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By Chuka Umunna

Saturday, December 3, 2011.

People forget that our HE sector is our seventh largest export industry, generating over £59 billion in output, and more than 650,000 jobs. Universities are drivers of jobs and growth nationally.

And institutions that you lead are major employers, and important drivers of regional growth too. With the abolition of the Regional Development Agencies, your voices as advocates for your regions are more important than ever.

The bottom line is that universities are integral to our future success as a country.

Nowhere was this more evident to me than during my recent trip with Ed Miliband to the Warwick Manufacturing Group which is part of Warwick University.

In 1980, Professor Lord Kumar Bhattacharyya set up the WMG to reinvigorate UK manufacturing through the application of cutting edge research and effective knowledge transfer. Thirty years on, it is continuing to do just that. It brings academic rigour together with industrial and organisational practice. It is an example of how the Higher Education sector, working with industry, can drive growth in the real economy.

There are other excellent examples too like Cambridge Technopole, at the heart of which sits Cambridge University. It provides research and innovation support for high-tech businesses in that region.

There is the University of Abertay, at the centre o f a video games designing cluster, with degree courses providing highly skilled graduates but also managing a research and development fund for local developers.

One of the business advisers helping our review talks extremely positively of the knowledge transfer from Sheffield Universities and his bakery business, in improving skills progression and development and productivity improvements to achieve his goal of being the best baker in Britain.

I am sure you would all be able to give me more examples of what your centres of learning are doing to add to this list.

These kinds of collaborations and partnerships should be a bigger part of getting growth going in our economy and our future success. And so it is an essential element of our policy review work.

Later I will say something about our thinking to date and the principles that will guide the development of our policy:

Fairness for students;

Autonomy for universities enabling them to deliver excellence; 

Sustainable funding; and,

Universities playing a central role in the economic as well as the cultural life, in regional and national economies.

However, before I do this I must turn to the elephant in the room (so to speak) - the cloud hanging over your futures – what the Government is pushing through and where it is getting it wrong.

Where the Conservative-led Government is getting it wrong

With the anniversary of the vote to triple fees next week, I think it would be worth recapping on what has been, let us say, a challenging year and where we have got to.

When the Conservative-led Government initially set out its changes to Higher Education - cutting the teaching grant by 80% and hiking up fees - we said what was proposed was unnecessary, unfair and unsustainable: not good for students or the future of Higher Education, one of Britain’s great success stories.

It was why we asked the Government to lay out their p lans in full so we could subject them to the necessary scrutiny. So what happened? 

The vote to triple tuition fees came first before any White Paper, surely the wrong way round. Then the changes on access and widening participation were forced out, with subsequent changes to those plans.

As fees levels began to emerge with £9,000 looking to be far from the exception to the rule which the Government promised, their sums didn’t add up and a black hole came into view. First Ministers ignored this and claimed it would all even out in the end. But their miscalculation saw a scramble to claw back in other ways. There were exhortations; claims OFFA was now a regulator and would set levels; even threats to universities with Ministers crudely claiming that fee levels were so high because universities were inefficient.

Lets take a step back and reflect on that particular claim for a moment - in business, companies have to factor in risk and cost it. You are businesses too and this Government has displayed an abject lesson in creating unnecessary risk for you.

So the White Paper arrives at the end of June of this year. When the threats failed, frankly because of the mess the Government had created, they pulled ‘core and margin’ and AAB out of a hat which they then bolted onto the original plans.

This is no way to run government policy on Higher Education – this is no way to treat our universities. Vince Cable called his dismantling of the RDAs Maoist and chaotic. It could equally have applied to another area of his brief.

The reforms are not the evolutionary change UUK has argued for.

Institutions have had to make decisions affecting their future financial viability not knowing how the rules will change month to month.

You are now in the ridiculous position where you have previously set your fee levels and agreed access agreements with OFFA in April only to find that the rules of the game changed with the Wh ite Paper. Following its publication you found you were faced with a deadline to bid for the 20,000 places which were taken from universities and for which you could now bid – that deadline closed before the deadline for revised access agreements to be signed off by OFFA.

27 institutions have re-submitted their access agreements proposing lower fee levels and 25 today have been told they can change their agreements according to OFFA’s announcement a few moments ago. We still need to look fully at the detail but the OFFA letter confirms there is no evidence on what works best to widen access - fee waivers or bursaries - but the Government still ploughs ahead none-the-less. Fee waivers of course help the Government’s mess as it reduces its bill. The chaos remains for students and the university system, a system which gets ever more complex and bureaucratic.

If the Government had backed Labour’s proposal at conference, which I will get onto in a moment, none of these current access changes, nor core and margin would have been necessary, nor would quality be under threat. Fees would have been capped at £6,000.

‘Core and margin’ is designed to reduce the cost of courses to make up for the Government getting its sums wrong – it isn’t for the benefit of students or the Higher Education sector. And because of this mess students have applied for courses without knowing the fee levels – making far reaching decisions about their lives without the information that they need. This is no way to help our young people get on in life.

Then there are the visa changes to Tier 4 - the student visa route – which hasn’t helped either. As I said, the UK’s 7th largest export is Higher Education for foreign students. This was thrown into chaos by the Home Office’s changes which deter foreign students from applying to UK universities. There was little regard to the impact and to the reputation of the UK HE Sector around the worl d. Where was the Business Department pressing your case? As an Opposition we recognised this threat and I know John worked with you in trying to get the Government to recognise the damage it was doing.

Overall, though, their reforms are seeking to introduce something more fundamental: a more market-led system, or mini-markets, overlaid with a more complex and bureaucratic structure.

We are supportive of student choice. Within a diverse sector, students currently have a wide range of high quality options by course and by institution. We welcome the extension of choice that will result from allowing Further Education colleges the power to award degrees, which will allow people who live in areas that are not near a university to access Higher Education courses.

But this market is beset with problems and few have said it will work well. There will be intended and unintended consequences. Ministers admitted that there would be institutional failure as a result.

There are rightly fears that the reforms will discourage universities from offering science and technology courses and student take up of the same, at a time when these types of course should be the centre-piece of a future Higher Education system as our competitors countries recognise.

There are rightly fears that social mobility and access will stall. Aim Higher has been scrapped, the National Scholarship Programme, though described as “national” is misleading – it does not have national eligibility criteria but is more a lottery with students with the same social and economic backgrounds getting different types of benefit depending on where they study; and there is widespread confusion among students as to its purpose. The respected Sutton Trust has said the tripling of fees will reduce the gains made on widening access and social mobility. This is exacerbated by ‘AAB’ and ‘core and margin’, which has led to complex access arrangements b eing crow-barred on to try and correct imbalances. Widening access is very much an afterthought not an outcome of the new system.

OFFA, with a hugely expanded role, is still an office of a handful of staff assessing access agreements. It is not clear what the sanctions are going to be for universities that do not fulfil their obligations.

In fact, UCAS figures have seen a drop in application to universities and a variation is emerging across regions with the North East seeing the highest drop. What does that say about ‘rebalancing’ the economy?

Also, there are fears that the expansion of for-profit providers will unbalance Higher Education further and undermine quality. Apollo Group, Kaplan and the Education Management Corporation have all met with the Higher Education Minister, David Willetts. All currently have lawsuits being pursued against them in the US for aggressive recruitment practices and miss-selling of courses.

And with the changes that have taken place we still do not know how much future turbulence will be added on top – will there be further rounds of core and margin?

So that is the landscape. In light of all this, let me pause a second and pose some questions:

Are the changes to Higher Education helping to widen access, ensuring that those with the best potential are in our universities?

Are they enhancing opportunities?

Are they giving stability to universities to plan and to build on their success?

Are they helping our universities compete in the world?

Are they helping to put universities at the heart of growth, working with business and Government to create future success?

Are they working to support the STEM needs of our economy?

In all case the answers is sadly a no.

So it is in this context that we are having to think about the future of Higher Education – who knows what we would inherit at the time of the next General Election were we elected.

And I know that you have of course worked with the Government to try and secure a better outcome to the changes. It hasn’t been easy. You all want the best for your institutions and the sector. For some there are silver linings - perhaps the ability to raise more income. Some argued from the start that, with the Government cutting the teaching grant by 80%, higher fees were the only way. Some perhaps see opportunities flowing from the access changes and bidding for courses. Others we know are deeply frustrated with what has been going on.

So what is our thinking? Well, we must deal with the world as we find it, not as we would like it to be. This lies behind the policy announced by Ed Miliband at the Labour Party Conference.

First, let me turn to fees. It is absolutely right that graduates make a contribution. It underpins the changes we introduced in Government and which brought an extra £1bn into Higher Education. But this Government is now forcing many students to take on debts of more than £40,000 – long-term debts, and long-term impacts.

It strikes at the root of what Ed Miliband has called the Promise of Britain – that the next generation should do better than the last. Many families fear their children will do worse than the generation before. That’s why we have put forward an alternative funding package, reducing the maximum level of fees from £9,000 to £6,000.

No university would be worse off under this plan, as any money lost through a reduction in tuition fees would be compensated for - for individual universities the proposal is revenue neutral.

And, there would be no need for the core and margin system and the uncertainties and mess it creates. With the sums back under control, there would be no black hole from £9,000 fees.

I’ll explain how this works: reducing the maximum level of fees to £6,000 while compensating universities for the difference costs £1.1 billion. Of that £1.1 billion:

£350 million will come from automatic savings from reducing the cap to £6,000 because it will means some associated expenditure, such as on as fee waivers, will no longer be required;

£300 million comes from cancelling the Government’s planned cut to the corporation tax on the banks; and,

£500 million comes from asking the top ten percent of graduates – graduates earning over £65,000 in each year of their working life – to pay more through a combination of a higher interest rate (from 3% to 4%) and to continue to pay for an additional two years if they pay off their loan within 20 years.

So this could be implemented now. It would maintain funding for universities but avoid harm to families and graduates from the Government’s plans. It would reduce the debt which graduates will be loaded with, and would be an important step towards a more graduate-tax like system with wealthier graduates being asked to pay more due to the combination of a higher interest rate and time limited overpayment for two years.

Our proposal and our approach are guided by our core principles – that graduates should make a fair contribution to the cost of Higher Education and that those who benefit the most should pay the most.

And if by the time of the next election we can do more, then we will – so starting out from the position set out at our Party Conference this year, we will be looking at further ways to:

Reduce the burden on families and students who are being saddled with high debts;

Maintain funding for universities; and 

Develop a fairer payment system for graduates.

Our policy review will be looking at these issues further.

To date the review – and the interim findings were published a few weeks ago – has been focused on the economic challenges we face which brings me to my second point – international competitiveness and paying our way in the world.

We need a new economy, which is fair, resilient, competitive, and supports the long-term. It needs active, intelligent government working with business to build a vision for the future economy, and develop strategies for the sectors for which we have a competitive advantage and where can compete. It is not business as usual but a different approach.

Higher Education is an essential element of our future success – not only as an export sector as I have laid out, but in terms of training, skilling and developing what will be part of the future workforce, supporting the research and leading the collaborative work with industry. Your report published yesterday supports this view.

One of the challenges Britain faces is that the economy has skill shortages at the same time as under-utilising the skills we have. We need more companies that can utilise those skills. That means creating the conditions where we encourage companies who invest in the long term; creating the conditions in which we do not rely on low skills, low paid jobs where we cannot and should not compete.

The role of universities is central to increasing our productivity and building a more skilled workforce to bring this new economy about.

In 2001 we set a commitment to get 50% of 18-30 year olds entering Higher Education to go to university. It was ambitious. It was right. It helped focus our collective efforts. It wasn’t arbitrary as some claimed but achieved real change. In 1999 39% of young people went to university and this grew to 47% in 2009/10. This is a huge achievement. And it happened at a tim e when we rescued apprenticeships and supported vocational education too.

But, the target was virtually met when we left office. A fair question is therefore what should the future hold?

As part of our review, we will be looking at how we can build on this and the best way we can assess ourselves against our competitor countries – I think that has to be the yardstick against which we should judge our progress in the future.

It is right in the global world, with global markets, that we are outward looking in this way. We need to be focused on being among the best in the world. So we need to benchmark ourselves against the best.

Yes, the numbers of young people going into university but also a broader account too, of the quality and type of courses students undertake which supports our industries and economy of the future and - in a similar way - the quality, level and take up of vocational education. We need to look at the overall skill and education levels of 100% of our future generation and be among the best in the world. 

In concluding, let me draw on your report and quote two thin gs to support the arguments I’ve just made for a new economy - something I can leave you to think about.

In your report you say, and I quote:

“Countries with high levels of innovation [also] tend to have, on average, higher proportions of graduates in their populations and a stronger track record of investment in Higher Education.”

I think innovation is key. 

In your report you also list the number of Chinese, US and EU graduates per year in 2010 and the estimates in 2020. I added up the numbers. The increase in per year graduates in China in 2020 compared to 2010 is nearly the same as the total number graduates in 2020 in the US and EU combined.

The landscape is changing.

Together we must work to ensure Britain is set up to meet the new challenges.

Chuka Umunna is the Shadow Minister for Small Business and Enterprise. He is also a Member of Parliament representing Streatham, London. The article is a part of speech given at a recent conference hosted by Universities UK.

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