the Government, but it is not realistic to rely on the Government to provide the funding, nor would it be wise to rely too heavily on government funding. Another source is fund-raising and endowment for those who are lucky enough to have endowment, but financial independence, although very attractive, is not achievable except perhaps in the very long term. A third source of funding would be continued academic subsidy, which I think is wholly unacceptable and needs to be reversed. The final possible source of funding is graduates themselves, those who have benefited from higher education and who are reaping the financial benefits in their later life; in other words, the charging of student fees that the Bill proposes in Part 3, and which I support.

However, it is absolutely essential that those fees are accompanied by measures to ensure that everyone who has the merit to benefit from higher education should do so. Of course we have to reach out to encourage people to apply who had not thought of applying. My own college holds summer schools for people from Sheffield and sends out undergraduates to talk to people in state schools. A lot more goes on than we get credit for.

Our new vice-chancellor, Alison Richard, whose leadership we all warmly welcome, has announced a new scheme to improve our present bursary scheme to provide bursaries of up to £4,000 a year. But, above all, I think that we need to recognise that all universities differ. We have great variety. There is great diversity between our universities. It is a good thing that we have diversity between universities. Just as we differ in the students and in our subjects and sizes and in the balance between research and teaching, so we differ in our costs. Variability is a fact of life and I think that the Government are right to accept it and to make it a matter of principle that that is the basis on which the Bill should go forward.

I share the concern of those who worry about OFFA. No doubt we shall discuss it in Committee. I would just like to say that a press release of 4 March from the Department for Education and Skills said repeatedly that, OFFA will not have any powers over university admissions … OFFA will have nothing to do with admissions". I hope the Minister will tell us where in the Bill we can find safeguards for academic freedom and institutional autonomy in admissions decisions, and if they are not there, I hope the House will be prepared to consider them.

There are many other clauses that I think we will want to drill into, but I shall rest on that note. I will support the Bill. I would just say that my noble friend Lord Wilson of Tillyorn, who is not able to be here, asked me to say that he too would support the Bill if he were here. We already exchange letters the whole time because our post gets redirected. I am now developing this close link between the Wilsons.

9.46 p.m.

Baroness Buscombe

My Lords, I should like to begin by declaring an interest. My three children are currently taking GCSEs and A-levels and are, along with thousands of young students, deeply concerned— indeed really worried—about the impact this Bill will have on their future, no matter how hard they work and how great their potential. I speak as a parent and as a member of the Bar who attended both a secondary modern and grammar school within the maintained system.

I shall focus entirely upon Part 3 of the Bill and, in particular, OFFA and the Director of Fair Access. Let me say straight away that if this part of the Bill was honestly and simply about OFFA achieving ways of instilling sufficient confidence in all school leavers with potential to apply to higher education institutions I would not feel the need to take part in this debate. I agree wholeheartedly with Universities UK, which in its paper dated 5 April, paragraph 20 states: It is important that OFFA should focus on supporting efforts to widen the pool of applicants. It should avoid any action to influence the composition of the student body. Admissions to institutions must only be selected on merit—admissions policies, standards, requirements and decisions must remain a matter for the institutions alone". Unfortunately, the Bill as drafted does not ensure that this will be the case. As the shadow Secretary of State in another place said, the Bill undermines the independence of universities. The access regulator will interfere with admissions policy in a highly bureaucratic way. Funding will be tied to compliance with the Government's social agenda.

The Minister this afternoon stated that fair access to universities does, not extend to university admissions", but nothing that was said by her colleagues in another place confirms that. Indeed, the main thrust of the debate on OFFA in another place was the Government and their Back Benches attempting to reassure Opposition Benches that they were not seeking to engineer change by artificial means; that they simply want to ensure broader and greater participation.

But, how can that laudable aim be achieved in terms of outcomes without improving standards of education in schools unless OFFA is there to fix the system? In the words of the honourable Member for Nottingham North, Mr Graham Allen MP, when referring to the system of university admissions, we want to clean it up".—[Official Report, Commons, 31/3/04; eel. 1619.] A diverse student body must be highly desirable but how do you achieve real diversity without fixing the system when only one quarter of all A-level students achieves two A-levels with good grades? The Secretary of State's draft letter of guidance states: We as a Government are determined that access to higher education is broadened not narrowed". But how do you measure whether a university has succeeded in achieving greater diversity without considering outcomes?

This afternoon, with regard to fair access, the Minister said that the Government will seek to monitor progress and have established an independent commission to review progress after three years. Good, but how will they do that? By just looking at who has applied to university or who has attended? I do not believe that it will be the former.

The fundamental question is: what do the Government mean by fair access? Ministers in another place spoke of groups that are under-represented in higher education. Whom do they mean? As my noble friend Lord Forsyth said this afternoon, the duties of the director of OFFA are woolly and undefined. That said, the Minister in another place made it very clear in Committee when he said: we want to direct the regulator".—[Official Report. Commons Standing Committee H; 4/3/04. col. 523.] In which case, the Government will require the universities to take a proportion of students who have underachieved because the education system has failed them and so effectively interfere with the admissions process.

As the noble Lord, Lord Eatwell, said this evening, the draft guidance refers to a broad-based intake. What do the Government mean by intake if not admissions? It is true that the Government have set up a separate steering group chaired by Professor Steven Schwartz to review options that higher education institutions should consider when assessing the merit of applicants for their courses. The remit of that steering group is instructive. It lists, first, the need to reinforce public confidence in the fairness and transparency of admissions arrangements". Secondly, it lists, the diversity in the missions of providers of higher education and their students", and, thirdly, they must monitor, the autonomy of institutions in academic matters including the systems and processes by which applicants are admitted". The first and third points are welcome. However the second is entirely unclear: the diversity in the missions of providers of higher education and their students". What does that really mean? More woolly words. No clarity, for obvious reasons.

It is only right to warn the eminent steering group that the Government will follow their recommendations only if they fit the Government's agenda. After nearly seven years of this Government, it would be naive in the extreme to hope otherwise. We will all know the truth when we see the regulations. If the Government were not seeking to hide the truth, the parameters of OFFA and the definition of fair access would be in the Bill. Even the Explanatory Notes tell us nothing.

The White Paper makes clear that nine out of 10 students with two or more A-levels go on to higher education and that students from lower socioeconomic groups are just as likely to go to university as those from better-off backgrounds. The nub of the problem is that the state-maintained education system is failing to provide the opportunity for many young people to get the exam grades that they need to get to university.

We need to tackle the secondary education system if we are to achieve a genuinely wider pool of participation in higher education without discriminating against those with potential who have achieved excellent results through commitment to hard work, combined with ability, in the independent sector and—this is really important—without patronising students from the maintained system. Most parents of students in the independent sector would, I believe, send their children to state schools if the standard was universally good. Indeed, I think it worth noting, given all the talk in another place of privilege, that about 20 per cent of university candidates from independent schools were the children of non-graduate parents who were not educated in independent schools.

The statistics speak for themselves, bearing in mind that only 7 per cent of the nation's pupils are educated in independent schools. At A-level in 2001, more than 15 per cent of all candidates and 36 per cent of those achieving the equivalent of three A-grades were from independent schools. Between 40 and 50 per cent of the schools' candidates gaining A-grades in "difficult" Alevels—maths, the sciences, modern languages, economics and history—came from independent schools.

I am constantly amazed, and indeed proud, of what my children are learning and achieving in the independent sector. Their working day is long; much longer than in the maintained system. They are encouraged to think and to want to learn. It is not about cramming and prepping; their education is enviable, and we should applaud the standard of teaching in the independent sector, not deride it. In addition to improving standards in schools overall, there is clearly a lack of consistency in the system, which could be countered by improving access, by reviewing options for assessing merit and potential across a properly co-ordinated system, but you do not need to legislate for that.

The effectiveness of additional funding earmarked for outreach activities designed to increase applications from currently under-represented groups should be measured by the increase in applications across the higher education sector as a whole, rather than individual institutions. Funding should be targeted to encourage regional collaboration between universities and schools and colleges. More use should be made of evidence from schools' own assessments to assist in the early identification of potential to benefit from higher education. In conclusion, the Minister said this afternoon that we have a higher education system of which we and the nation are justly proud. My response to that is simple—let us keep it that way.

9.56 p.m.

Lord Tomlinson

My Lords, in this debate we have heard from representatives from Oxford, Cambridge and Imperial, together with extremely powerful speeches from the noble Lord, Lord Rix, on behalf of east London, from my noble friend Lord Puttnam, speaking on behalf of Sunderland and from my two noble friends speaking on behalf of Greenwich—both chancellor and vice-chancellor designate—and it has become clear that there is no single solution to the extremely diverse problems that have been so excellently described from different perspectives today.

I started off when I was preparing for this debate by reading the introduction, by Steven Schwartz, to the Fair Admissions to Higher Education document, in which he says: Overall, the benefits of higher education are strong and are holding steady, but they also vary considerably from course to course and between institutions, in terms of both the learning experience and the graduate outcomes". To me, that established clearly what I have held to be the position since the beginning of this debate; namely, that the case for variability of fees is not an option in the debate, it is an imperative part of the debate.

Unlike the noble Lord, Lord Eatwell, I have no desire to attack the Minister's salary. In fact, as she is required to defend this Bill as it stands, she ought to be offered a top-up fee, and one that is not necessarily subject to capping. Unlike Universities UK, I cannot strongly support the Higher Education Bill. I might just about, on balance, give it a rather apathetic, supportive nod in the right direction, if I am in the right sort of mood.

I can support parts of it. The long-needed establishment of the arts and humanities council, which is long overdue, is obviously to be welcomed. The creation of the independent adjudicator for higher education, although there could still be some argument about the extent of that role, is clearly to be welcomed. I can give muted support to the Bill's stated principle of variability in fees; a principle that could and should have been far less constrained than is the case in the Bill. I remain unconvinced by anything that I have heard today about the need for an office of fair access, and I concur fully with the analysis of the noble Lord, Lord Butler of Brockwell, in this respect.

The Bill is not really a Higher Education Bill. It is a less than adequate measure to buy off parliamentary objection in another place to measures that are needed to address what the noble Lord, Lord Holme of Cheltenham, described as the supply and demand equation in higher education.

Variable fees start as a basic principle, but, at the end of the process—I would call it horse trading, but, with horse trading, you at least end up with a horse—we have wound up with a concept in which top-up fees are capped and everybody appears to expect everybody else to apply the maximum permitted increase. What sort of variability is that? We started off with it as a fundamental principle.

Although there appears to be agreement that higher education is underfunded—I share that view—there appears to be no agreement on the net value to universities of top-up fees after the various offsets. There is even less clarity about how much it will cost to collect the approximately £1 billion—or is it £1 billion less 10 per cent? Will it cost £1.2 billion to collect or £1.4 billion? We had all the permutations during the debate. The only thing that is clear is that we are not sure how much we will get or how much it will cost to get it.

The Bill might, as noble Lords have said, be the only show in town. It may be supported because the alternatives are either worse or remain unstated. It might, in principle, be the right way, even if the principle has got confused along the way. Should the Bill be supported? Probably. Will it solve the funding problems in higher education? Probably not. Even if the full £1 billion that is seen to be available percolated through to the universities, we would almost immediately restart the debate on the funding crisis in higher education. We would not have solved it; we would just have a new starting line for reopening the debate concerning the quantum of money available for higher education and its distribution.

How do we improve the supply of good students to higher education? We do not start by arguing about what we do with them at the age of 18. We do not solve the problem by persuading some of them to go on weaker or cheaper courses. I have already made clear my views on the excessive number of courses on offer in media studies, when there are not enough places in the media to engage those people in useful employment. Then there is the number of variants of marketing courses related to an industry that seems to have precious little left to market. We should not start at that end of the equation; we should start as the Government have done—I praise them for it—with their commitment to Sure Start, by providing better, cheaper, even free nursery school places and by massive investment in primary, junior and secondary schools. That is how to improve the supply of good students. We will not get that by demanding notional targets, whether it be 50 per cent or any other figure. There is no merit in having 50 per cent going in through the front door, if, at the same time in departments in some of our universities 30 per cent go out through the back door unqualified. Such students would have been far better off engaging in vocational training than being artificially encouraged into a course for which they were unsuited.

In the longer term, there are other questions that must be addressed. We have put all the questions to the Government and not put enough to some of the universities themselves. The universities sit on large amounts of frequently underutilised and expensive capital. Should not our examination of the funding of higher education include the utilisation of that capital? What about more intensive teaching, longer academic years, multiple entries during an academic year'? All those factors must be recognised.

We have heard a lot about the responsibility of the state towards the universities. There is also a parallel responsibility of the universities to account better for the stewardship of the resources for which they have exclusive control. We have heard a great deal about university responsibility to students. We also ought to say something about the responsibility of students to the society that is investing large sums of money in their education.

I do not believe that it is necessarily illiberal or old-fashioned to talk about the need for some degree of discipline among those who are accepting large sums of public money for an education that will benefit them and who will never, even after top-up fees, meet anything like the cost of the provision. They have a responsibility to the providers, to the taxpayer. I should like to see greater discipline in relation to old-fashioned ideas, such as attendance at lectures being required of students and not something that they do as an optional extra if they have nothing else to do that might inconvenience them.

With a few additional thoughts—

Earl Russell

My Lords, I am most grateful to the noble Lord. The vast majority of students who are not doing the work that they should are either earning money because what is provided is grossly inadequate or they are suffering from some form of undiagnosed mental illness, which we try to get treated for them as soon as possible. But we cannot do it without consent.

Lord Tomlinson

My Lords, I am grateful to the noble Earl, Lord Russell. I was using the very limited sample of my own four children who have been to university; one of whom worked adequately, and three of whom worked with varying degrees of application and differing degrees of success. With those few remarks, I apologise for going slightly over the time, but I shall blame the noble Earl, Lord Russell.

10.6 p.m.

Baroness Rawlings

My Lords, I, too, as many before me today, declare an interest as chairman of the council, King's College, London, which is one of the nation's leading universities. I, like the noble Earl, Lord Russell, receive no pecuniary benefit. The proposed legislation will have a profound effect on the college. It is a complex Bill with many important reforms and controversial parts. In the short time available at this late hour, when most of the points have been covered excellently and more adequately than I am able, I shall speak mainly on the one aspect that at King's College we feel is of paramount importance; that of financing. Before I address that point, perhaps your Lordships will forgive me if I put the argument in the context of King's College, London.

King's College is committed by its mission statement to the service of society. It can by no means be described as an ivory tower. Among other things, it is the largest single provider of research to Her Majesty's Government. That contribution extends beyond the corridors of power into the wider sphere of public discourse. Experts from the college—for example, in strategic studies or healthcare provision—are in constant demand from the media to contribute to the national debates that are integral to active citizenship.

A college with more than 5,000 employees and 19,236 students—a high proportion of them from the European Union or overseas—it also represents a huge contributor to the vigour of London's economy. It also works closely with the London boroughs that lack a tradition of sixth-form achievement to assist the ablest students to gain access to study medicine and other professions, as mentioned by the noble Lord, Lord Winston.

By careful stewardship and largely from its own resources, in recent years, the college has been able to finance the largest building project seen in the UK higher education system since the Second World War. It is now in sight of completion and has received the Queen's Award for Industry. That said, there is no doubt that a very significant investment needs to be made at King's College, as in other British universities with an international reputation, in order for them to remain internationally competitive. It needs to be made soon.

The unit of resource for home students, who include of course a huge pool of talent from the EU—not least now, in 2004, with the accession countries—has fallen inexorably for many years. The effects are visible in inadequate facilities which provoke sympathy, if not derision, in colleagues visiting from the US and which harm overseas recruitment in the global hunt for talent. We see already that, with few exceptions, the ablest students from the developing powerhouses of China and India are aspiring to enter the US college system, which is able to offer top students a much better deal.

We are also starting to witness the return of the dreaded "brain drain" as some of Britain's most outstanding scientists and scholars despair of salaries, which now rank very low in the white collar hierarchy, and leave these shores for places where they will be adequately rewarded. The late Elie Kedourie, the distinguished LSE professor and conservative thinker, diagnosed that British universities would soon be "diamonds turned to glass". We must prove him wrong.

For all these reasons, the Government's and the Conservative Party's recognition that significant investment is now required, as we heard from my noble friend Lord Forsyth of Drumlean in his eloquent opening speech, must command assent. The universities themselves argue that, so far, no better way of funding has been found, even after long and searching debates, than to generate this investment from graduates themselves. How different it is in the US. I remind noble Lords that the cost to an undergraduate attending Harvard is now 42,850 dollars a year, yet students are fighting for places.

Although in a general sense society is the beneficiary of an educated workforce, graduates themselves benefit directly. Inculcating in them a sense of social responsibility is not something of which any country need be ashamed. It is also argued that such a system, properly administered, need not prejudice the life chances of those who start with few of life's advantages, and the American system offers much to learn from, as well as certain lessons in what to avoid.

But a word of caution is required and a note of dissent about the general drift of the Government's concessions to their Back-Bench critics. The extra funding generated by the proposed fee of £3,000 will not solve the problems of universities. A few of the best public universities in the US are in a position to charge fees this low because of their reliance on that country's great tradition of philanthropy. However, most have to charge much higher sums in order to create a world-beating research environment and an unstinting commitment to undergraduate teaching.

The creation of differential fees could prove a bad bargain for British universities if it is not explicitly conceived as being not merely a new income stream, but a way of setting our universities free from the state. This latter question has been a preoccupation of my party for some time, and a definitive statement from the shadow Education Minister will need to await the outcome of the present debate on fees, but its importance cannot be overstated.

If there is one aspect of university life in recent years that has caused despondency in those who try to keep these great institutions internationally competitive, it is the once unimaginable burden of interference by organs of the state. Here I agree fully with the points made by the noble Lord, Lord Butler of Brockwell, and my noble friends Lady Perry and Lord MacGregor. This is not a matter of nostalgia for a medieval clerical and collegiate past. Whatever their current inadequacies, universities are no longer governed in that manner. It is a question of universities having their destiny in their own hands.

That means self-control over admissions, supported so rightly by the noble Lord, Lord Dearing, without heavy-handed external regulation by OFFA; control over fees, with responsibility for administering bursaries; and, ultimately, a facing down of the unions to achieve local control over salaries.

It may have been understandable that, with the sweeping changes brought about in the system since 1992, the UK higher education sector as a whole came in for an extensive and highly intrusive inspection by an alphabet soup of agencies, but the system can no longer stand the financial and intellectual costs of such regulation. The Government's objective now should be to restore the independence of our leading universities so that they can get back into international contention and not a first step in a new phase of social engineering. At the risk of ending on a politically incorrect note, I believe that a university should be academically elite but socially comprehensive.

10.16 p.m.

Lord Beaumont of Whitley

My Lords, like many noble Lords, I belong to the welfare state generation whose higher education was paid for by the state. I realise that those days have passed—and no one examining the case history of my career and its affect on my family would necessarily criticise that—but I and the Green Party do not believe that it is necessary that they should have passed beyond recall.

The whole problem can be seen by analysing what happens within the whole welfare system that we have in this country; the whole relationship between the welfare of the citizen and the state. The whole welfare system is now so tied to means tests that it has got us—quite largely by the efforts of Gordon Brown and despite the efforts of Frank Field, one of the sadder casualties imposed by new Labour—into the kind of dependency situation that its enemies unjustly accused it of in the past. We can and must get out of this mess. We shall do so eventually by some version of citizens' income. When we do that, we will be able to extricate the problems of funding the higher education for all who want and can use it out of the situation into which the present social welfare system and the Bill have got us.

But the arrival of the Bill in the House does not offer us a chance of tackling the basic problem. Instead, we will be confronted with no doubt tedious and confrontational attempts to see that it does no more harm than can be helped. To this end, I have listened with immense interest to the speech of the noble Baroness, Lady Sharp, and I have had the pleasure of reading an analysis of the whole situation of the Bill. With the approval of my party, in the forthcoming weeks I shall, I hope, be following her into the Lobby on most occasions.

I cannot pretend that I regard the next few weeks devoted to the Bill with anything but gloom, but I hope that we can improve it in some respects.

10.18 p.m.

Lord Graham of Edmonton

My Lords, I rise to deliver the speech that you have all been waiting for—the last one before the Front Bench speakers wind up. Like many. I have been dazzled by the breadth of experience paraded during the debate. Almost without exception, the speakers understand what the Bill is about. I respect them all for that. But I am moved to contribute my own personal experience. The noble Lord, Lord Tomlinson, served us well when he spoke of the responsibilities of both universities and students. I declare an interest as a graduate of the Open University.

Perhaps I may begin by telling my own story. Almost 70 years ago I ran home from school with a piece of paper in my hand and said to my mum and dad, "Mum, dad, I've passed the scholarship". They looked at me and said, "What's that?". I said, "I sat the scholarship. I've got a piece of paper. I've got a place". My mum cried and dad laughed. Dad was unemployed; he had been on the dole for seven years. There were seven of us in the family—I was the eldest of five. He had 37 shillings a week to feed seven of us—the rate for each child was 2 shillings—so I could not go. That was an elementary school—you passed in order to go to a secondary school. When I left school at the age of 14 years and one week, the headmaster wrote me a testimonial, saying, "Ted leaves this school as the top boy. He is too good for a dead-end job".

From then on, for many years, I undertook courses of study. largely through the Co-operative movement and its college at Stanford Hall. Eventually, I had the opportunity of a university education through the Open University. When Harold Wilson spoke to me in my office, he said what he had said in many other places. If he were to be remembered for one thing during the whole of his time as Prime Minister, it would be for the establishment of the Open University. I served along with Ted Short, the Minister who introduced it, and Jennie Lee. We dearly miss Walter Perry, the first vice-chancellor, and many others. This place is rich and redolent with the Open University. The noble Baroness, Lady Carnegy of Lour, served on the Open University's council, as I have.

When I got my degree and the publicity rolled, one of the interlocutors asked me, "Ted, how did you study?". I said, "Victoria line". He said, "What do you mean?". I said, "Every morning I left Enfield to come to work. Other people chatted or dozed or read the papers I read the outlines". The great thing that the Open University gave me was the feeling that I had had all my life—that there was a degree in me that was coming out. It only came out through the Open University.

The size of the Open University today is quite staggering. Since 1971, 2 million people have graduated. As the noble Baroness, Lady Boothroyd, said in a marvellous speech, this year and every year for the past rive years, 200,000 people have graduated. The case that she made was a plea to the Minister to respect the fact that there are part-time students and institutions which look after part-time students, such as the Open University, who will not get a penny out of this. The Minister may correct me on that.

Some 31 per cent of all part-time students study with the Open University and so do 9,000 disabled students every year. Such people do not have access to the money that will come from the Bill—they rely upon support from the Open University. I am told by the Open University that they are already at the margin of acceptability. Some might argue that the answer is to put up the fees. Putting up the fees may very well encourage and sustain people who can well afford to pay, but on the margin you cannot. Some 14 per cent of Open University students are unwaged or below the poverty line. They will not be able to be sustained by an increase in the fees.

I simply ask the Minister to listen very carefully to her friends—I am one of them—who support the Bill. We need an understanding of some of the problems. It is not possible for the Minister and her colleagues to have thought out every wrinkle when they drafted the Bill. We have to listen. The Open University can either go forward and continue to do its marvellous work or it can be held hack. I want the Minister to assure the Open University tonight that it will not be financially disadvantaged by the new arrangements compared with other universities in England. Specifically, additional funding should be allocated to the Higher Education Funding Council to ensure that the resources available to the Open University to teach part-time undergraduate students are not less, pro rata, than those available to other institutions to teach full-time students, taking fees and grant together. The Minister may welcome the suggestion that further discussions across the table with the Open University could well be productive for the Government, the Bill and the Open University.

This has been a marvellous debate. We have seen people with passion speaking from their brief—that is not meant to be offensive—about how they feel. There is no doubt that there is a problem that has been grappled with by the Government in the past and needs to be solved. The Bill will not be the answer—the noble Lord, Lord Tomlinson, was quite right to say that it may have some of the answers but will not solve the basic problem. If it is down to this Government to start the debate and push it forward, I welcome that. The Minister can rely on my support and I hope that there will be some kind words about the role that the Open University can play in the future.

10.26 p.m.

Lord Shutt of Greetland

My Lords, this is the home stretch. I follow the chancellors, vice chancellors, pro-chancellors, wardens, deans, masters, professors, lecturers, and graduates—and I am none of them.

Happily, I do not feel deprived, but it means that I have no institution that I particularly want to promote or complain is particularly hard up. The noble Lord, Lord Forsyth, referred to a guest performance. I feel in the same boat. However, bearing in mind the Committee stage and everything else to follow, perhaps what is to come is more like a guest tour.

As I have indicated, my own position is that I have not had what is called the benefit of a university education. When I left my local grammar school in Yorkshire, only a tiny proportion of my friends went to university, and going to university meant going to Leeds University. I went into accountancy, and it was a fluke that my accountancy practice did the audit for Leeds University, so I saw some of my friends and got into that place a little. However, apart from my experience of being on the council at Bradford University for a couple of years when I was a local councillor, this area has been outside any remit of mine.

The major item of concern is the business of student fees. We have had various items of literature from the Government and from Universities UK and they seem pretty close in what they have to say. We have also heard what noble Lords have said here. What the Government are saying is very clear. There was some doubt about where the Conservatives stood, but we have heard their voices and they are shoulder to shoulder with the main feature as far as the Government are concerned, with one or two exceptions such as the noble Lord, Lord Taylor of Warwick. The Government, most Conservatives and the university glitterati in this House are in agreement. We are told—by the noble Lord, Lord Layard, for example—that the £3,000 fee level is not enough and that it will have to be increased. With this huge gathering of producer power—if one can call it that—this is the way that universities want to see the market move.

I feel that it is right to speak up for the student and the student's parents about where things stand. We have heard about the worry of debt, which the noble Lord, Lord Puttnam, spoke about. Of course, parents are one of the major influences on young people contemplating going to university. Parents know about mortgages and credit card debts. They will soon learn about university debts. Indeed, as other noble Lords have said, some of those parents will say, when thinking about all the things that are coming the way of their children, "What about the Open University— it's another way forward, isn't it?" That may well be an element in the equation.

People do not know the future—they do not know how things will pan out. Parents do not know how things will pan out for their children. They do not know whether they will be on a roll to a salary of £100,000 a year, or whether they will have a sort of modest struggle. That worry of debt will be there. They know that loans will be creeping up on them if they embark on a university education, and they know— and we are all worried—about the cost of housing and the huge mortgages that people are taking. It is another debt on top of that.

There have been some wonderful speeches in this debate, and noble Lords have spoken from the heart and from their experience and so forth. But the most dreadful thing about the debate has been the worry about the fear of taxation. People are scared to death of taxation. That fear has been referred to in the context of university education, but it could occur with regard to any element of what we now believe to be public expenditure. Is this the only area in question? I do not believe that there is any subsidy to the middle classes in our proposal that people earning more than £100,000 should be taxed at 50 per cent. That would bring a bit more money in. There is a cultural issue in pushing debt to the next generation, and this is another way in which to push debt on and a further encouragement from the Government to get into greater debt.

We have heard about the independence of the university. I do not believe that some small item of fee income from some other source than the Exchequer, by the grace of the Chancellor and the expected grace of future Chancellors, can somehow guarantee that independence. It could well be that a future Chancellor will say, "What have the universities got coming in? If they are getting so much from the charities and so much from fees, the balancing figure that I will cough up will be so and so". That figure could be less than expectations are today.

I do not understand this fear of taxation. On the one hand, in this Bill, it is suggested that a graduate who does well early on could be on a 40 per cent tax rate, which is the highest that we have now. However, there is the new university loan tax of 9 per cent. which makes it 49 per cent. Apparently, it is okay for a few graduates in a few years' time to be paying 49 per cent. but not for the fat cats of today. I genuinely do not understand that.

I noted the suggestion by my noble friend Lord Phillips of Sudbury of a commission—"the Chancellors versus chancellors challenge commission", as I have written it down—to ensure that universities actually get what is thought of as right today. I wonder how practical that suggestion is. By all means, let my noble friend have a go at the idea, let him table some amendments and get it legislated. However, I feel that impecunious Chancellors could somehow get round it.

As for the Bill, everyone has said how wonderful it is that, under Part 1, research for arts and humanities will have its own research council. Part 2 details with the review of student complaints. It is interesting that the Lord Chancellor and other distinguished personages will be relieved of duty of visitor. Is one of the reasons for that relieving of duty that there will be more complaints? The noble Lord, Lord Lucas, referred to complaints. Indeed, the bigger the fees and the debt, the more likely that students will say, "Just a minute, is there any way we can challenge this? The teaching wasn't that good anyway. The degree was not good enough. I did rather better than that, so I want some money back". Is that why we are to have this review of student complaints? Are we expecting to see more of them? Indeed, as the noble Lord, Lord Wakeham, said, a student may think that his course has not been value for money. Is that the reason?

Part 3, entitled "Student fees in higher education", refers to "an English approved plan" and "the plan for that course". What will one of these plans look like? is there a pro forma? Will that be shared with noble Lords as we are going through the Bill? It is not clear whether it is one A4 sheet of paper or whether it is a book or several books. I feel that we ought to know what these plans look like.

I understand Part 4, which deals with student support and the effect of bankruptcy. It is a very important change in bankruptcy law. Could other changes follow from this? One could see circumstances in which the health service makes a charge for an operation—I hate to think of it, but who knows what might happen the way things are going? Is that then a special debt like a student debt? Will there be other categories of special non-bankruptcy debts? It will be interesting to have the Minister's comments on where that is leading.

Several noble Lords spoke about OFFA and the suggested independent review. The review is to be conducted by a commission and in the other place the Minister spoke about various items to be considered in assessing how successful these policies are in future. I did not see mentioned there an examination of those people who elected not to go to university and those who were kept out of university. It seems to me that if any review is to be done, it should not relate only to those who have experienced university and the problems that they might have faced, but also to those who did not go.

Several noble Lords spoke about OFFA. There has been a fair wind for the questions on whether we really need another quango and whether there are other bodies that could cope with this work. Therefore there will perhaps be some serious challenges to the proposal before we get too far in Committee.

In conclusion, value for money is an important feature and I think that of all the features that are scrutinised, that must be one of them. It is costing £1.4 billion to go through this awful exercise and only £0.9 billion will end up with the universities. This does not seem too clever—not clever at all. Therefore it needs scrutinising and it seems that there is plenty of work for this House to do in Committee before we finish with the Bill.

10.38 p.m.

Baroness Seccombe

My Lords, I begin by congratulating my noble friend Lord Forsyth on his robust response to the Minister and by welcoming him to his first Bill on the Front Bench in this House. I look forward to working with him on what will be a most interesting Bill, to say the least. His incisive remarks, as well as those of many other knowledgeable Peers, will, I am sure, have helped many of us to frame our thoughts on the Bill.

I congratulate the Minister on taking on the task of piloting the Bill through this House, with the assistance of the noble Lord, Lord Triesman. I am but reiterating what so many noble Lords have already said in this debate when I say that a debate on the difficult issue of university funding is long overdue some serious time on the Floor of this House, and that all parties welcome the opportunity to explore in depth the issues relating to higher education and this Bill. From the quality and range of debate today, it is clear that this topic is both complex and wide-ranging. There are many concerns although I can gladly say that all sides welcome Parts 1 and 2 with little reservation.

The access regulator is a matter of concern, not only for me but for many speakers including—I shall list just a few—the noble Lords, Lord Butler, Lord MacGregor, Lord Dearing, Lord Eatwell, Lord Quirk, Lord Winston, Lord Walton of Detchant, Lord Wilson of Dinton and Lord Tomlinson, the noble Baronesses, Lady Carnegy, Lady Howe of Idlicote, Lady Brigstocke, Lady Buscombe, my noble friend Lady Rawlings, and others.

In a splendid speech championing the excellence, independence and standards of our universities, my noble friend Lady Perry rightly identified the importance of handing the access regulator powers to attack these virtues on the face of the Bill. From many of the discussions that I have had with the universities themselves, the loss of academic freedom is a very genuine fear. One can understand why our universities in their current financial situation are pro-fees regardless of the modest relief they may provide, but it is a great concern what they are prepared to give up in return. It may be that they feel they would be able to "handle" OFFA and retain the control of admissions. It has been argued that having that control of the fees themselves actually puts universities on the road to greater financial independence from the Government, but—and it is a big "but"—not if this finance is then curtailed by a fine of up to £500,000 imposed for not meeting the Government's ideas on access.

In addition, many fear that the income from fees will not be additional and could be clawed back by the Treasury. Additionality, which was referred to by the noble Baroness, Lady Warwick, and the noble Lords, Lord Dearing and Lord Phillips of Sudbury, will certainly have to be addressed as we go through the Bill. Can the Minister assure the House that any income from fees will be additional to what is being currently received? Can she allay the fears of where the money to achieve the Government's 50 per cent target is to come from? It seems strange that supposedly having carefully thought out the rest of the policy, they have failed to tell us this.

In light of the numerous changes made to this new Labour education policy, we must ask ourselves whether we can believe the Government on so many aspects of the Bill. For example, would the draft letter of guidance to OFFA currently available remain so drafted once the Bill was on the statute book empowering the Secretary of State to alter it? I emphasise my agreement with my noble friend Lord Forsyth that the letter itself is unclear and would need amending. Do we believe that the power in Clause 30 enabling the Secretary of State to give the regulator guidance would be delivered as promised with a light touch'? We should question whether it is right that an independent regulator is actually independent under this contract, and whether more details relating to OFFA should be on the face of the Bill.

I wonder, as do the noble Baroness, Lady Blackstone, and the noble Lords, Lord MacGregor of Pulham Market and Lord Wallace of Saltaire, how the universities will cope with the expected leap in the numbers of students coming from the 10 countries which join the European Union next month. HEFC thinks that it will be at least 200,000 while the Higher Education Policy Institute thinks that it will be 30,000. If extra places are not provided, UK students would be displaced. According to the Government's own logic, higher education in England must be more attractive to students from the existing EU states as well when the £1,150 up-front tuition fee is abolished. From 2006 the Government will give EU students up to £3,000 a year in loans. Would this apply to Scottish students attending English universities? Would these Scottish students receive the same support as English students? In addition, if EU students return to work in some of the new member states they may not have the same chance at earning over the minimal amount required each year for repayments. Perhaps the Minister could enlighten us on those questions in her winding-up speech.

What would fees actually provide? Not too much compared with what is needed, as identified by my noble friends Lord Renfrew and Lady Brigstocke and the noble Lords, Lord Puttnam and Lord Wilson. Even Universities UK argues that there is still little or no real-terms increase in the core funding for teaching. As we have heard, it has identified a funding gap of more than £9 billion. The Bill would itself cost £1.1 billion, while the net fees would raise only £900 million. Meanwhile, we remain in the dark on where the funds for the 50 per cent target will come from. It appears that the taxpayer will end up paying more not less.

Have the Government considered the knock-on effects of the Bill on other sources of university funding? Universities are often successful in persuading past students to donate money in the form of endowments. As the noble Lord, Lord Butler, has highlighted, those endowments may not be as forthcoming after the Bill, as people would feel that more money was going to universities through fees, and, secondly, many would feel that they had paid their due. Thus fees could not only dissuade poorer students from applying but also dissuade those who currently contribute via endowments.

We shall have to consider carefully the truth of another statement, by Professor Sterling, of Birmingham University. If, we have all got ourselves into a mode of belief that what is in the Bill will solve the problem", we must ask ourselves how effective the legislation would actually be or whether it would not solve the problem at all.

Other points raised were the plight of hard-working families whose income is just above the threshold for support, mentioned by the right reverend Prelate the Bishop of Portsmouth, the necessity for admissions policy to be clear and universities' provision of a feedback service on performance, suggested by the noble Lord, Lord Wakeham, and a view supported by the noble Baroness, Lady Dean, and my noble friend Lord Lucas. The noble Lord, Lord Graham. gave a moving account of the Open University. We share the view that the Bill does not address the situation of part-time students. The noble Baroness, Lady Boothroyd, made a powerful speech on an important point that we shall certainly return to later. My noble friend Lord Taylor of Warwick is concerned about the level of student debt, as is the noble Lord, Lord Puttnam. My noble friend Lady Buscombe highlighted the responsibilities of schools in preparing young people for university, a point on which she was strongly supported by my noble friend Lady Brigstocke and the noble Lord, Lord Tomlinson.

I have barely touched on the range of issues raised today. It has been a long, informed debate to which it has been a privilege to listen. But I wonder why we are here at all. Prior to the 1997 general election the new Labour manifesto stated that an incoming government had no intention of introducing tuition fees, but, hey presto, a year later they legislated to do so. In the 2001 manifesto the Government published that they would not introduce top-up fees but, like a rabbit out of a hat, they now want to do so, just like that. It is therefore no wonder that the electorate feel let down by Mr Blair and have lost trust in him and his colleagues.

It seems that in another place the Bill was eventually sold to Labour Back-Benchers as a package after much unhappiness within the Labour Party. In this House it is our duty to take each clause on merit as a separate issue and not to have our arms twisted to do deals behind the scenes. Some issues are obviously more contentious than others, but I am sure that when the Bill returns to the other place it will have had careful scrutiny from noble Lords. I look forward to the next stage, when I am sure we will tease out the full impact of the Bill.

10.49 p.m.

Baroness Ashton of Upholland

My Lords, it has been a very wide-ranging and stimulating debate. I am struck, as always, by the depth of feeling and strength of belief in the value and importance of higher education in your Lordships' House. As the noble Baroness, Lady Seccombe, indicated, it is impossible to do justice to all the contributions made but I begin, as I always do, by saying that any noble Lords whose questions I fail to answer will be written to, and a copy of those answers will be put in the Library.

I was very conscious of how many former Cabinet Ministers and Ministers participated in the debate. It was quite scary, although not quite so scary as the former recent Cabinet Secretary, the noble Lord, Lord Wilson of Dinton. He said that there were no Ministers in Cambridge; I am very sorry about that, because I was hoping to get lunch out of him in the not too distant future.

I, too, welcome the noble Lord, Lord Forsyth, and was sorry to hear his words about being a one-off. I trust that that will not be so, and I look forward to debating with him. However, I know that he will not mind if I say how sorry I am that his colleague, the noble Baroness, Lady Blatch, is not on the Front Bench this evening. I, too, very much look forward to her return, and I am sure that all noble Lords agree on that.

The welcome to the Bill has been at one level effusive, occasionally lukewarm and hesitant, and perhaps lacking at times in terms of what noble Lords believe that we arc trying to achieve. I want to make it clear to the noble Earl, Lord Russell, and the noble Lord, Lord Winston, that I am in no way complacent about the plight of the universities, and I did not want to give any indication that I failed to understand the issues around funding, university pay and so on. I believe that we have a world-class university sector, and I wanted to make that clear as well. If, as the noble Earl said, we ended up with degrees that were not worth having, every noble Lord would join him in saying that that was a tragedy for this country. However, it is not where I believe that we are heading.

A number of themes have emerged. I am very aware of the diversity of the sector, which was spoken about by several noble Lords. There is lots of agreement that those who benefit should contribute. We are debating how we might do that, but not the principle of that. Many noble Lords described the Bill as the only show in town. The noble Lord, Lord Dearing, expounded on the Bill better than I ever could, and I pay tribute to him for that.

Some issues were very clearly at the heart of noble Lords' concern. The director of fair access and the relationship to admissions and to HEFCE have exercised many noble Lords. I accept that the members of the club of former Chief Secretaries to the Treasury will have much to say on the critical nature of the additionality of funding during the passage of the Bill, but I am aware of it as an issue. Part-time students played a major part in our deliberations, as did European Union students and the issues as new nations join the European Union. The subject of bursaries was also important. In the time that I have, I shall try to address those core issues, and perhaps some others raised, but anything that I fail to deal with will be picked up as I read Hansard, and I shall make sure that I address any such matters in future.

I was very pleased to see the welcome for Part 1. I note that the noble Lord, Lord Forsyth, asked me about the Arts and Humanities Research Council and the funding to implement the Roberts review. The council will benefit through a minimum PhD stipend of £10,000 a year and funding to support the development of transferable skills in postgraduates. There will also be more stable funding to support a proportion of the 1,000 new academic fellowships announced. If I can give the noble Lord further details, I shall of course write to him.

The noble Lord, Lord Lucas, made a very heartfelt contribution. I ask him to look at the office of the independent adjudicator, because many of his concerns are addressed there. I say to the noble Lord, Lord Shutt of Greetland, that academic judgment is not covered by that office, so some of his fears and concerns will not be realised as a consequence of its arrival. The noble Baroness, Lady Warnock, was the only speaker whom I recall touching on the issue of visitors. She welcomed the changes. We will debate that; there are noble Lords present who perform that role, and I hope that the issues raised will have a fair and good debate.

I was particularly thrilled by the references made by the right reverend Prelate to saints and pennies, and by the noble Lord, Lord Quirk, to the King of England in the context of OFFA. Such moments are always thrilling for us on the Front Bench. I was also pleased that the noble Lord, Lord Dearing, and the noble Lord, Lord Parekh, who has had to leave, were keen to welcome the appointment of a director of fair access.

I shall begin my comments on that matter by referring to the background. The noble Lord, Lord Butler of Brockwell, raised the issue of why it was needed. We know that one in four working class young people who achieve eight good GCSE passes do not end up in higher education; 19 per cent of young people from lower socio-economic groups enter higher education, compared to 50 per cent from middle and upper groups. Nine out of 10 students who obtain two A-levels go to university, but many people with top A-level results are not applying to the universities that, on an objective analysis, would match their talents.

Those are some of the issues that we hope to address through the director of fair access. I agree with my noble friend Lady Lockwood, who spoke of the need to raise aspirations. Indeed, I agree with the noble Baroness, Lady Buscombe, about the role of schools. In the schools education system, starting with nurseries, we are trying to focus on ensuring that children and young people can aspire to university— that they believe they can go there and can recognise it as a potential for them. Equally, our universities must reach out to young people.

My only anecdote from when I was at school is that it was common to hear that certain schools, including my own, were not places from which one applied to go to Oxford or Cambridge, because that was not "clone". I do not believe that we are in that position now, but there are still many children and young people who simply do not think university is for them; and there are still schools who do not support those young people. I see many noble Lords nodding. That is where we are trying to go by establishing the post of a director of fair access to higher education.

The noble Baroness, Lady Rawlings, said that she believed a university should be academically élite, but socially comprehensive. If I changed the word "élite" to "excellent", I would agree with the noble Baroness completely. It is about academic excellence and socially comprehensive universities, on the grounds that many people in our society can achieve a university education. That is what we wish to see.

My noble friend Lord Layard talked about the need for creativity in the system to achieve that aim. We need to be creative when we think through what we, as a government, and our schools and universities can do together to help raise the aspirations of our young people. There is also the critical responsibility of the Government to raise the achievement of students' academic abilities so that they can go to university.

I have listened carefully to noble Lords, listed by the noble Baroness, Lady Seccombe, who have raised concerns about admissions. I repeat that admissions are outside the remit of the director of fair access for two reasons. First, the evidence suggests that admissions are generally fair. Broadly speaking, the social mix of students who apply to universities is reflected in the social mix of acceptances. As I have said, the problem lies earlier—in raising attainment and aspirations in the young people who do not apply. Secondly, admissions are entirely the business of universities. They are autonomous institutions. It is, and will not be, for either the director of fair access or the Government to dictate who the universities should admit.

However, your Lordships have made a powerful case for more explicit safeguards and I will, with my right honourable friend the Secretary of State, reflect on that. I am particularly mindful of the comments made in that context by my noble friend Lady Warwick and the noble Lord, Lord Wakeham— comments that were echoed by the noble Baroness, Lady Perry. The noble Lord, Lord Wakeham, talked about the Government playing no part in the process. I agree that it is about individual students and sometimes about looking beyond academic attainment. Many universities do that and we would support and encourage them, but I am mindful of noble Lords' comments and will reflect on them very carefully.

The noble Lord, Lord Eatwell, asked me for the definition of "intake". While it is not for the director of fair access to deal with admissions, we believe that if applications from under-represented groups increase and universities have fair procedures for admissions the intake will change over time. I think that universities and other institutions have seen that happen. That is what we mean, but if my noble friend would like to know anything further on the matter I shall be happy to write to him.

The noble Lord, Lord MacGregor of Pulham Market, raised the issue of a right of appeal in relation to OFFA. As the noble Lord is aware, there is no specific right of appeal. The director is subject to judicial review, and we believe that that is the way forward. Within the draft regulations, we have published a mechanism through which institutions can put their point of view at all stages of approval and enforcement. We consider that to be the right way forward.

The noble Baroness, Lady Perry, asked what the cost of OFFA would be. As we have indicated, we estimate it to be £500,000. In my opening remarks, I set out what the relationship between the Director of Fair Access and HEFCE would be.

In response to a question raised by my noble friend Lord Winston, we believe that the cost of the Director of Fair Access will be neutral. Because universities already have a widening access programme, which, under this legislation, they would not have, we think that roughly the same sum would go into making plans for the Director of Fair Access.

A number of noble Lords asked why the job cannot be done by HEFCE. We believe that HEFCE is fundamentally a funding body and its first responsibility is, rightly, to the sector that it funds. The Director of Fair Access will be a regulator whose concern will be for access and prospective students. We do not consider it appropriate for HEFCE to fulfil both roles. I have no doubt that we shall debate that matter at length in Committee. We want the director to have access to HEFCE's experience and expertise but we believe it is important that he is independent.

A number of noble Lords raised the issue of bursaries. We believe that they form an important part of the offer that we make to students. As we said, we expect universities to provide a minimum financial support to students of £300. Those who will be eligible for maximum student support will be on courses that charge £3,000. I say to the right reverend Prelate that even the institutions with the highest proportion of poor students should require no more than 10 per cent of the additional income that they raise.

We said that where we believe there is more to do, the director will work with institutions to look at what more can be achieved. However, universities have indicated that they would be willing to consider the issue of bursaries, and I have already mentioned that some universities are offering £4,000 a year. The University of Surrey, to which the noble Baroness, Lady Perry, is connected, is one of those universities.

My noble friend Lady Blackstone, in particular, wanted to know why we could not simply top-slice the HEFCE grant and avoid the bursary requirement. We believe that there is a principle of "something for something" and that that is the right principle to have behind the access plans. Therefore, institutions which have responsibility as autonomous bodies need to provide some support. Nor am I sure—again, we can debate this at length—whether I approve of the principle of top-slicing the HEFCE grant. I believe that it is a precedent that noble Lords, and certainly universities, might be reluctant to see come about. We think that the mechanisms that universities already have to offer bursaries in different circumstances will be sufficient. However, again, I look forward to debating that matter.

The noble Lord, Lord Rix, and my noble friend Lord Parekh raised the question of a national bursary scheme. We decided against that for a number of reasons. We believe that institutions must make their own decisions about the kind of support that they offer. We are not convinced that a national scheme into which institutions put money and from which money is then transferred from one institution to another is the right way forward. I believe that noble Lords have indicated that they would have concerns about such centralisation. In addition, we think that such a scheme would be difficult to administer. For those reasons, we believe it is better if a scheme is run by institutions in order to support the students who go to those institutions.

Several noble Lords—in particular, the right reverend Prelate—raised the issue of student debt. Again, I say that student debt is very different from commercial debt. The rate of interest is only that of inflation and repayments are based on what students can afford. If you do not earn, you do not repay. Graduates earning £20,000 a year will repay £8.60 a week, which is less than the amount they pay now. We believe that the right kind of communication and information, which, again, has been mentioned in your Lordships' House, will ensure that students understand what the scheme is and what it is not.

The noble Lord, Lord Shutt of Greetland, talked about students' parents. The big change is that there will be no up-front fees. Students may not know what the future holds, but the scheme includes a guarantee that if their future is not what it might be, proportionately they will not pay. So students who do not earn £15,000 will not pay. After 25 years the debt will be written off.

I am not sure I even understand what the noble Lord is indicating—I may have got it wrong. Why is buying a house a sound investment, but getting a university education is not a sound investment?

Lord Shutt of Greetland

My Lords, it is one more feature in what appears to be a debt-ridden society. One would take on a huge debt to buy a house and a huge debt for education. We live in a culture where debts galore are poured on people. Almost daily I receive mail from credit card companies, as I am sure all noble Lords do. That is my worry.

Baroness Ashton of Upholland

My Lords, I agree with the noble Lord on the issue of debt, but this is a very different proposition. That is fundamentally the problem of the noble Lord.

Earl Russell

My Lords, I am sorry to intervene again. I do not believe that anyone on these Benches is against either a higher education or ownership of a house. The point is that the Bill will make it difficult to do both things at once.

Baroness Ashton of Upholland

My Lords, we shall debate these issues at length. I do not believe that to be the case. It is important that adults, university students and people who are thinking about their future make sensible and solid decisions. I believe that this is a system whereby students can make sensible and solid decisions that will be in their best interests in terms of their long-term future.

The noble Lord, Lord Holme, asked about London students and whether they will have sufficient funds. Those who are eligible will benefit from the higher education grant and also from the increase in maintenance loans from £5,050 in 2004–05 to £6,170 in 2006–07, an increase of 22 per cent. That will make a difference for London students.

The noble Lords, Lord Waldegrave of North Hill and Lord MacGregor of Pulham Market, made some interesting and fair points on the history of funding, on the importance of priorities and on diversity in terms of ensuring that we recognise the priorities of government and the history of how the sector has or has not been funded. I say to my noble friend Lord Winston, who asked about the cost of maintaining intellectual property, that I plan to consult my noble friend Lord Sainsbury. I shall write to the noble Lord and place a copy of the letter in the Library. I apologise that I cannot answer that question now, but I do not expect that that will surprise noble Lords.

A few noble Lords asked me about the figures. I shall quote the figures that we have from the Institute for Fiscal Studies because that will take away the issue of them being government figures or somebody else's figures. I believe that those figures will be acceptable. The Institute for Fiscal Studies has said that our response will cost £1.15 billion. That is by no means all associated with additional fees. In addition to the cost of deferring the additional fee—the noble Lord, Lord Holme, asked me about that—which is about £445 million, its figures include the new grant, £420 million; the cost of increasing maintenance loans at £65 million to cover students' basic living costs; the cost of deferring the current fee which is about £165 million to £190 million, depending on the student numbers; and £30 million for writing off loans after 25 years. That is also based on 2006 student projections.

The noble Lord, Lord MacGregor, hinted at some distressing consequence being forced upon us. I believe that they are good innovations in their own right and we are proud of them. As we were reminded, it was one of the key recommendations of the National Committee of Inquiry into Higher Education that we should have a grant system for students. I know that the noble Baroness, Lady Sharp, has been very clear about whether we can simply hand over the £1 billion as that would be a better option.

I want to draw your Lordships' attention to the consequences of that. It would mean that we would continue to charge up-front fees; there would not be a £2,700 grant; there would not be an increase in the maintenance loan; there would not be a write-off of loans after 25 years; and I believe that we would not be on the road to a better and a more sustainable funding for the higher education sector. Under these proposals students will receive all those benefits and the universities will receive the extra £ 1 billion a year— £900 million as the noble Lord, Lord Forsyth, said if one takes 10 per cent as the average. I will not dispute that. I believe that it is critical to understand that this is a big package that provides different kinds of support for both the sector and for students.

As noble Lords have said, the art of the possible is about what we will make a priority. I think, as the noble Lord, Lord Butler, said, that it would be unrealistic to assume that an incoming Chancellor of whatever persuasion would put this funding at the top of his list. I refer again to the figures I have previously given in your Lordships' House; that the amount of spending that we are putting into three year-olds is £1,775, to primary school children £3,220 and for university students starting before 2004–05, £5,000.

Your Lordships will know that I am a passionate advocate of providing support to our youngest children when we know that the differences in terms of academic and other achievement begin at the age of 22 months. I make no apologies for that.

There are other noble Lords with other passions who would argue with their own Chancellors of whatever persuasion that this perhaps was not number one in the priority list. Noble Lords present may feel that is wrong; it is a reality. I think we have to look at the funding of the sector from that position.

The noble Lord, Lord Forsyth, talked about unit funding. I have the figures here. Rather than take up your Lordships' time, I propose to put them in the Library. The noble Lord is not wrong that unit funding has gone down. It is now on the increase. That is critical. I could spend some time—and I have some figures—talking about previous administrations. I believe my noble friend Lady Dean talked about that. We are very clear that we need to look forward and make sure that we have a funding regime that makes sense for universities.

The noble Lord, Lord Phillips, echoed by the noble Baroness, Lady Seccombe, asked about additionality. That matter is very close to Universities UK. My noble friend Lady Warwick also mentioned that. This is additional funding. The noble Lord, Lord Phillips, came up with wonderful machinery, which I will study, and, as by the noble Lord, Lord Shutt, suggested, we can think about whether it will work. I have no idea whether it will, but we shall of course look at that.

It is important to remember those who have been former Chief Secretaries in terms of committing any government to the future in terms of this money. As I have said, we have given that commitment for the moment.

I say to my noble friend Lord Winston that I happen to have the figures for Sheffield Hallam University if the university charged £3,000 for its courses. The extra money would be £27.8 million, which is a 23 per cent increase. I shall again be happy to discuss the figures with the noble Lord, or other noble Lords. I have some figures here with me.

My noble friend Lady Warwick and the noble Lord, Lord Walton of Detchant, talked about research funding. That is a very important part of the university sector and will be part of our deliberations on the Bill. We are raising research funding by £1.25 billion. Noble Lords have referred to that. We recognise its importance, not only to fund existing research of the highest quality, but also to fund emerging areas of research. Noble Lords will know that HEFCE has allocated £18 million to departments rated 3a and 3b to support that emerging research. Again, I am sure we will have much more to discuss on those issues.

A number of noble Lords, my noble friends Lord Eatwell, Lord Layard and Lady Dean, the noble Lord, Lord Renfrew, the noble Baroness, Lady Howe, and the noble Earl, Lord Russell, talked about the issue of academic salaries. I recognise that my own salary was up for grabs. I reckon I earn it. I would say that, wouldn't I? But I do absolutely take the point that my noble friend Lord Eatwell made about university salaries. That has been well acknowledged in your Lordships' House.

We also know—and I think that this was in a sense what the noble Earl, Lord Russell, was alluding to, and certainly a matter that the noble Lord, Lord Walton, mentioned specifically—that student/staff ratios have worsened from 10:1 in 1983 to 17:1 in 2001. These are clear indicators of the need for additional funding. I pay tribute to noble Lords who have raised this issue so passionately and so strongly. It is very important.

My noble friend Lord Puttnam asked whether we were going to break ranks until the review has reported. I will give my noble friend the reassurance that there will be no above inflation increases before 2010. By then we will have the report of the independent commission. After that, an above inflation increase can occur, but only after a debate and vote in both Houses of Parliament.

My noble friend Lord Winston and the noble Lord, Lord Walton, talked about medical schools. We recognise the additional costs of courses in medicine. HEFCE fund the clinical stages of medicine and dentistry courses at 4.5 times the standard course fee. But of course Sir Alan Langlands review on the gateways professions I believe will be very important in looking further at what more can be done. Of course, as noble Lords will know, the Department of Health spends £460 million at present on bursaries and on payment of fees for health professionals.

The noble Baronesses, Lady Howe and Lady Brigstocke, talked about vocational education, which we touched on earlier in your Lordships' House. Inevitably, plumbers and electricians were mentioned. We are clear about the demand for graduates in the economy; it is growing. This is, increasingly, a knowledge-based economy. We make our living as a nation through selling high-value services. Of course, we need modern skills at all levels. We need more plumbers, and we need more graduates in academic subjects. Much of the expansion will be in the vocational courses and two-year foundation degrees being developed with employers being work-focused. It is not a choice between the two; it is both. We need to think carefully about the expansion of opportunity for all young people through modern apprenticeships, through higher education, through foundation degrees and through vocational courses. That is a critical part of the work that we have to do.

The noble Lord, Lord Holme, talked about endowments. The work that Eric Thomas, vice-chancellor of Bristol, is doing is important. I address also the points raised by the noble Baroness, Lady Seccombe, about ensuring that we think carefully about how we get endowments, recognising the need to look at graduates, industry, and other sources that can provide those endowments.

Noble Lords talked about the European Union. Clearly, there is some concern about that. We are required under Article 12 to provide tuition fee support for European Union nationals in a way that does not discriminate compared to UK nationals. It does not extend to providing access to student loans for maintenance purposes. From 2006–07, students from the European Union will be offered the option to defer payments by taking out subsidised loans for fees, but they will not be eligible for the new maintenance grant, or for maintenance loans. There are implications of that, because this is not necessarily an inexpensive country in which to live. The noble Lord, Lord Wallace of Saltaire, and my noble friend Lord Desai gave strong views on this, which I will take away. My noble friend Lord Desai was particularly novel in his approach to how we might use this issue in our negotiation.

My noble friend Lady Blackstone was concerned about making sure that we have robust and effective long recovery mechanisms. That is under discussion and debate. We will debate that more at length. Fewer than 5 per cent of students currently get financial help from the Government. We think that there will potentially be an increase. We must weigh that against the desire that we have as a world-class education sector to offer our education, but I take the points that have been raised about ensuring that we are able to offer the opportunities to our own students, and the issues that noble Lords have raised about ensuring that the money is repaid.

The noble Lord, Lord Phillips, raised some technical questions about Clause 31 and qualifying persons. I assure the noble Lord that he would much prefer it if I write to him, than read this out—I will do so. Institutions are subject to European law and the obligations not to discriminate against non-UK European students in relation to access to higher education. That covers financial support, but not maintenance, and institutions will not be expected by OFFA to visit other parts of the European Union to promote access. That will not be part of the debate.

The noble Lord, Lord Forsyth, raised the question of cross-border flows. The Secretary of State met with Jim Wallace today. I do not know the result of their deliberations, because I was in your Lordships' House. Discussions are continuing. I am sorry that the noble Lord, Lord Roberts, intervened but did not participate in our discussions. I am sure that we will discuss issues to do with Wales at greater length. I say to the noble Earl, Lord Russell, that Article 7 does not apply in this context, and I will write to him to explain why.

I want to make sure that I cover the question of part-time students. This was clearly a big issue raised by noble Lords. The noble Baroness. Lady Boothroyd, was eloquent, as the chancellor of the Open University, and my noble friend Lord Graham gave us the eloquence of a graduate. His story alone is testament to the achievements of the Open University and to the achievements of Harold Wilson and Jennie Lee as well. We can be rightly proud on these Benches of those achievements.

The question that the noble Baroness, Lady Boothroyd, was getting at was what about this £1 billion, and why would the Open University and those involved with part-time education not benefit from it. This is about allowing universities to raise the money by changing the way in which they get their fees; deregulating, if you like, to an extent. There is a totally deregulated market for part-time students now. I take the point that the institutions do not necessarily wish to do it, but there is nothing to stop the fees being raised at any time. Theoretically at least, there is nothing to stop the Open University raising its fees, if it wishes to raise more money. That is how the £1 billion comes about. It is not government grant; it comes from fees directly.

I am sure that the noble Baroness will say to me that that is the reality and that there is an issue about fee deferral. It is not our policy at the moment to provide fee deferral for part-time students, but we have said that we will consider further the question of student support and institutional funding for part-time students. The Bill would allow fee deferral for part-time students, if that were decided at a later stage.

Lord Graham of Edmonton

My Lords. I am heartened by the Minister's last few words, but my information from colleagues at the Open University is that there is still no understanding in the department— on the margin—that, in comparison with what is happening in the full-time sector, the part-time sector is being disadvantaged. I asked the Minister whether she would be willing to meet representatives yet again—I appreciate that meetings have taken place— to see whether a resolution of the problem could be found.

Baroness Ashton of Upholland

My Lords, the noble Lord pre-empts me. I was about to say that the noble Baroness, Lady Boothroyd, is coming in to meet the Secretary of State and me on Thursday. I am particularly looking forward to that meeting. as the noble Baroness has not yet had a meeting with me. My noble friend Lady Blackstone said that she would offer some suggestions about part-time students. My reply is, "Yes, please".

We will continue to consider the issue, and we have said that the next student income and expenditure survey will include a more comprehensive examination of the issue of part-time students. The survey has not previously included Open University students, but it will this time. It would be wrong for me to say to noble Lords that we had not considered the issue of fee deferral. For the moment, we have decided on grounds of cost that we would not want to do that, but I am sure that we will continue to debate the issue at length.

I shall finish by talking briefly about the purpose and values of higher education as covered by the Bill. The right reverend Prelate the Bishop of Portsmouth and the noble Baroness, Lady Perry of Southwark, were particularly concerned about that. We support the sentiments expressed, but, as the right reverend Prelate has already learnt, it is difficult to get at the concepts. The right reverend Prelate should read the normative statement on higher education that was signed by my noble friend Lady Blackstone. It is UNESCO's equivalent of an international treaty. The missions and functions of higher education as set down and signed up to by the UK Government probably fit the bill, so I will pass it to the noble Baroness, Lady Perry of Southwark, and the right reverend Prelate for their deliberation. I was thrilled to discover from my noble friend Lord Triesman that it existed, and, when I read it, I was even more delighted. I hope that the right reverend Prelate will be too.

The noble Lord, Lord Rix, asked whether the system compared with the best in the world. It does. The OECD has said that the UK graduate contribution scheme could be a model for other countries in Europe that may have to consider the adequacy of their higher education system in the modern knowledge-driven economy.

I end by adding to the Benjamin Franklin quotation used by the noble Lord, Lord Taylor of Warwick. The noble Lord said: An investment in knowledge always pays the best interest". The beginning of that observation is: If a man empties his purse into his head, no man"— or woman, I would argue— can take it away from him". We should join the noble Lord, Lord Taylor of Warwick, and take the advice of Benjamin Franklin. The Bill will help us to transform the situation. It is the best and most realistic way of helping our higher education to be all that it deserves to be.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

House adjourned at twenty-five minutes past eleven o'clock.