Higher Education and the Economy

rose to call attention to the economic impact of higher education institutions; and to move for Papers. The noble Baroness said: My Lords, it is a great pleasure to open this debate on the economic impact of higher education institutions. It is very good to see so many Members of this House connected with universities here today and prepared to speak this afternoon. I know that other noble Lords would very much have liked to be here. I am particularly pleased that the noble Lord, Lord Dearing, who is celebrating the 10th anniversary of his famous report, is here. As many noble Lords will know, universities have changed dramatically over the past 10 or 20 years. From being seen as ivory towers for the few, they are now perceived as engines of change in the economy and the means of effecting real social change. Who, 10 or 20 years ago, would have thought of our universities in hard-nosed commercial terms? Yet now, higher education is recognised as a substantial industry in its own right with a significant impact on the UK economy. According to a recent study by Universities UK on the economic impact of higher education institutions, in 2003-04, higher education had a total output of just over £45 billion. Education and education-related services are our fastest-growing export earner and have already eclipsed food, tobacco, drink, insurance, ships and aircraft. Giving these figures, I should declare my interest as chief executive of Universities UK. Clearly, higher education exists for many purposes. Its prime purpose is the sharing of knowledge and the development of minds. Today, however, I want to celebrate this new and very successful dimension of economic impact. It is worth pointing out that higher education institutions are also employers in their own right. Many institutions are the major employers within their localities and the wider region. For example, more than 280,000 full-time equivalentjobs are provided by institutions themselves, which amounts to just over 1 per cent of the whole workforce. Noble Lords will also be interested to know that a further 300,000 jobs across the whole of the UK are created through connections with higher education institutions. International students bring in £3.6 billion, of which £2 billion is from fees. UK universities are able to attract large numbers of students from overseas because of the continuing international demand for education in English and, of course, the reputation of UK universities in research and teaching. We must not forget that our international students also provide a valuable cultural mix on our university campuses and in many cases, on return to their home country, act as excellent ambassadors for the UK. Much of that is well understood by Members of this House, but the contribution of our universities goes beyond those very direct impacts. The UK’s higher education institutions are vital to addressing many of our country’s long-term challenges. I want to link the diversity of our sector with the five major strategic challenges identified by the Treasury as the context for the current Comprehensive Spending Review. I shall list them in no particular order—namely, an increase in an ageing population, cross-border competition and increasing globalisation, increasing levels of information and technologyand a more knowledge-intensive-based economy of goods and services, global conflict and international terrorism, and increased pressure on natural resources and the threat of climate change. Universities have a role in meeting every one of those challenges. In relation to an ageing population, higher education will help to equip the UK workforce to be more productive for longer. Our universitiesare already catering for an increasingly diverse population. Currently, 30 per cent of full-time undergraduate students are mature. Some 39 per cent of all students study part time, and 90 per cent of part-time students are over 21, with around 20 per cent in their forties and 15 per cent now aged over 50. Many of these students are undertaking study while in full-time work through continuing professional development, and indeed through work-based learning. I think the House will agree that these figures show how far higher education entry has now moved away from the traditional 18 to 21 year-old student studying for a three-year undergraduate degree away from home. On the second challenge, increasing levels of cross-border competition and globalisation, the Chancellor of the Exchequer acknowledged the increasing importance of higher education as an export in his speech at the Academy of Social Sciences in Beijing, China. He said: "““In just five years the value of British education as an export has almost doubled, from £6.5 billion to £10.3 billion … Indeed, I believe that if we continue to make the right decisions, by 2020 education exports could contribute over £20 billion a year to the UK economy””." I think that many Members of the House would agree with him. On the third challenge, could any noble Lord not be aware of the rapidly expanding markets in China and India, which between them produce 4 million graduates a year? Universities are key to staying ahead of these markets by invention and innovation and by ensuring that we equip our population to work smarter. That means that we need to expand higher education, and we need to provide public investment to ensure that expansion is of high quality. The expansion of higher education will help to plug the growing skills gap and, as the noble Lord, Lord Leach, stated in his recent report, the UK should be looking at increasing skills in the workforce. He recommended that 40 per cent of the workforce should be qualified to level 4 and above. That must be broadly the right ambition, extending as it doesthe current government target that focuses on 18 to30 year-olds. I also know that Her Majesty’s Opposition have similar views on this, as the shadow Higher Education Minister in another place, Boris Johnson, has also said that the UK should be looking at a participation rate higher than 50 per cent. Collaboration with further education is essential in this regard, and while I may have had my differences with the Minister on the Further Education and Training Bill which is currently passing through another place, retaining those progression links from further education to higher education is essential if we are to ensure that we have the right high-level skills to cope with the demands of employers and the workplace in the21st century. I turn now to the challenge of global conflict and terrorism, the fourth of the Treasury’s priorities. Universities have a particular role in addressing this problem. World-class research departments in both the social sciences and the sciences are essential to combating and understanding that threat. Much of their work influences thinking in the police, the security services and the Armed Forces. The fifth and final Treasury priority will resonate with many across the House. It is climate change and the threat to natural resources. In my view, the only way to address the enormous challenge of climate change is through rapidly developing technologies that allow us to use fewer natural resources more efficiently and increase the amount of energy from renewable sources. Universities are already at the forefront of this agenda by providing some of the solutions through research and innovation, and many university campuses themselves are going green by introducing environmental targets to reduce emissions, using more energy-efficient lighting, reducing paper use and so on. Our universities make a substantial contribution to the UK economy and to our ability to meet the major strategic challenges of the future, but it cannotbe taken for granted. In order to deliver on that potential, we need the right level of continued investment, as so many of the contributions to this spending review make clear. I believe that the higher education sector is great value for money and certainly punches above its weight, but in order to continue to do that it needs continued investment. There is no doubt that higher education finances have improved since the turn of the century and have improved further with the advent of variable fees. However, to build on this position, we need in particular three main things, and I should like to draw them to the Minister’s attention. The first is to maintain the unit of funding for teaching. We need a continuation of the guarantee that there will be no reduction in funding. This will ensure that the extra money available from variable fees will enable a higher quality learning experience and better sustainability. I hope that the Minister will be able to give me a guarantee that the Government are committed to this. The second issue is more money for teaching infrastructure, by which I mean buildings and equipment. There is a £5 billion backlog of infrastructure maintenance—which in itself is a great improvement since 2000, as a result of the Government’s commitment to increased capital allocations. Universities need to be able to invest further in state-of-the-art teaching infrastructure to support pedagogy and to ensure that graduates are taught to the highest standards. Thirdly, there must be further investment in knowledge transfer, business links and other forms of employer engagement, which I know the Government are committed to. The Higher Education Innovation Fund, known as HEIF, has been extremely successful in stimulating this engagement. It has also enabled better engagement between universities and the community. I hope that the Minister will be able to reassure me that the Government will continue to demonstrate their support with sufficient funding and resource. I do not want to appear complacent; there is so much more that could and will be done. But the universities themselves are strongly committed to this agenda and I am delighted that this House has the opportunity today to celebrate one of the UK’sgreat successes—its university sector. I look forward enormously to the contributions of the many distinguished Members of this House who I know also feel as passionately as I do about the sector’s continued success. I beg to move for Papers.