UNIVERSITIES UK INAUGURAL ANNUAL LECTURE 2007 RICHARD LAMBERT, Director-General of the CBI 11 December 2007 I plan to focus my comments this evening on part-time students and life-long learning. There’s one negative reason for this decision, and three positive. The negative reason is that I don’t have much that’s fresh to say about the themes of Business-University research collaboration, which I reviewed for the Government a few years ago. The data show a steady increase in the pace of collaboration across the UK. The Government has stepped up to the plate with increased third stream funding and support for the Technology Strategy Board. And businesses everywhere are recognising the value of academic links at all levels. Lord Sainsbury’s excellent review – The Race to the Top – was published just a couple of months ago, and pretty much said it all. The positive reasons for concentrating on part-time and life-long learning are: First, this is a large and rapidly changing part of the higher education system, and does not always get the attention it deserves: I pretty much ignored the subject in my review. Around two-fifths of students in this country are classified as part-time, a total of roughly 840,000 at the last count, and this proportion is certain to grow as a result of demographic and economic changes in the decades to come. Second, part-time and life-long learning have a crucial role to play in a modern economy, where global competition and technological change mean that skills and knowledge have constantly to be refreshed and upgraded throughout the working life. Third, this is an area where there are some big and rather fierce policy debates to be had. Among other things, I’d like to discuss the thinking behind the Government’s decision in September to withdraw funding in England for Equivalent or Lower Qualification Students – the famous ELQs – which will affect students from the UK, or the EU more broadly, who are studying at a level equivalent to or below a qualification they already hold. I’d like to talk about the role that business plays now – and might be expected to play in the future – in funding university teaching, whether it be full-time undergraduates at the 18 to 21 year-old level, postgraduate students, or continuous professional development through the employee’s working life. And I’d like to think about whether the current distinctions that are drawn between part-time and full-time students make sense and are sustainable. I should start by emphasising that what I am about to say does not represent CBI policy, in this sense: it’s not been carefully debated through our various committees at a national and regional level. That’s the way our policies are formed and is what gives us our mandate. Instead, these thoughts are just the results of my reflections on the news in the past few weeks. But as I shall suggest later, I do think that there is work to be done here between the CBI and Universities UK. What these debates badly need, and what in some cases they seem sadly to have been lacking, is a firm base of evidence. Surely it’s up to our two organisations to come up with the goods. So who are these part-timers, and what is the relevance to them of the debate about ELQ funding? Answering the second question first: part-timers are much more likely to be affected by the withdrawal of funding for ELQs than full-time students. A substantial minority of part-timers – something over two-fifths – already have some form of higher education qualification. And the indications are that as many as a fifth of part-time students in England will become unfunded after 2008-09, compared with only 2 per cent of full-time students. As for who the part-time people are, the message from a policy briefing published by UUK a year ago is that there is no such thing as a typical part-timer. They come from all backgrounds, and for all kinds of reasons study many different subjects at all possible levels. But a few broad themes do emerge. They are not particularly well off. Affordability is very important when it comes to studying. For many of them, the choice is not between part-time or full-time: it’s part- time or nothing at all. A sizeable proportion of those in the UUK sample had an income of less than £20,000 a year, and only a minority received any help from their employer. Most of them were not eligible for a course or fee grant, and most paid their own fees up front, or in a series of instalments So the pricing of study courses is a very sensitive issue. Their studies have to fit around working hours, as well as all kinds of domestic responsibilities. Not surprisingly, the drop-out rates tend to be higher than for full- time students. Quite a few see their studies as a way of changing direction - breaking out of their existing employment and into a new career, or of getting back into the workforce. That’s something to be born in mind when thinking about how far businesses can be expected to support their employees in this area. On average, they are quite a lot older than full-time students – around half are between 30 and 50. But significant numbers – a tenth or more – are under 21, and this proportion appears to be growing, perhaps as a result of increased tuition fees. For women, part-time studies are a particularly important route to higher education. Over three-fifths of the total are female. Part-time studies are heavily concentrated in a relatively small number of institutions. The Open University is by far the largest, accounting for over a fifth of all part-time students, and most of the other big players are post-1992 universities, usually in metropolitan areas. It’s hard to get a firm handle on how the numbers are changing, because of various classification changes. But it seems that after a decade of rapid expansion, the demand for part-time undergraduate study has levelled off and may actually be declining. Part-timers face bigger barriers to study than their full-time equivalents, whether it be in financial, social or intellectual terms. Those in the UUK sample emphasised their wish to gain a qualification and improve their skills, labour market and career prospects – but they were also driven by their interest in the subject and their wish to continue learning. What this all adds up to in big picture terms is a vitally important part of the UK’s economic and social infrastructure. Part-time studies provide an opportunity to retrain and reskill in a changing work environment. And by offering a step on the ladder to higher education, they support wider participation and social mobility. No wonder the decision to remove funding for ELQ students has caused such a stir among those institutions that are most affected. It came completely out of the blue. And, to put it politely, it seemed hard to reconcile with the Government’s broader policy objectives and the life-long learning agenda. The official explanation is that at a time of strictly constrained public finances, difficult choices have to be made. The funding that would have gone to ELQ students – around £100 million in a full year – is not being taken out of the system. Instead, it is being redirected to support those students who have never had a chance to study for a first degree, and to create new initiatives that will encourage businesses to share the cost of higher education funding. The changes will be phased in over a three-year period, and those institutions that will be most seriously affected will receive financial support over that period to help them to redesign their programmes. And there will be exemptions. ELQ students undertaking foundation degrees will continue to be funded, and so will a number of other subjects, such as teacher training, doctors, architects and so on. What could be fairer than that? But the policy change causes some problems, and raises some questions. First, to quote Baroness Sharp in the House of Lords last week, “It hits disproportionately precisely those institutions – universities and FE colleges – which have been doing most to widen participation and encourage those who have traditionally not gone into higher education to do so. It is not just Birkbeck and the Open University, but the likes of the London South Bank University, Westminster, Anglia Ruskin University, Barking College and Lewisham College.” The sums of money involved for Birkbeck and the Open University are so large that it is hard to imagine these two great institutions will not to some extent be destabilised, even with the promise of transitional support. Second, the change has a marked impact on particular disciplines. For example, I was warned in Cambridge last week that “the theologians are mobilising” – large numbers of them will be affected for obvious reasons, and will no doubt be going on a rampage. That may not be a prime concern for the CBI. But the impact on management programmes and business schools definitely is. There is a broad public interest case for helping well qualified graduates to attain high level management education as contributors to the UK’s competitiveness. We should be encouraging scientists, engineers, doctors and others to study for a masters qualification in business at a later stage in their careers as they move into managerial roles. This change will have the opposite effect. Curiously enough, the London Business School will lose a larger sharer of its HEFCE funding than all but four other English institutions as a result of these changes. I’ve got to admit, too, that I feel a bit uneasy about the idea that the state should decide which disciplines are worth supporting, and which are not. If a mother in her thirties decides that a law degree is her best way back into the workforce, why should she receive less help than one who opts for land management? Why are vets to be exempt from the change, but not pharmacists? Who is to say that one kind of knowledge will be more valuable to society in ten years time than another? I am also offended by the hints you sometimes hear that ELQ students are nothing more than a bunch of middle class freeloaders. That’s the “Why should we pay to teach the Ambassador’s wife to learn French” question. Quite apart from the fact that it would be a jolly good thing if the ambassador’s wife could speak French, this attitude simply demeans those students who are struggling to move ahead in the workplace. A third problem is that the support of life-long learning of all kinds is quite a risky exercise for most universities. It doesn’t bring in lots of income from foreign students, and it is generally more expensive to provide than full-time teaching. If they are going to lose income from their ELQ students, it seems to me likely that at least some of the life-long learning centres that have been built up around the country in recent years will become very marginal activities. Then there are some questions. At the Higher Level Skills Summit last week, the Government announced new funding rising to at least £50m a year by 2010-11 to support “innovative ways for Higher Education to work with employers to meet their skills needs.” The money will be used to part fund places, with employers topping up the actual costs of what might be anything from short customised course to something much more substantial. These, we were told, would allow HEFCE to deliver at least 20,000 additional student places in three years time. But this decision in turn raises at least three sets of questions, which extend well beyond the ELQ debate. Where are the extra students going to come from, and where are they going to go? Why should businesses in the future be expected to fund a much bigger share of higher education teaching? And third, are we running the risk of focusing on quantity, rather than quality, especially when it comes to undergraduate teaching? A number of English universities are already struggling to meet their HEFCE teaching contracts. There are still large numbers of applicants to universities each year who do not take up their places. There’s no obvious reason to think that our secondary school system is suddenly about to start putting out large numbers of more students with the qualifications and ambition that are required to move on into higher education. Rather the opposite: we are approaching a period of demographic change, during which the cohorts of 18- to 21-year-olds are likely to shrink significantly. There may indeed be evidence that the cost of funding ELQ students has been to deprive significant numbers of qualified first time students of a university place. It’s just that I haven’t seen it. In last week’s House of Lord’s debate, Lord Triesman had the task of defending the Government’s position against an onslaught from a group of noble Chancellors and professors. He did a good job in tough circumstances: I think he may be here tonight. He had this to say about the responsibilities of business when it comes to investing in HE skills: “The House and those way beyond it will have to accept that the employers in this country will have to change. The economy of this country has no option but that employers change…We do not have the option, given the number of people in the workforce without the kinds of skills we need over the coming periods, or, indeed, the skills we need today. There is no option other than that there is a fundamental lifting of the level of skills. The role of employers has to be that they increase whatever they have done historically.” To which the question that employers might ask in return is: “Why?” The reality is that business does indeed have an option. The labour market has changed beyond recognition in the last decade: in a word, it’s gone global. If businesses can’t find the skills or work attitudes that they need in the national workplace, they can perfectly well recruit them elsewhere. They don’t have to hire people from the UK education system. And they don’t have to locate their activities in the UK. That surely has been the big lesson since the EU enlargement of three years ago. Since then, I’ve lost count of the number of times that employers have told me depressing stories about how the skills and employability of their central European – often Polish - recruits compare favourably with those of the domestic labour pool. Of course it does not make sense for a whole society to meet its skills needs by bringing in qualified immigrants. But it is perfectly rational, and it is certainly possible, for an individual company to behave in this way. So raising the national pool of skills is a public policy challenge, more than an issue for particular firms. Then there is another challenge for government and – for that matter – for the higher education sector. True employer engagement must be led from the demand side. It’s not a question of modifying the supply-side agenda, tweaking existing degree products here and there to fit some assumed new business needs. And anyway why should businesses be expected to pay more for generic skills as if they were in some sense additional to conventional academic work? Skills and employability should be seen as part of the return on the substantial public investment that is already made in the sector. That’s why we all pay taxes. Of course, businesses do have a keen interest in skills, education and training – indeed, it's the number one issue that they all want to talk to the CBI about today, whatever their line of activity or their location around the country. But two points have become very clear to me in the 18 months that I have been in the job. One is that business people have very little interest at all in Government targets for raising the proportion of employees with a university qualification. There is a sense, I am afraid, that more means less – that the rapid increase in the number of students graduating from college or university has come at the expense of quality, in terms of knowledge, attitude, and employability. That, surely, is a perception that universities need to be addressing head on. The other message I have picked up is that employers’ concerns are primarily focused at the level of basic and intermediate skills, rather than at the HE end. They are much more likely to feel that their business is being held back by shortcomings in literacy and numeracy, or by the difficulty of attracting qualified technicians or apprentices, than they are by the quantity of graduates in the workforce. They certainly don’t give you the impression that access to another 20,000 potential graduates a year will be the answer to all their skills problems. Of course this does not mean that businesses don’t have an interest in supporting HE teaching. Of course large numbers of them do. I’ve seen all kinds of examples in my trips round the country. Foundation degrees, like those at Nissan’s manufacturing plant in Sunderland, or the programme which Tesco is developing with the University of the Arts in London and Manchester Metropolitan. Accountancy degrees, such as the programme developed at Lancaster in conjunction with Ernst & Young and the Institute of Chartered Accountants of Scotland. The programmes which Anglia Ruskin is developing with the likes of Specsavers or Barclays Bank. No doubt there will be real interest in the possibilities of cofunding now being developed by the Government. Businesses will welcome more incentives to develop courses of this kind. But they are not going to step up to the plate just because the public purse is too constrained and because students can’t afford to pay more either. They are not expecting their employees to stay with them for a lifetime, and they have lots of choices about where in the world they are going to find – and locate – their talent. Moreover, business engagement is far from risk-free from the university’s point of view. Business needs and strategies change. The life expectancy of a chief executive is even shorter than that of a vice-chancellor. And the first move of the newcomer in the corner office may just be to cancel all the pet projects of his or her predecessor. Setting up a business-facing course is expensive and time consuming. If, for whatever reason, businesses walk away after a year or two, the financial consequences may be serious for the institution concerned. For all these reasons, I was not surprised to read in the Times Higher Education Supplement this week that HEFCE regards the Government’s cofunding strategy as high-risk. To quote from a HEFCE board paper: “We are trying to do two things at once: build a platform of capacity within higher education to support a potential programme of accelerated growth in employer cofunded provision from 2010-11 onwards, at the same time as test marketing whether a market exists, the nature and scale of the potential demand, and the most effective provider approaches to growing and supplying that market.” HEFCE reportedly argued that the risks of the new policy would be outweighed by the tangible benefits for universities. But it warned: “This will involve us in committing significant levels of upfront funding – perhaps of the order of £100m to £150m over three years – to projects from which we shall learn, but which may not in all cases deliver the expected outcomes or create the sustainable capacity we are looking for.” Something of a leap in the dark, then – and one that is being funded by switching money away from a well tried system that has delivered economic as well as social benefits. Let’s hope it succeeds. If it does not, business will not accept responsibility for what after all has been a top down, provider driven initiative. As I understand it, the thinking behind the cofunding idea is that HEFCE and the relevant employers will share the background costs of developing new courses to provide the skills that employers need, and that employers will then still have to contribute to the course fees. Will there be a great clamour for this kind of approach? Businesses can and do pay for training employees in the skills that they need in the workplace today and tomorrow. But they can’t be expected to be ready to invest in the knowledge that society might be needing in five or ten years' time. And I think it’s very difficult to argue that they should be responsible for funding the teaching of those generic skills that people are going to require as they move from job to job over their working lives. They’ll pay for a course that meets a particular requirement – and it may well be that cofunding will provide a lever for more activity of this kind. But such courses are very unlikely to have the character of a three-year undergraduate degree. That leads me on to the third of my big questions which is: are we running the risk of concentrating on quantity rather than quality when it comes to funding teaching at the HE level? Let me start this section by stating my unqualified belief that our country needs more citizens with further and higher education qualifications. And if we are going to make the case for free trade and open borders – which we must – we also have to argue for a society that has the knowledge necessary to prosper in this globalised world. But having accepted all that, I do worry about the way that the target set by Sandy Leitch – namely that by 2020, 40 per cent of the working population should be qualified to level 4 or above, compared with just 29 per cent today – is these days being quoted as if it were carved on tablets brought down by Moses from the mountain top. Oddly enough, the other side of the ELQ debate is also calling the words of Lord Leitch into evidence for their argument, this time citing his emphasis on the need to refresh our skills throughout our working lives. It’s all rather ironic, given that other large chunks of his work have been quietly sidelined. Is it right to argue – as the Government has implicitly done in its ELQ decision – that an extra undergraduate is more worth funding than is someone who already has an equivalent degree? It is true that the former would contribute to the Leitch target, whereas the latter would not. But that cannot in itself be a sensible reason for changing policy. You might argue that the Government’s approach would support the highly desirable case for broadening access to higher education. But it does so at the expense of institutions that focus on part-time studies, which are themselves probably the best route we have for wider access. At this point, I will make a confession. It’s probably not politically correct, but I find it much easier to make the public interest case for funding the education of a hard working person approaching mid life and seeking to re-enter the workforce of upgrade her skills than I do for an 18-year-old who is somewhere on the margins of university entry. That’s why I think we should be giving more thought to the funding of part-time education as a whole across the UK. Demographic and economic change along with technological developments all point in the same direction – and suggest an increasingly important role for universities that specialise in life-long learning. The data indicate a sharp decline in the cohort of young people reaching the age of 18 over the next fifteen years – the numbers could fall by around 16 per cent, or 100,000 young people, by 2020. Alert to this big picture trend, a number of universities have been cranking up their efforts to reach older students in recent years. They are looking to plug the gap left by a decreasing number of 18-year-olds. In addition, universities are trying to capture a larger share of the investment that business already makes in continuous professional development. The latest figures show that income to higher education institutions from this source is now running at around £400 million a year, up from £220 million at the turn of the century, but still representing only about 10 per cent of the available pot. There is obvious scope for growth here. As I have said, more and more of us are going to have to refresh our skills or retrain throughout our working lives to keep up with changing demands in the workplace. At the same time, the distinction between part-time and full-time studies is becoming increasingly blurred. According to one recent study, 30 per cent of full-time students now do paid work for more than 20 hours a week, and that proportion is set to rise along with tuition fees in the years ahead. So the lines between full-time and part-time are getting narrower and narrower. Everybody’s having to worry about money. Yet the economics behind the delivery of part-time studies are very different. Universities specialising in these studies tend not to be those that will benefit most from rising tuition fees. Nor, I would guess, have they been among the main beneficiaries from the rapid increase in students from outside the European Union – this has been the biggest source of revenue growth across the English system, with income doubling to around £1.5 billion since 1996-97. The premium paid to institutions to compensate for the higher per capita costs of supporting part-time students is set to rise in 2009-10, but will still fall well behind most estimates of the extra costs that are actually incurred. And part-time students receive much less financial support than do full-timers. The Education and Skills Select Committee reported this summer that although funding for fees and grants for part-time students in England has increased, they are not included in the variable fees scheme, nor do they have access to student loans. The Committee was told that funding of fees for part-time students is currently 50 per cent of what it would be if it were set at an equivalent level to that for full-time students. On student support, the highest grant available for those eligible is £250, and research by South Bank University has suggested that 58% of those eligible spend more than that on course costs. An estimated 77 per cent of students in the UUK study were ineligible for a course or fee grant – the main source of student support to which part-timers are entitled. In Australia, no distinction is drawn in terms of the support offered to full- and part- time students. So it’s no wonder that the Select Committee argued that for the future, students should be seen as one group with a variety of needs for support, rather than being arbitrarily divided into categories of part-time and full-time. Although there is no faulting the logic, this is probably too big an ask from a cash- constrained Government which already faces some politically very sensitive questions in the next few years about lifting the cap on tuition fees. But the Funding Review due to take place in 2009 will surely be an opportunity for reappraising the whole approach to part-time funding in the future. So where do we go from here? I’m glad to say that Universities UK and the CBI are already working together in a number of important areas. We are engaged in a project to highlight good practice in building effective partnerships between businesses and universities to develop workforce skills – and making recommendations for encouraging others to get involved. We aim to show what works – and what doesn’t – when it comes to delivering high level training for business. Another initiative I am especially keen on: our offices around the regions and nations of the UK are working to bring university leaders and business people together in informal networks to chew the fat, and learn to understand each other better. Quite a few business people I meet have only a vague notion of the role of a modern university, and don’t understand the glorious diversity in mission and output that is increasingly available. And quite a few academics still have a pretty fuzzy view about business, and what it can and cannot be expected to do in partnership with their institutions. The more we can help to bring the two sides together, the better. But there is more to be done. The Government is now setting out on a drive to develop cofunding with what seems to me like a very limited base of evidence on which to build its arguments. I suspect that the results are likely to be more modest than it is hoping for. Its decision to finance this programme in part by shifting funding away from ELQs looks like a crude measure, which has not been properly discussed with the sector and which will probably have unintended consequences. It is now up to the universities to work together with the business sector to identify the skills needs that the UK will need to develop in the global labour market. What can business sensibly be expected to deliver in terms of talent and money? And just as important, where are the market failures that must be met by public as opposed to private sector funding? There are broader questions to be answered too, for example about the proper role and financing in the decades to come of part-time studies, a question which has to be judged in social as well as economic terms. But the issue on which our two organisations are being challenged most directly by Government – and where policy decisions in the next year or two will be especially critical – is that of cofunding. I suggest we had better put our heads together. Thank you.