Higher Education and the Economy

My Lords, I join other noble Lords in thanking the noble Baroness, Lady Warwick, for stimulating this timely debate. I also declare an interest as an honorary fellow of Sussex University, of Birkbeck, and, recently, as an associate fellow of Newham College, Cambridge. This wide-ranging debate has celebrated the success, diversity and importance of the university sector in the UK. The noble Baroness, Lady Warwick, began by referring to a document produced by Universities UK, The Economic Impact of Higher Education Institutions, which gives the total value of higher education institutions’ impact on the UK economy as £45 billion. That may seem a large sum but is only 4.5 per cent of UK GDP. I think that the report underestimates the value of universities to this country. I admit that it uses input/output analysis and takes account of indirect effects but, essentially, it presents a static photograph of the impact of universities. Our discussion today illustrates that the impact is dynamic over time rather than one that can be captured by a still photograph at one point. I illustrate that with some work that, I confess, I did 15 years ago at the University of Sussex. We considered a question posed to us by the Treasury: what do we get from spending money on basic research? We began by looking at a lot of surveys, which considered how far industry uses university research. The answer was that it did use it and that, the longer the term for which you look at it, the more use they made of it. The pharmaceutical and electronic industries—the high-tech industries—and the motor car industry, in design, and even the low-tech industries, such as mining and agriculture, are thoroughly dependent on the output of ideasfrom universities. That was captured in work by an economist called Mansfield. His reckoning—I must say that I think that it was rather a back-of-an-envelope reckoning, but it has been widely cited—was that the long-term rate of return on basic research was 38 per cent on average. That is where our work started. As we delved into the matter, we recognised that the key benefit to the economy from basic research came from the training of individuals. The concept is simple. Less than 10 per cent of the scientific publications in the world come from the UK; therefore, about 90 per cent come from other countries. If we are to make use of that contribution, we must have scientists working at the leading edge of science and technology so that they can understand the ideas in those publications, use them and apply them in the areas in which they are working. Those highly trained scientists and engineers must be the receptors of that knowledge and the translators of it for industry. Technology transfer therefore depends crucially on individuals. The dynamic effect of that over time is considerable. If we did not have those trained people working at the leading edge of technology, the innovation potential of the UK would be very little. We need to look at the university sector far more widely than the document does. Let us take teaching, for example. I was much taken by what the noble Lord, Lord Giddens, said about simply having to have many people trained to higher educational level in a knowledge-based economy, because we need the creativity and lateral thinking that come from that education. The noble Baroness, Lady Deech, also made that point. In my preparation for the debate, I went back to the report written by the noble Lord, Lord Dearing, in which he quoted from Ernest Boyer’s article on the scholarship of teaching, which we considered in 1990: "““great teachers create a common ground of intellectual commitment. They stimulate active, not passive, learning and encourage students to be critical, creative thinkers, with the capacity to go on learning after their college days are over””." Picking up again the Dearing concept that at the centre of education must be the student, surely the greatest output of our universities is training young minds to think for themselves so that they can hold down jobs where they are required to take decisions and to hold substantial responsibility for those decisions. This is why the CBI says that 60 per cent of future recruitment will be of graduates, because this is what industry wants from our graduates. However, as the noble Lord, Lord Morris of Handsworth, said, we should not forget that we are also training students to be work-ready. Universities increasingly fulfil that function. If we think about it, professions suchas accountancy, business, medicine and its allied professions, law, engineering, information technology, media and communications, and teaching and education, all of which provide a great deal of our GNP, are now graduate professions. Our universities also deliver a good deal of our vocational training. It is acknowledged that basic research in universities provides the seed corn for innovation,and in turn that innovation underpins our competitiveness. For a long time, the universities were seen too much as ivory towers, tied up in their own ideas and not sharing them with others. However, as the noble Baroness, Lady Lockwood, said, this is no longer true. The Lambert report documented a sea change in the culture of our universities, which are now positively seeking out industrial partners. The problem, as the Lambert report also documents, lies with the reluctance of British industry to do its part and invest the resources necessary to develop and exploit these new ideas. Increasingly, it is also realised that, in the world of the knowledge economy, universities provide a dynamic nucleus for regional economic growth. Noble Lords have cited many examples today of the contribution made by universities in this respect. The noble Baroness, Lady Bottomley, talked aboutthe contribution made by the University of Hull, and the noble Baroness, Lady Blackstone, talked about the regenerating effect in the Thames Gateway. Universities are now playing this vital role in their regional economies. They are big employers in their own right in all sorts of labour. They provide high- and low-skilled jobs, and are a focus for training in higher-level skills. They act as incubators for new enterprise and provide expert advice and consultancy for existing enterprise. I was very pleased that the noble and right reverend Lord, Lord Carey, mentioned the Arthur D. Little report, because it is not only our research-intensive universities that are doing all this. The report found that the 35 less research-intensive universities levered three times more contract income from public research funding that they received than the more research-intensive universities. That illustrates so well the fact that universities actively support a whole range of industrial and business services in their local areas by working with their RDAs and providing a dynamic nucleus for those economies. Finally—we have heard a great deal aboutthis—universities contribute a great deal to the international balance of payments. We hope that the students who are trained in this country and by this country overseas retain good feelings towards Britain, and through those links go on to work with service providers and equipment manufacturers who can meet the needs in their own countries. Put together, the impact of these dynamic influences is enormous and is talked about in the regional economy. Increasingly, the picture that emerges is that our universities provide the dynamic nucleus for this country as a whole. I should like to add a slight caveat to what I have said on two issues. First, the success of our British university system has happened because we have been able to individualise education for personal needs. Overseas students come here because they get contact with senior members of staff. The success of teaching comes from knowing individual students and being able to help them to know themselves, which is part of the creativity. It is vital that we retain that tradition. I endorse wholly the request of the noble Baroness, Lady Warwick, and other noble Lords that we maintain the current unit of resources. Teaching is stretched to the limit. We need more resources, if possible, to maintain teaching levels. We cannot squeeze them further. Secondly, universities have grown up within a collegiate system, which has contributed a great deal to the open discussion of ideas and, therefore, creativity. The collegiate system is not part of the market system and it would be dangerous to make it too much a part of it. We can go so far in developing business methods of running universities, but, in so doing, we should not lose the creativity that comes from collegiality.