UK Government

Department for Business, Innovation and Skills: Lord Mandelson - Business Secretary - speech the Lord Dearing Memorial Conference - Nottingham University.

News   •   Feb 12, 2010 11:02 GMT

It is a great to be asked to give a lecture in memory of Ron Dearing. Lord Dearing was an outstanding public servant, respected across the political spectrum, who played a role in British public life for more than forty years.

His obituary in The Times observed that: “One minister after another turned to him to help to extricate them from some crisis or to study the need for longer-term reforms”. That makes him sound a bit like Sir Humphrey Appleby’s benevolent twin.

But of course what defined Lord Dearing was the fact that he was everything that the privileged and complacent Sir Humphrey was not. He was the product of ladders of opportunity created by our post war government and society. He left school at 16 to start work as a clerk. He ended his career a visiting fellow at the London Business School.

My last conversation with him was coming out of the Chamber and I asked if I could bend his ear to discuss wider education and skills policy. I am worse off for that conversation never having taken place.

One of Ron Dearing’s great contributions to British public life was his report on Higher Education, It has been associated ever since with the recommendation to adopt variable fees. But it was a much wider vision of the role and future of higher education.

Without really intending to do so, our Higher Ambitions strategy last November marked the halfway point of Ron Dearing’s long vision of UK higher education. What I want to do today is to say something about Lord Dearing’s original vision, and how I believe we have stayed true to that in setting the course for the next decade.

I think it is necessary and unavoidable to ask how we can hold that course at a time of fiscal constraint, and some reduction in total public funding for high education.

I have been criticised for talking up the critical role of higher education in our society and our economy, while looking for £915million in savings across higher education, research and science spending over the next three years. That criticism requires a proper response.

From The Learning Society to Higher Ambitions

If you go back and read the 1997 Dearing report now, you are struck how deeply it has permeated the way we think about higher education in Britain. It had a clear message for everyone who has a stake in a strong higher education system.

For politicians, it said as diplomatically as possible that the UK had a crisis in public patronage of higher learning. Capital budgets had been slashed. Investment per student had fallen by 35%. The UK was haemorrhaging academic talent.

For universities Lord Dearing had a clear message that the institutions needed to focus on distinctive missions, diversified sources of income, a new recognition of the value of teaching, a constant focus on the quality of the service to the student.

And, of course, for students and their parents there was clear notice that the user can and should be expected to pay some measure of the cost of higher education, because the benefits accrued both to society and to the individual in improved prospects. This cost had to be set in a way that did not act as a check on university access for poorer students, but it was a legitimate part of a properly funded university system.

The decision to follow Lord Dearing’s recommendation with the introduction in 2004 of capped variable fees in England was heavily criticized. But in fact it has provided an alternative source of income for universities – without the damaging consequences for participation that were predicted by some at the time. Young people from areas that traditionally have some of the lowest participation rates are now 30 per cent more likely to go to university than even five years ago.  Real progress, if not nearly enough.

Lord Dearing was very clear that our higher education system was central to what made our society intellectually curious and critical, what made it socially just and humane.  It is the place where we define and redefine our sense of ourselves and the forces that shape us.

These are all convictions that I share very strongly. We have to hold very tightly to a belief in the importance of higher education as a civilising force, as the ultimate and necessary bastion of knowledge and learning for their own sake.

Lord Dearing also stressed that they are where we develop the basic capabilities that underwrite our economic strength. Although he did not use the word globalization, he described a globalised economy and he knew that higher education had to be central to our response to that challenge.

This is the key reason why we made the decision to bring skills and higher education into a new department devoted to policy on Business, Innovation and Skills. A decision that has been widely welcomed, and which I believe puts university policy where it belongs, at the heart of growth policy.

Universities are where we learn to challenge and innovate, where we develop the raw knowledge that is ultimately refined into skills and innovation. New industry and new jobs start in the research lab and the classroom. I have often been criticized for sounding ‘instrumentalist’ when I talk about this economic role for higher education. I don’t regard universities as factories for workers, but nor do I apologise for insisting on the link between higher education and a job.

And it is precisely because of those close links between higher education and quality employment, and between higher learning and our critical outlook and cultural inheritance that the question of wider access to university is so important to the whole question of social mobility in Britain, which is something on which Lord Dearing insisted very strongly.

A decade of transformation

Looking back we can see now that the Dearing report marked an important turning point in the recent history of higher education in England. This Government has always made reversing the neglect of higher education the centre piece of its ambitions.

Since 1997 total funding for higher education in England has risen by 25% in real terms. Public support for research has doubled. Universities have benefited from an unprecedented commitment – both political and financial - to their transformation and strength.

On the back of that strong public investment, universities have been able to leverage a steep rise in non-state funding. They have widened their sources of income by exporting their teaching brands, opening their doors to fee-paying international students. Higher education is now a major export industry for the UK and a key comparative advantage – some £5.3billion in exports in 2008. Nottingham does this well. The Open University has become a global pioneer of distance education.

We strongly support institutions in branching out in this way, and I want to assure you that the new migration requirements set out by Alan Johnson yesterday will in no way jeopardize the ability of genuine students to study here as both undergraduates and postgraduates.

Universities have also been commercializing more of the knowledge they generate and building more collaborative relationships with business and industry to fund research and teaching. Over the last decade annual university earnings from collaboration with business have risen to £2.8bn.

The result of this growing diversity in university finance is that public funding for universities accounts for just half of the total income of UK universities. The £23 billion in public and private income that universities received in 2008 is now transformed into an economic footprint in our society worth almost £60 billion in jobs, exports, innovation and added value.

The right expansion

This represents a real transformation in the place of higher education in our society and economy. Around 60% of British 16 and 17 years olds now see themselves as likely to go on to university. It is hard to overstate the revolution that this represents in social attitudes.

But the benchmark here will of course be our success in meeting those raised expectations. We have successfully raised participation levels from every level of British society, including the most disadvantaged. But not enough, especially for our best institutions, which is why I have asked Martin Harris to report back on how we can do better.

We have created new routes into higher education, and new ways to get a degree while working or at work. These opportunities need to and must expand, even in more constrained environment.

And this remains the fundamental challenge of higher education policy. How do we continue to expand higher education participation in a way that respects the finite resources of the state? And which reflects the fact that three quarters of the workforce of 2020 that is already out of formal education and already in the job market. The demographics of an ageing population also mean that even with an influx of international students, the student market is going to get progressively older.

These people need flexible and good value choices that can include or fit around work. The three-year, campus-based, straight-after-school honours degree serves us well and is popular with students and parents. But it is not where we should focus future growth. Because the profile of students is changing, the range of options must also adapt.

That is why we have invested so heavily in building up Foundation Degrees to their current level of around 100,000. It is why we have asked HEFCE to support models for employer co-funding of courses, which have doubled this year to 10,000 and are projected to double again next year .

That is why, along side traditional three year full time degrees, I want to see part time study, two year Foundation Degrees and three years Honours courses delivered intensively over two years expand as part of the mix.

When their objectives and outcomes are clearly defined, and when they are taught well and properly resourced, there is no sense at all in which these alternatives should be seen as inferior to three year equivalents.

And they can be, in many respects, better for students, especially for students without financial resources behind them. Because they enable them to earn and learn. They reduces the amount they have to borrow to get a qualification.

And because these flexible kinds of education and training are vital for those who miss out on higher education straight after school the push for two year degrees and wider part time or work-based study should be at the core of the wider participation agenda. Those who argue against it risk painting themselves as defending an institutional inflexibility that doesn’t serve students, and doesn’t get the most out of public investment.

That is why we have asked HEFCE to advise on how we best use the public funding system to offer the right incentives to those universities and colleges that are willing to set the pace on these kinds of alternatives.

And it’s important that this growing diversity of quality provision doesn’t stop with universities. One of the most important changes that we have driven in the higher skills system over the last decade is in making sure that university is only one of a range of options for advanced and higher learning. Especially if you want vocational training with a strong emphasis on technology or business skills.

Hence our ambition to ensure that 75% of Britons have a higher or advanced qualification by the time they reach 30, recognising clearly that university is only one way to achieve this.

This is why we have expanded the advanced apprenticeship system by more than 35,000 places to start the work of creating a modern class of technicians in Britain. All these apprenticeships will earn UCAS points so that they act as a ladder into university.

This point about the huge expansion of alternatives to university is important, because this year, like every year, there will be greater demand than supply for university places. But this year, like every year, many students will not achieve a university place. Although the scope of university education has massively widened, getting into university always has been and always should be a competitive process.

I acknowledge that this autumn there are likely to be more disappointed people who do not achieve the university place they aspired to. I don’t in any way seek to minimize that.

But no student who does not get into university should feel that they have exhausted their options or wasted their efforts. Our best further education colleges and apprenticeships can provide a preparation for the world of work that compares in its excellence and market value to the best of our universities.

The right response to that very real disappointment, as tempting as it might seem, cannot be to guarantee every applicant a full time university place. It makes no sense either in terms of the cost to the public purse, or the provision of quality teaching, which remains critical to the credibility of higher education.

A large scale, untargeted further expansion of full time three-year degrees without any real attention to what these additional students are studying, or how well it equips them for life at work, also makes no sense at a time when we need to be focussing more closely on strategic skills and alternatives to full time study.

That’s why we specified STEM and other economically essential disciplines for the additional 10000 places we provided last year. That’s why we have provided clear financial incentives to provide vocational or work based Foundation Degrees in place of traditional three-year campus based equivalents. That’s why the key challenge is not expansion, but the right kind of expansion.


Now, I realize that to trumpet the diversity and achievements of British higher education at this point is going to invite the response: why, then are you cutting its funding?

The simple answer to that is that we are acting out of necessity. Public funding cuts are the regrettable cost to the UK of saving the banking sector and getting the country through the recession.

The first important point to make is that universities are not bearing the brunt, they are not being singled out for financial constraint. The lead times for higher education funding cycles means that we have wanted set out at this early stage, ahead of other areas, where we expect savings to be made.

Much of the rest of the public sector will receive similar constraints in the course of this year or soon after. The appearance that universities are in the frontline of public spending cuts is an illusion created by that need to plan ahead.

I have always said that higher education would have to bear its share of public spending cuts, but not more. What I can say very clearly is that I believe that our higher learning system is fundamental to our capacity to grow and prosper, not least as we recover from recession and balance the public finances. We have built up this extraordinary asset in our universities and we will not see it undermined. We are committed to continuing to expand participation in a sustainable way. Next year the budget for science and research will actually continue to rise.

And in that respect it is important to be clear. Precisely because of the widening base of income that British universities have achieved over the last decade, a small reduction in public investment impacts less than it might have, although I recognise that reductions will impact in different ways at different institutions.

But the proposed £915 million in reductions across higher education, research and science spending over the next three years represents savings of less than 5%. In the coming year- 2010-11- this is just £315m out of a total university income of around £23billion – clearly structured to minimise the impact on teaching and research.

Now, I don’t want to dress up funding mutton as policy lamb. But I do want to argue that it can focus minds in two ways.

The first is on the need to seek out alternative sources of funding. The best university systems in the world are defined by a wide range of public and private funding and British universities need the same diversity.

I recognise that sources of additional business income are not limitless and can be irregular, especially during a downturn. But even a small expansion in this work would go a long way in closing the gap created by a period of fiscal constraint.

The second is that the push to save costs can and should actually push the system in the direction of the modes of study I have just been advocating. Part time degrees, shorter and  more intensive courses all offer the potential to lower student support costs, use resources more intensively and improve productivity.

Finally, I do not believe that the net effect of public funding constraint has to be a fall in quality, even if it requires a refocusing of resources. Universities are free to find the savings the government requires where they wish, and they can, if they choose, focus funding in their strongest areas of teaching and research.

This is a process that needs to happen anyway and it must inevitably mean institutions removing resources from areas where they are weaker to concentrate them where they are achieving teaching and research excellence. The reality is that we cannot afford a system in which every institution tries to do everything.

And of course basic operating efficiency can absorb some of this reduction. In this respect, the years ahead for Higher Education will be no different from any other part of the public (or private) sector

The fees review

It would be odd to speak about the financial resources available to universities without mentioning student fees. I don’t intend to pre-empt or prejudge the outcome of the review currently being conducted by Lord Browne and his team. The fees debate is as much about how we guarantee access to higher education as it is about the necessary level of resources universities might want or need.

But I would say simply that we need to see this review as part of a wider debate of how we guarantee excellence in British higher learning in the future. Accepting as I think we must, that state funding can only be part of the final mix. A critical part – but only part.  Whether the balance comes from industrial collaboration, learning exports, donations or fees, the stronger this non-state component of funding is, the stronger the sector will be.


Ron Dearing’s core conviction, which I share, was that higher learning is the foundation of a civilised society, a expression of the value of knowledge, for every sake, including its own sake. He also saw it as vital for equipping British people for their economic future and to social mobility.

I do not want to minimise or ignore the impact of reduced state funding for universities and colleges. That has not been my intention today.

But I have argued that the system Lord Dearing helped map out for us, and which we have transformed over the last decade, need not be weakened or undermined by a period of constraint in public budgets so long as we recognise two things.

The first is that a greater focus on alternative income and a greater focus on institutional strengths and a greater focus on alternative modes of study can all cushion the impact of a small reduction in the total level of public support.

The second is that this direction of travel is right and necessary in itself.  It is the route to a higher learning system that is constantly testing its relevance against taxpayer value, the expectations of students, the demands of research and teaching excellence and the needs of our economy and society. It will build on state support, but reach beyond state support.

It is important to be absolutely clear that our best institutions are already doing this. Some were doing it even before Ron Dearing set his pen to paper in 1997. It is those institutions that have defined the pace and potential of reform, not Government.

I welcome debate about the future of higher education and I expect cuts in university funding to be greeted with dismay – some of it vocal and critical.

But does a less-than-5% reduction in public support for universities reverse a decade of rapidly rising investment in universities, or leave our best institutions on their knees? Does it seriously damage the extraordinary potential in this extraordinary sector? I don’t believe by any stretch of the imagination that it does.

Is it an opportunity to reinforce some clear-eyed thinking that is already happening about the future of British universities and colleges?

I believe it has to be.  Thank you very much.


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