Examination of witnesses
Professor Louise Richardson and Professor Luke Georghiou.
Q1 The Chairman: Good morning to both of you. Thank you most sincerely for making time and taking the effort to help us with this inquiry. We are broadcasting live and—this also applies to Committee members—any conversation may be picked up, so keep it to the business if you can. It would be helpful if you could introduce yourselves on the record, and any initial comments that you might want to make would be most welcome.
The purpose of this short inquiry is to examine what the effect might be on university funding on developing and carrying out research, and what factors influence universities’ ability to think out new research, develop it and continue to research. That is the Committee’s principal focus, but we have lots of questions for you.
Professor Louise Richardson: I am vice-chancellor of the University of Oxford and previously vice-chancellor of the University of St Andrews. I have been at Oxford for three and a half years. My disciplinary background is that of political science. I have spent my career in several countries. I was educated in Trinity College Dublin and at Harvard University. I was on the faculty of Harvard for about 20 years before moving to Scotland and then down to England.
There is nothing more important for Oxford than research and research funding. We certainly welcome the Government’s commitment to 2.4% of GDP on R&D, but we are acutely conscious that this is a very challenging time for universities. Brexit poses real challenges to our ability to recruit and maintain our staff and to engage in the kind of global research that we want to. The prospect of Augar poses another challenge, and the combination of the two is particularly difficult. On top of that, we have issues such as pensions that remain unresolved and which are potentially enormous financial challenges.
We believe passionately in the importance of our research to improve society. I could give a litany of examples of important research that we are doing, from finding a universal flu vaccine to a cure for macular degeneration, from taking the lead on autonomous vehicles to working with families in deprived areas on educational programmes for healthy living. At the same time, we feel that we are driving the economy. We have had BiGGAR Economics, some external consultants, do an analysis of our gross value-added, and it says that Oxford alone contributes £7.1 billion a year to the global economy, £5.8 billion a year to the UK economy and £2.3 billion to the local economy, and £1.2 billion of that is due to our commercial activities.
We feel that we are an engine of the economy but we feel that we are in a very tenuous position at the moment, so we are delighted that you are looking at this issue with such seriousness.
Professor Luke Georghiou: I am deputy president and deputy vice-chancellor of the University of Manchester, which is also a research-intensive university and in fact the one that does the largest amount of collaborative research with business.
This morning, I too would like to stress the vital contribution that university research makes to our economy and society, a contribution that is well backed up by econometric and other evidence. There is already an existing threat to the sustainability of our research funding system, and that could be deeply exacerbated if tuition fees are reduced without full recompense. We also have an added threat from some potential Brexit outcomes.
Q2 The Chairman: Thank you. We will have the opportunity to explore some of the issues that you raise, including Brexit. I shall kick off with a question about the current state of public sector funding for university research. What is that like? What has been the trend over time? How does it compare with other funding—for instance, from industry?
Professor Luke Georghiou: Broadly speaking, expenditure on university research has slowly risen over the past decade, from £6.6 billion in 2009 to £8.2 billion in 2017. It currently accounts for 23% of the UK’s gross expenditure on R&D. There were two main factors shaping that curve. The first was the austerity years of flat cash in the first part of the decade, which in real terms meant a decline, then the increases with the formation of UKRI, and more recently the industrial strategy. The increase for business R&D in the last year was slightly less than the increase for university R&D—4% versus 5%, in rough terms.
Professor Louise Richardson: There has been considerable pressure on public funding for research in universities over the past decade. While we welcome the 2.4% commitment, if you exclude the ring-fenced allocation for industrial strategy goals and official development assistance, five out of the nine UKRI councils will experience falls in their core budgets over the period 2017-18 to 2020-21. Six out of the nine councils will receive real-term reductions in their budgets.
One of the biggest issues for us is that our annual research expenditure is 50% of our overall budget, excluding commercial activities. That is £725 million a year, of which £578 million is through competitively awarded external research income and £146 million is through QR income, which as you know is driven by our performance in the REF.
If I have one plea this morning, it is that we need to protect QR funding, balance the public funding and pause the decline in QR funding. About a decade ago we recouped 30% on the charity arm of QR funding, but that is down to 19%. This past year, that difference alone has cost us £20 million. Our research activities, which are world-leading, are seriously under threat.
The Chairman: How does the public funding compare to industry?
Professor Luke Georghiou: Although the UK has a higher proportion of industry funding for university research than the US, for example, none the less it is at a relatively low level. In our case, it is in the £20 million range in direct contract funding, with much more—over £80 million—tied up in collaborative programmes.
It is important to say that funding for research in universities and for research in business are not alternatives; they are highly complementary. If we take the 2.4% target, the greater part of that increase will have to come from business R&D. None the less, that is crucially dependent on university research, in two ways.
First, as the Universities and Research Minister has recently pointed out, to achieve that increase we will need another 250,000 researchers in our system. These will have to be trained in universities to doctoral level, which has substantial implications for our ability to recruit and attract talent.
Secondly, as I indicated, there is also ample econometric evidence that if you increase university R&D spending, you raise private sector R&D spend and patenting, due to all the knowledge, skills, instruments, methodologies and more which create new markets and increase productivity.
Professor Louise Richardson: We receive more from UK and overseas industry than any other British university: £75 million this past year, which is about 13%[1]. Our research income profile has diversified over the past decade, with the strongest growth seen in UK government funding, primarily through the National Institute for Health Research, as well as very significant growth in EU funding and in industry funding.
Q3 Lord Griffiths of Fforestfach: I have no interests to declare in connection with this inquiry.
How do you allocate resources within the university with regard to research and other things? In particular, where do you have to make tough decisions on cross-subsidising? What sorts of issues are you facing in that area?
Professor Louise Richardson: Actually, we do not cross-subsidise, in the sense that our expenditure follows activity. We have a resource allocation model that funnels all income to the activity. We lose money on every student and on every research grant we accept—quite significant amounts in both cases. The subsidy comes from other activities: commercial activities—in our case, publishing is a significant example—philanthropy and so on. We do not cross-subsidise between research and teaching. The situation in Manchester may be different.
Professor Luke Georghiou: I can give a slightly different answer, although allocation is not quite the right word. The great majority of our research funding is generated either directly by our researchers writing proposals or through the limited and declining-in-real terms QR funding, which we distribute to schools according to the formula by which it was originally calculated. We keep back very small amounts of pump-priming funds—1% or 2% of the total—which we allocate strategically to develop areas of high opportunity with internal competitive calls.
On the question of where there is subsidy, it is not explicit but, broadly speaking, national TRAC (Transparent Approach to Costing) data shows that UK student tuition fees more or less exactly cover the cost of that tuition nationally, although not in high-cost subjects such as STEM and medicine. International student fees generate a surplus, which offsets the very substantial losses that we make on research.
Lord Griffiths of Fforestfach: Professor Richardson, you said that Oxford does not cross-subsidise. It may not explicitly, but is there not an implicit cross-subsidy, in the sense that one’s observation—it is just a casual observation—is that a lot of universities really go for overseas students to reduce how much they lose on other students? You say that you lose on each student. So there is an implicit cross-subsidy.
Professor Louise Richardson: Our international student numbers are relatively low: 20%-22% at undergraduate level, of whom 8% are EU students. I fully agree that this is not the case in all institutions; my previous institution was very different in that regard. But unlike Manchester, where, as Professor Georghiou has just said, the tuition roughly covers the cost, tuition covers about half the cost of educating an Oxford student. There is no money to spare from teaching, even from international tuition, to subsidise research. As with the national sector, we get a deficit on research. Our recovery rate is about 80%—nationally I think it is 71%—so that is still a significant deficit.
Lord Griffiths of Fforestfach: To what extent, particularly in Oxford, is your calculation complicated because of the independence of colleges and their endowments?
Professor Louise Richardson: Everything in Oxford is complicated, as you know. But just like in Manchester, the differences in costs are in laboratory subjects versus non-laboratory subjects—some cost more than others. Within a university there is an implicit and enormous amount of cross-subsidisation. Healthy students subsidise students who are ill. Students who do not participate in sport subsidise those who do.
There are all kinds of cross-subsidisation going on. It would be corrosive of the community if we were to start to try to slice and dice it. I know I said a moment ago that there was no cross-subsidisation specifically between research and teaching, but within the entire community, as you say, there is implicit cross-subsidisation all over the place.
Baroness Morgan of Huyton: I declare interests relevant to the inquiry: I am currently vice-chair of King’s College London, master-elect at Fitzwilliam College, Cambridge, and chair of the Royal Brompton & Harefield NHS Foundation Trust.
May I pick up on the cross-subsidisation point? Obviously, these are very different institutions. Professor Georghiou, you did say that international students subsidise the gap in research funding. First, did I hear that right? I would not be surprised, because we have heard it from other institutions.
Secondly, how concerned are you about the fact that in the end that means that affluent international students are subsidising other areas of the university? There is a big access conversation happening about domestic students but no parallel conversation about international students.
Professor Luke Georghiou: There is no conversation in our university—or, I suspect, in any other university—where people sit around the table and say, “We’re going to subsidise X from Y”. But in the broader economics of it, in round numbers we get about £280 million for publicly funded teaching—about three-quarters of our students—and £230 million for non-publicly funded teaching, mostly international students.
As you can see, it is a very substantial sum. Given that research is a loss-making area, that is an effect. There is also, in general—it is true for us and, I suspect, for every university—a cross-subsidy between subjects. There is the potential, perhaps, for modest surpluses for tuition in non-lab-based classroom subjects, which offset the high-cost subjects I mentioned earlier. Every university probably struggles with the finances of its biomedical faculties in particular.
Q4 Lord Fox: I have no interest relevant to the inquiry. We are not trying to play different groups of students off each other, we are trying to understand the giant Jenga game that is your finances and the effect that dislodging one piece has somewhere else. It therefore behoves us all to have some sense of what is moving where—the tides of money that move around this huge enterprise that you are all involved in.
Coming back to the point that we have already alluded to—the dual funding streams of QR and research council funding—Professor Richardson, you made a plea to protect QR funding. That would indicate that you think somehow that the system is already beginning to fail.
So the first part of the question is this: is the system failing, and has it already got past the point of failure? Secondly, you have noted that challenge funding, for want of a better phrase—or project funding—has been the order of the day in terms of boosting it, yet the Office for Students’ numbers for 2016-17 for England and Northern Ireland show that the ability to recover costs out of that has fallen substantially from around 78% to around 70%. Why is that inability to recover costs failing as well? Give us an idea of that.
Professor Louise Richardson: There is a real challenge in the recovery of costs. Despite our having the largest volume of world-leading research in the UK, as judged by the REF, our QR income has grown at less than half the rate of the growth that we have seen in our external research income. As I mentioned, the charity research support fund has gone from recovering 30% to recovering 19%. That alone meant a difference of £20 million last year, and over the past decade it has meant a difference of £80 million. It would be overstating it to say that the system is failing, but it is certainly in jeopardy at the moment. Both elements of the dual support system are very much under strain, but the particular strain that we are feeling is on the QR side.
Lord Fox: In order to understand this better, in a sense: at a time when QR funding is relatively falling, recovery is falling at the same time, so it seems to me that you need to do something different. In the event that you do not get your wish and are not granted QR funding at the level that you need, and in the event that politically this challenge funding is the way that the Government can justify putting the money into research when there are all sorts of other societal demands, what do you need to be able to do differently in that environment in order to recover the money that you need?
Professor Louise Richardson: That is the real challenge that we face, and different universities are dealing with it differently. Some are indeed bringing in large numbers of international undergraduates but we are not. We raise money through philanthropy, although, again, not enough to fill the gap. We generate a significant amount of income through Oxford University Press and other commercial activities.
Lord Fox: I understand that. I come back to the terms with which the money is passing from government, in inverted commas, to you. When it is coming over as research council funding or challenge funding, is there something that you can do with that money that gives you a better share into the recovery side and better support for research facilities? Are there different terms that should be coming with funding in order for you to protect the research base in future?
Professor Louise Richardson: My pitch would be for a different quantity rather than different terms.
Lord Fox: Yes, but if you continue to reduce what you are harvesting from that, in a sense, for the baseload, then you still have a problem if you are essentially doing more with less.
Professor Louise Richardson: Yes, exactly.
Professor Luke Georghiou: First, the money cannot be spent on the same things. QR has a particular nature and it has served the country very well. In our case, it is more or less the sole source for strategic investment. Andre Geim would not have come to the UK and discovered graphene if we had not made a substantial QR investment to give him his lab. Our cancer research activities are also heavily dependent on ring-fenced QR funding to shore up the large amount of grant income that they bring in. The Russell Group has calculated that the value of QR has fallen 12.8% in real terms since 2010 and, as Professor Richardson said, the demands on it have increased almost exponentially in that period. Increasingly, as you alluded to in your question, public research funders have been falling short of providing the intended 80% that full economic costing provides for. In 2010 it was just short, at 77.8%. In 2016-17 it was down to 70.7%. In other words, universities are being asked to subsidise government-funded research.
Lord Fox: That is the point I am making.
Professor Luke Georghiou: On top of that, more and more research funders are trying to lever their funding, demanding so-called match funding for almost any significant grant that is given out. They use phrases such as, “Universities need to have skin in the game”. From the point of view of individual incentives for someone running a programme, that is quite understandable, but in reality the net effect of this is to take us back to the 1980s and 1990s, when there were major concerns about the hollowing-out of research funding in our system.
Lord Fox: Just to be clear from an evidential point of view, in your view, with the current funding mechanisms, QR is the only way to do this. Is that what you are saying?
Professor Luke Georghiou: I would want both QR and a return to the original full economic cost model, which was designed to alleviate this hollowing-out. All those decades ago, I gave evidence to this Committee about a very large survey of the state of research equipment and laboratories in this country before fEC was brought in. One newspaper described our laboratories as “historical theme parks” at that time on the basis of those data. We do not want to go back to those days.
Professor Louise Richardson: I agree entirely. We are left trying to raise money externally to fill this gap. We too have created an internal fund because the QR funding is not enough to support the kinds of things that it is hard to find support for, such as early-career researchers and infrastructure. We have the John Fell Fund, which is just £6 million a year, which we generate from publishing and other commercial activities and use as strategic funding to supplement the QR funding because it is not enough. To give you an example of how important this is, Oxford has the Big Data Institute, a wonderful interdisciplinary research centre focusing on the analysis of large datasets for research into causes of and treatments for disease. It is not difficult to get funding for research using that data. That we are fine on, even if we do not quite recover the full economic cost, but we need QR to do all the boring work—the infrastructure development, the curating of this data, the converting of raw data into datasets, the stuff that it is hard to find research funding for but without it we could not do the research.
The Chairman: Lord Fox, do you have any other questions?
Lord Fox: No, that was very helpful.
Q5 Lord Vallance of Tummel: I have no direct interest to declare. You have just touched on where I was going to, Professor Richardson. So far we have talked largely about the revenue accounting. Could we move on to the balance sheet and fixed assets, specifically infrastructure? What is the current system for funding science infrastructure? Does it work for your two respective institutions? Apart from upping the volume, can anything be done to improve it?
Professor Louise Richardson: At the moment, scientific infrastructure is funded through a mixture of direct grants from external sources such as the UK Research Partnership Investment Fund and philanthropic contributions—for example, we have just built a wonderful new physics building, the Beecroft Building. Last year we took out a £750 million century bond at a coupon rate of 2.5% precisely so that we could build the scientific infrastructure that we need. However, we face the real strain, which we have already alluded to, of having to provide match funding. You may be wanting to avoid Brexit but Brexit represents a serious threat to our ability to retain access to funding for large-scale scientific infrastructure, which can operate only at the transnational level, really. Funding the infrastructure is a challenge.
Lord Vallance of Tummel: Could you give me a quantitative feel for those streams? You say that some of it is leveraged, some of it is from a bond, some is philanthropic, some will be from the research council. How do they balance out?
Professor Louise Richardson: The bond, for example, is separate. We took out one bond, we have this fund and we have 100 years to spend it and pay it back, and we will spend it far faster than that. We have not started spending much of it yet because, as you know, it takes time to spend money well and to develop scientific infrastructure. So up until now we have been relying overwhelmingly on public funding. However, we feel that it is not enough, which is why we are moving to private sources.
Lord Vallance of Tummel: Thanks. And Manchester?
Professor Luke Georghiou: There is a modest annual allocation of public funding that probably does not meet even basic maintenance and health and safety requirements. We then occasionally have equipment rounds from the research councils, which we bid in to, and we are relatively well served for our headline institutes—the Henry Royce Institute, our graphene buildings—when we manage to secure matched or double-matched external funding, particularly in advanced materials.
However, when it comes to the regular and very necessary equipment demands that are not easily ascribed to a single grant, everything becomes much tighter and you have to squeeze everything else down to find the money. Advanced fume cupboards and glove handling for dealing with radioactive materials are not sexy grant items; they are basic items that a laboratory working with nuclear materials needs. The same goes for a new gas system for your labs. Without a regular and free-to-allocate capital stream, we can get them only by budgeting hard in other areas, and I suppose, in the language we have been using, by finding subsidies from other activities.
Lord Vallance of Tummel: So the pressure on capital is about the same as it is on revenue account.
Professor Luke Georghiou: I would say that it is more, because we have to find the capital ourselves, whereas the revenue is largely money in and money out for research.
Q6 Lord Mair: I should start by declaring my interests. I am emeritus professor of civil engineering at Cambridge University, director of research at Cambridge University, and a fellow of the Royal Academy of Engineering and of the Royal Society.
I come back to the interesting question about cross-subsidy and the results of the Augar review, which I would like to explore more. Do you have a battle plan, and what will happen, given that the Augar review will almost certainly cut the tuition fee? You have said that there is no cross-subsidy, but in reality that must have an effect on research. I want to ask both universities a bit more about what you feel about that.
Professor Louise Richardson: We are not fans of the Augar report—not that we have seen it. At some level, we are agnostic as to where the money comes from for tuition fees. Personally, I certainly have a view, but institutionally we are agnostic. If the Treasury were to make up the difference in fees, Augar would not be such a problem for us. It is precisely because we fear that the unit of resource will not remain the same that we are concerned about it.
We cannot say that it will directly hit research. In our case, because of the unusual federal system that we have, the colleges will bear the biggest brunt of any reduction in fees unless there is a supplement. But the fee income will generally put a strain on the university’s finances and sustainability, which will necessarily have an impact on the areas in which we lose money, such as research.
We have certainly modelled the financial results of different fee arrangements, but we have not modelled what the particular impact on research will be. Many of those are somewhat intangible and indirect. Any university is only as good as the academics it can recruit and retain, and any academics at world-leading institutions such as ours are very hot commodities. They can leave, and if they feel that they are in an environment of constant penny-pinching, leaving aside for a moment the environment created by Brexit, it just erodes their confidence and makes it more difficult for us to retain them.
We can retain our world-leading staff by attracting them to work with other wonderful people and by convincing them that we are absolutely committed to creating an environment in which they can do their best work. Constantly striving for penny-pinching will make that much more difficult.
Lord Vallance of Tummel: Sure.
Professor Luke Georghiou: I believe that the effects of the post-18 review, if it recommends what we have been told it will recommend, will be absolute and dramatic for research, causing us to lose both quality and volume.
A straightforward reduction to £7,500 across the board would knock £60 million off our income straightaway. Obviously the front-line effects would be on teaching and the student experience. We could see subjects close, bigger class sizes, declining infrastructure, an end to the very positive trend of widening participation, and particular pressure, again, on higher-cost lab-based subjects.
For all universities there would be an imperative to grow high-yield subjects such as MBAs and to shrink high-cost subjects such as engineering. Universities would probably compete in a non-strategic way for more international students. It would take something like a 20% increase to offset that amount. Although probably many of us would like modest increases in getting excellent people from around the world, chasing an increasingly competitive international market purely for financial reasons is not the right thing to do at all. Because of all that, we can also imagine job losses and disruption. Any disruption to universities disrupts research as much as it does teaching.
There is a long list, but essentially it would deeply upset the ecosystem that supports research in a university.
Lord Griffiths of Fforestfach: I have a supplementary. You say that you are squeezed for resources on every front. As first-class universities, you have the ability to do what the Americans do and raise fees and make it market-based. Why do you say that you simply cannot do that?
Professor Louise Richardson: We are not allowed to.
Professor Luke Georghiou: Of course, we can raise only certain fees; the vast bulk of our fees are regulated. There is in effect a competitive international market—a market in which we are already under strain because of unfavourable visa conditions compared with our major competitor countries, such as Australia, Canada, and increasingly continental Europe, teaching in English. So we cannot simply raise those fees and expect the numbers to come. There is a demand curve in front of us.
Lord Griffiths of Fforestfach: The market, yes.
Lord Fox: I have detected a slight dissonance in the language that you two used. Professor Richardson talked about penny-pinching, and Professor Georghiou described apocalypse. First, does that reflect the difference in the nature of your organisations or the difference in your characters? Secondly, Professor Georghiou, you said that reducing the fee level to, say, £6,000 or £7,000 would reduce wider participation. Why?
Professor Luke Georghiou: The arrangement with the current level of fees is that an amount is set aside to promote widening participation and has led to very good programmes.
Lord Fox: So essentially you would be reducing bursaries or suchlike.
Professor Luke Georghiou: Yes. It would not be possible to find those funds.
Lord Fox: We need to have that on record.
Professor Louise Richardson: I, too, noticed the difference in our responses to that question, which I think reflects the nature of the two different institutions.
I agree that it poses a threat to access because of the precise nature of the funding for access. I hope it has not escaped your notice that this morning we announced a very significant access initiative. Our plan is that, within four years, 25% of the students at Oxford will be from non-traditional or deprived backgrounds. This is a major commitment by the university—by all its departments and all its colleges. It is a very expensive commitment, and one that we are more than willing to take on.
We currently lose 50% on every student[2], so this will just increase the amount we lose, which is why the impact is not quite as dramatic as it is in many other institutions. Again, we have a relatively small number of international students on whom we could raise fees. There is a very peculiar market in our case; we have a commodity that is in enormous global demand, and we have a limited supply, but we cannot set the price.
Baroness Morgan of Huyton: May I come back to a point that Lord Mair raised? You are describing really well the difficult effects, or worse, of the Augar review.
I am interested in your game plan. Is it to fight this, or do you have a financial modelling plan—if it is £7,500, this is what you will have to do? Have you as universities taken decisions around that or are you, in a sense, waiting to see what happens?
Professor Luke Georghiou: As with any prudent management team, we have developed scenarios for different cuts and ways to mitigate them, either by cost savings or, where we can, by revenue increases. But until we know what is in front of us, we cannot turn them into what you would call a plan.
Professor Louise Richardson: The key issue is whether or not the difference in fee income is made up and, if so, for what subjects and under what circumstances.
Lord Fox: Coming back to preparation, there is also a public conversation preparation. Surely it would be perfectly possible to have a scale as to how the fees reduced and what was removed from the menu. You could say, “By reducing it this much, this is no longer on the menu; by reducing it by that much, these are no longer on the menu”. Do you have any sense that such a process is under way?
Professor Luke Georghiou: Your questions have been about our institutions, which are at the most research-intensive and probably the most financially secure end of the system. We should not forget that at the other end of the system there may well be institutions that close completely. We are not really looking at the effects on teaching and student access in this conversation. Yes, there is a menu, but there would probably be a complex answer for each institution rather than a national list of what would go—other than widening participation, which is probably the most threatened aspect across the board.
Baroness Morgan of Huyton: That would be very compelling as an argument.
Lord Vallance of Tummel: You have touched on what I was going to ask, which was: should we not recognise that perhaps there are too many universities, and that the resources that go to them from the public sector would be better placed, get better value for money and see a better retention of high-quality research if we faced up to that and had a programme of closures, much as we have had a programme of hospital closures?
Professor Louise Richardson: I am sorry, I missed the last part of what you said.
Lord Vallance of Tummel: If you had a programme of closures much as we had a programme of hospital closures, rather than just letting individuals just drop off the back of this in a war of attrition because it is all going to be too difficult. Better to say, “Let’s have a closure plan and concentrate our resource on where you get the best return and value for money”.
Professor Luke Georghiou: There is a debate to be had about where research is located in universities. But if we look at the broader picture, the most vulnerable are also in the most vulnerable localities and often provide the sole anchor that those regions have in terms of giving their communities hope and bringing people forward and educating them. So even though their numbers look bad and their quality ratings do not look as good as other universities’, they are often critical to the left-behind towns in this country. It is rather difficult to make any statement about cutting institutions.
Lord Mair: In compensating for the consequences of the Augar review, many universities will take more international students. We are talking about undergraduates only, for whom there is a regulated fee; graduate students are a different story. This may be more a question for Oxford than for Manchester: in Oxford you have the college system, as we do in Cambridge, and therefore the numbers of undergraduates are pretty much fixed, unless you have new colleges. If you take more international undergraduates, that will be at the expense of UK undergraduates. Is that a concern? Are there discussions about it? What is a reasonable proportion of international undergraduates?
Professor Louise Richardson: This has been covered in the press, as you know. Oxford and Cambridge have been criticised for taking more international students. As someone who was an international student for much of my life, I am a firm defender of international students and their role in enriching the community in which they find themselves. They make themselves part of the education system, and part of the educational experience for British students is to sit next to kids from other parts of the world with completely different worldviews. The last university that I led was a very international one. My field was terrorism and I used to be able to teach while vice-chancellor there. I remember teaching courses on terrorism where in a seminar of 14 no more than two kids would be from the same country, and the educational experience that all those students had, where all their assumptions were questioned in an environment in which their opinions were respected, was fabulous for the international students as well as the British ones.
Again, because of the way that we make decisions in Oxford, which is not dissimilar from that in Cambridge, there have been broad discussions about the appropriate number of international students. Very broadly, the number is around 20%, but that could change. Consider that 8% are from the EU. We do not know what is going to happen to that 8%; it depends very much on what the fee structure is post Brexit. If they are charged home fees then the number will continue at roughly 8%, and we will get ever-increasing numbers of wonderful applicants. If they are charged international fees, we can reasonably assume that their numbers will decline. Will they be replaced by international students or British students? Actually, they will be replaced by the academically best students who apply, and we do not know whether those will to be international or domestic.
Lord Mair: Other universities have an elasticity in the sense that they can deal with this problem by saying simply, “We’ll have more international students, and increase our total number of students, without reducing the number of UK students”.
Professor Louise Richardson: We do not have that.
Lord Mair: So it is a bit more critical for you in that sense. You will be asked questions such as, “UK taxpayers would like to see the opportunity for UK students to go to your university and that would diminish if you had more international undergraduates”.
Professor Louise Richardson: As I say, having more international graduates will enhance the experience and education of those British students.
Professor Luke Georghiou: We are missing one important point in this: the incentive will be to take far more postgraduate taught students rather than undergraduates. They are both already in higher fee bands, even domestic ones, and there is much more scope for international market growth for them than there is for undergraduates.
Lord Fox: What evidence do you have to support your last statement that international students add to the experience of national students? I can see why it might be attractive as an idea, but my own personal experience is that that was never very true, in that most international students tended not to be participants in a lot of other things. Obviously that was a very long time ago, so what evidence is there to back up your statement?
Professor Louise Richardson: To be honest, I cannot cite reports, although I am sure they exist and I will be happy to search for them.
Lord Fox: If you could, that would be very helpful.
Professor Louise Richardson: However, I can speak from my own experience, both as a student and as a teacher, that it enormously enhances the experience. Indeed, the nature of the collegiate system and other systems that I was in is that students integrate.
Lord Fox: It might vary by course, of course. If you have a lot of talking in your courses, as opposed to a lot of lab or whatever, then they might be different experiences. I would be very interested to see the evidence on that. People take it as a given but I have never seen any actual research to that effect.
Professor Luke Georghiou: There is one very practical benefit, which is that many of the courses that are vital to our economy—for example, specialist engineering, Masters, certain science degrees and certain language courses—would not be economically viable in the first place unless we had the numbers.
Lord Fox: Absolutely. That point is understood. It was more a cultural question.
Professor Luke Georghiou: Professor Richardson has very eloquently expressed what you get from an international class—the kind of global outlook and different perspectives that enrich UK students as well. That is the world that they are going to have to work in.
Baroness Morgan of Huyton: We have heard a suggestion that there are some institutions—possibly not yours, Professor Richardson, and I do not know about Manchester—where certain schools are heavily dominated by one or two groups of international students, so the integrated story that you are talking about is not necessarily everywhere. That has been a level of concern that we have heard.
Professor Luke Georghiou: It is an issue that you have to be aware of. In this country, there are particularly large numbers of Chinese students: the combination of large population and relative affluence brings them here. We have to make sure that we give them a proper international experience and they do not just come and see, work with, talk to and live with other Chinese students; otherwise, there will be little point to their coming in the first place.
Q7 Baroness Morgan of Huyton: I will kick off on the Brexit question; no doubt others will want to come in.
First, in summary, what impact of Brexit are both of you seeing yet, if any, on student applications, staff turnover, recruitment and retention, and research funding? Secondly, can you sketch out for us the possible implications for them going forward?
Professor Louise Richardson: The implications for Oxford are that we get 11% of our research funding from the European Commission: £63 million last year. Loss of access to that funding would be deeply, deeply damaging; I would almost use the term Lord Fox used—apocalyptic—to describe Professor Georghiou’s response to an earlier question.
Between 22% and 24% of our staff are citizens of the non-UK EU. As I said earlier, every one of those people is a hot commodity and could leave. The moment their research funding is in jeopardy, we do not doubt that they will leave. It is not just the raw numbers; it is access to the networks of collaborators; it is being able to participate in large-scale activities. It is enabling us to recruit the very best academics from across Europe because they know that their research can be funded here. The biggest threat to us from Brexit is to research funding and all that that entails: research funding, collaborative networks and the impact on our staff.
In truth, we have not seen a decline in the number of applications from EU citizens: we have seen a decline in the rate of increase, but we continue to attract students. They are rational beings. Brexit has not happened, so why would the number decline? We have not seen a mass exodus of our staff; we have lost a small number. We have noticed significantly fewer EU nationals applying for jobs that we advertise.
In all this, we need to remember the human element. Last term, I said that I would hold an open meeting for students about Brexit; I regularly hold one for staff. Six hundred students showed up. That is pretty unusual in Oxford. Even more interesting, at the beginning of the talk, I asked how many of those in the room were international students from beyond the EU. There were 20 or 25 students. I asked how many were British students. There were fewer than a dozen. So everybody else—in the high 500s, close to 600—were from the EU. Those students will be fine; their fees will be covered and they will be able to complete their degrees. But they are all deeply personally unsettled. So are our staff. In all this discussion, we are forgetting the emotional impact on people, which is considerable and a high cost.
We have the very tangible impact on our research funding, our staff and, we anticipate, on our EU students once—if—fees rise, but also the intangible sense of uncertainty and discomfiture among EU members of staff.
Professor Luke Georghiou: For us, too. Our enrolment of EU students actually increased by 8% overall in the most recent year, but we think that that is driven by undergraduates seeking to come before the fees rise and, more critically than fees, for access to UK student loans—most of them take up those loans.
Applications for postgraduate research, which you could say is more of a futures market, is down by 10%, so we see quite a difference there. Research income is about 13% of our external grant income, so of course it would be highly damaging to lose that—not just the financial element but, more importantly, it would cut us off from our collaborative networks with both universities and business. There are so many things better done in that context: the opportunity to deal with cross-border problems such as air or plastic pollution, influencing new norms and standards, achieving critical population mass for medical studies and so on.
We are most concerned that there does not seem to be any obvious way to replace the mobility that participation in those programmes gives us. That is critical for early-career researchers. If you want to develop a leading researcher, they need that experience of mobility. Outside the research scheme, there is Erasmus for earlier-stage students. That has been a key mechanism for us to attract the best to the UK at all levels.
In any scenario, of course we would prefer to have financial replacement than not, but in no case would it be sufficient to replace what we have now.
Lord Fox: You sort of got to the place that I was going to start with. Professor Alice Gast of Imperial made a strong plea about movement and the ability to have almost a special class of people who contribute to our academic world. I assume that you would support that, but you had not mentioned it until that point. In your view, in terms of putting people off, which is more powerful: doubt about money, or doubt over the ability to move around in the first place?
Professor Louise Richardson: I would not have a hierarchy between them. Free movement simply goes without saying: it is essential to what we do.
Lord Fox: But it seems to be needing quite a lot of saying at the moment. It is going: that is the point Professor Gast was making.
Professor Louise Richardson: And that will be enormously damaging. Which will be more damaging? They will both be dreadful. I cannot say which will be worse. If people do not want to come here because there is no research funding, the fact that they cannot get here will not matter so much.
Lord Fox: We are not saying that there will be no research funding, even under the apocalyptic scenario. There will be less, is what you are saying.
Professor Louise Richardson: It will also be very different funding. EU funding is valuable for many reasons, not just because of the amount but because of the type of research it funds. It funds early-career researchers, it funds curiosity-driven research, the humanities and the social sciences.
Lord Fox: It being the European Union?
Professor Louise Richardson: Yes, the ERC, Horizon 2020, soon to be Horizon Europe. It funds all these areas that are difficult to get funding for and which, should the money Britain gives to the EU be brought back and distributed nationally, we fear will be distributed in a very different way: towards more applied, short- and medium-term government goals and much less towards the humanities, the social sciences, the curiosity-driven research that is so critical to us.
Q8 Lord Vallance of Tummel: I suspect that there is an elephant in this Room. Universities are really retail businesses on the teaching side and the outlet is normally the campus. There is an argument that the campus is at much at threat as a high street shop is to Amazon. All right, so far, MOOCs are not very exciting, but the idea of true online student journeys right from recruitment through examination is on the horizon. That could make a major difference to the nature of the market, because it is independent of place. It is also independent of the structure of three terms a year for three years for an undergraduate, and so forth. Is that on your horizon, is that something you are thinking about in terms of the future economics of your universities?
Professor Louise Richardson: We have of course thought about MOOCs. Had we been having this conversation five years ago, you would have interred us already with the view that we would all be irrelevant within a few years. It has turned out that MOOCs have not been the transformational force that we thought they would. It turns out that the people who benefit from them are people who are already highly educated. The number of those who complete the course is generally in the single digits. This is not to say that there are not enormous opportunities for online learning, and we certainly embrace them, but that will not for a second erode the kind of education that we provide.
Forgive me for invoking our 900 years in one place. We have withstood greater transformations than these and are convinced that we will. It is precisely because of our commitment to place, to one-on-one or two-on-one, highly personalised education, that we have never gone down the route of trying to establish a campus elsewhere, although we have had any number of opportunities to do so.
Online learning will help us in many ways, but it will not replace the individual, personal relationship between a teacher and a student. Nothing we have seen from all the technological developments has suggested that that can be replaced.
Lord Vallance of Tummel: I am not sure you are right. You can do a tutorial online if you want to. The only things that are missing—you have sound and you have vision—are touch, smell and taste. I am not sure the relationship I had with my tutor depended very much on those three senses.
The Chairman: We will leave that as a personal comment. We are coming to a conclusion. I ask Lord Griffiths to declare his interests because he did not when he asked the question.
Lord Griffiths of Fforestfach: No, I did.
The Chairman: In that case it is me who has not. So I will do it now. I have been associated with the University of St Andrews and the University of Dundee, of which I was the chancellor until recently. I am an emeritus professor at the University of Dundee. I am also a fellow of the Academy of Medical Sciences and the Royal Society of Edinburgh. I have previously been a council member of the Medical Research Council. I will give you the floor for a few minutes. Having heard our questions and the discussions we have had, and the principles under which we are doing this inquiry, would you like to summarise and say anything you like about the issues we should be addressing in terms of developing and funding research in universities?
Professor Louise Richardson: I would just say that universities are one of the great success stories of the UK. We currently have the top two universities in the world in this country, and the top six universities in Europe. For a country of this size, the success of our universities is something to be celebrated and it is a source of great surprise and disappointment to me that it is not celebrated more often. We are drivers of the economy. We are the best engines of social mobility this country has. We are generators of new ideas and we are the guardians of our culture. We need to be protected. In particular, if we are to remain the research powerhouse that we currently are, we need public support for research funding. We need more research funding. More immediately, we need a rebalancing of the QR to ensure that we do not continue to haemorrhage money. I have to disagree with the notion of us as a retail outlet. We are so very much more than that and, if one has to invoke the language of the market, we have a product that the world wants.
The Chairman: Some of us have a retail background.
Professor Louise Richardson: There is nothing wrong with a retail background. Indeed, I would love to retail our degrees because, believe me, we could command a very high price for them. But that is not the system in which we operate. We do not operate in a retail system.
In short, I thank you for your interest in the research that takes place in universities because this is so important to the future of the country as well as the well-being of all these fabulous institutions. I wish the Committee more power to its elbows as it proceeds with its work. Thank you.
Professor Luke Georghiou: I endorse everything Professor Richardson has said. Your inquiry is addressing some absolutely critical issues for universities, including the present sustainability of our funding system, the importance of QR, the potential effects of Brexit and, above all, the real and imminent threat of changes in front-line fees. If we were retail organisations, enforcing a near-20% cut on everything permanently would be rather difficult to deal with, especially when we are already in a marginal situation.
What I would really like to leave you with is that we have kept discussing the interests of universities, which makes us feel rather privileged. In fact, it is the effects on the communities that we serve that are really important here. The effects of these cuts are not on us, they are on our students, our business partners and the cities and citizens that we work with. That would be my takeaway message.
The Chairman: I thank you both enormously for taking the time to come and talk to us. It has been most helpful. Thank you very much. We will turn the broadcast off now.
