Oral statement to Parliament

Guardian HE Summit

The purpose of those three speeches was to show how the Coalition’s policies - in particular, our decision that funding for universities should…

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon David Willetts

The purpose of those three speeches was to show how the Coalition’s policies - in particular, our decision that funding for universities should follow the choices of individual students - will be good for students and for universities. These policies will ensure we continue to fund our universities properly - indeed we estimate that, by the end of this tough spending period, universities could receive 10 per cent more cash than they have now. We can do this through the shift to fees and loans. It means that money gets to universities via the decisions of students. They do not, of course, pay up front. Graduates need not repay a penny until they, first, complete their studies, and second, start earning more than £21,000 a year. It is a fair and progressive funding system.

In the Dearing Lecture at Nottingham University, I argued that our approach was consistent with Ron’s recommendations in his 1997 report. I also explained how our approach to university access could enable us to achieve greater social mobility - without undermining academic excellence. Future access agreements can be very effective, without introducing quotas by the back door.

Universities should now have the self-assurance that they can select students on the basis of their potential, and not just what they are predicted to achieve at A Level. It will involve difficult decisions, but providing institutional decisions are fair, transparent and evidence-based, I am confident they will be accepted as legitimate.

There is one way The Guardian - and other papers which care about social mobility - can contribute to this. You publish league table of universities which take A Levels as one measure of excellence. So if a university admits students with lower grades, it faces slipping down the league table. Is this something you can address as you set what I might call your benchmarks?

At the British Academy, I set out how we are scrupulously neutral between subjects and absolutely value the humanities and social sciences - without which the very idea of the university is challenged. The ring-fenced settlement for research is not only a good deal overall, but one that’s of particular value to the arts, humanities and social sciences. Indeed, I was able to announce the 2012 birth cohort study as a major contribution to the continuing strength of social research in the UK.

At the UUK conference, finally, I set out more information on the financial framework for universities. I also presented specific figures, showing not only that the future funding system contains no bias against certain disciplines, but that institutions will - in the great majority of cases - find it hard to justify setting student contributions at the maximum £9,000. It’s worth noting that Oxford’s announcement yesterday includes a system of graduated charges - with a charge of £3,500 for first years from families on incomes at the free school meal level.

Today, I want to focus on another critical issue: what’s happening to graduate employment. In particular, I want to address the perception among some young people and their families that going to university no longer pays, especially in the current economic climate. Ultimately that has to be a decision for individuals - albeit with access to far more information than they have had in the past. These will always be personal decisions, but as a Government, we have to deal in averages not individual cases.

If you look at the overall data, the perception that going to university is a bad deal or a worse deal than it used to be is clearly wrong. People with higher education qualifications are still, on average, more likely to be in work and less likely to be unemployed. Whether they work part-time or full-time, they achieve higher earnings than those without such qualifications.

The most recent Labour Force Survey data comes from the fourth quarter of 2010. The employment rate for all those of working age with Level 4 qualifications and above was 86 per cent, and the unemployment rate was 4 per cent. For those with lower-level qualifications, the employment rate was much lower at 66 per cent and the unemployment rate higher at 10 per cent.

It also remains the case that the lifetime earnings of graduates are higher than those of non-graduates. The so-called graduate premium, net of tax, is still worth comfortably over £100,000 in today’s money.

The graduate premium is calculated very carefully. It takes account of tax, earnings foregone while studying and future earnings growth. It also discounts future earnings. Both internal and external studies have examined the premium in recent years - including one by PwC and UUK. They have used different methodologies to reach similar conclusions, but all have determined the premium for the average student to be over £100,000 - and that it has held up well over the past few years.

So the graduate premium is not a perfect measure, and it doesn’t tell the whole story. But it is a good measure, and an important element to factor in when an individual is thinking about entering HE.

Now, I readily admit that we live in tough times, but average earnings for people with Level 4 qualifications or better are around £31,500 - compared to £18,500 for those with Level 3 qualifications and below. For those who take their studies further, the average for individuals holding a masters degree is around £39,000, and £46,000 for a doctorate.

Recent surveys of graduate recruiters indicate that the outlook for graduates is improving. One survey indicated a 9 per cent increase in vacancies last year; another noted a 13 per cent increase, with further increases expected this year. We’re still not back to pre-recession levels, yet the total number of vacancies has actually increased for the first time since the recession.

While younger graduates were badly affected in the previous recession, they were - as people with higher-level skills - ultimately able to recover their position in the labour market, unlike - sadly - many with lower-level skills. Recent graduates are finding it difficult right now. Their anxiety is understandable. All the same, graduates in their twenties have, for the past decade, consistently enjoyed higher earnings than their counterparts who have lower-level qualifications.

Let me go into more specifics on the STEM subjects: science, technology, engineering and maths. The situation for STEM graduates is an interesting one - especially since we’re in the middle of National Science and Engineering Week. As always, you have to look behind the macro figures to the micro story.

The first headline is that a higher proportion of STEM graduates report working in professional and associate-professional occupations, compared to non-STEM graduates, six months after graduation. They also report slightly lower unemployment rates when compared to all graduates.

There is a belief, however, that - at the aggregate - we are not producing enough STEM graduates. The overall figures do not bear this out. Internationally, according to the OECD, the UK produces more science graduates per 100,000 employed people in the 25- to 34-year-old age bracket than many of our competitors. In 2006, we produced 2,290 science graduates per 100,000 people. Japan produced 1,612; Germany 1,423; and the United States 1,368. Just six of the 27 nations providing figures did better - including France, at 2,706; and Korea at 3,863.

Moreover, in a recent survey of five hundred 14- to 16-year-olds, conducted in parallel with the main Public Attitudes to Science survey, science emerged as the most popular subject, with half of those polled intending to study it beyond GSCE. The system appears to be improving. Last week’s Big Bang Fair, which attracted over 30,000 people, demonstrates a healthy interest and participation in STEM subjects, as does the continuing popularity of Maths at A Level.

The youthful enthusiasm is there - and the graduates. So how do we account for employers citing difficulties in recruiting STEM graduates?

For a start, our STEM graduates may not all have the skills that STEM employers seek. For example, life sciences companies are among those struggling to recruit suitable candidates, even though almost 10 per cent of all first-degree graduates study biological sciences, and their numbers increased by a third between 2002/03 and 2009/10 from 24,000 to 31,500. The problem comes from too few graduates in critical biological science specialisms, such as molecular biology or toxicology - and an increasing need for graduates in new and emerging fields. Shortages in critical areas are also compounded by the variable quality of UK graduates’ practical laboratory skills - which raises some questions about some university curricula and current levels of engagement between universities and industry. A university biology degree may not always deliver the practical lab skills or the specific knowledge that certain sectors look for.

This is where accreditation of courses can help. Back in October, I launched the Society of Biology’s accreditation scheme, which was developed through universities and employers agreeing the skills that undergraduates should be taught. It will drive up standards, starting with biochemistry and in vivo sciences, and has been welcomed in a Society of Biology survey by both current biology undergraduates and recent graduates.

Evidence suggests that this approach works elsewhere, so it’s no good churning out people with STEM qualifications if they haven’t got the skills that employers value. In the video games industry, graduates from accredited courses are almost three times as likely to get jobs in the sector within six months of leaving university than those who’ve completed non-accredited courses.

Accreditation is not the only valid approach. For example, I’m delighted a project involving HE, FE, industry and professional bodies has just secured funding from the National STEM HE programme to embed nuclear power-related skills in degree courses at English and Welsh institutions. These are skills of singular importance - as we’ve sadly witnessed over the past several days.

There are also the career decisions taken by STEM students. In truth, there is no “STEM pipeline” as graduates in STEM subjects are free to choose what they do with their careers. Insofar as there’s a STEM pipeline at all, it’s leaky. But STEM students in their final undergraduate year do need an opportunity to consider STEM jobs, and this is where the recruitment system may not be working - according to our recent “STEM graduates in non-STEM jobs” report.

The findings from the Careers Research and Advisory Centre, the Council for Industry and Higher Education and the National Institute for Careers Education and Counselling have serious implications for applicants in these subjects, for universities and for the economy as a whole.

STEM graduates confront a wide range of employment choices. Indeed, just over a half of them choose to enter non-STEM jobs. About 10 per cent go into finance, for example - although those who go into science-based occupations actually earn a wage premium, even allowing for other factors. The most likely reason why some STEM graduates do not go into STEM jobs is because they regard other fields as more interesting. Earnings are an important motivating factor, but not the critical one.

Of course, there’s nothing wrong with physicists working on trading floors in the City, or biologists becoming management consultants. Their analytical abilities and high levels of numeracy are rightly valued, and scientists are useful in all industries. Indeed, almost all STEM graduates feel they make good use of their STEM skills, irrespective of the job they end up in - a feeling corroborated by employers.

However, only a very small minority of STEM students - just three per cent of final-year undergraduates - say that they definitely do not intend to pursue a STEM-related career. So what accounts for the 50 per cent who ultimately don’t? It looks as if they are unsure of their career path and very susceptible to job offers from big recruiters in the final months of their course - because the same study shows that five per cent of final-year STEM undergraduates had no idea at all about career plans, with a further 20 per cent having only vague ideas.

Clearly, decent information, advice and guidance is absolutely vital for this group of students at this stage of their lives - especially with employers so keen to attract STEM graduates into non-STEM jobs. Without proper IAG the STEM pipeline providing qualified people to the high-tech, high-growth sectors of the future becomes even leakier. Effective IAG is essential, therefore, both at school and beyond. Without it, undecided STEM students facing the transition from university to work will be attracted by other career paths.

Once again, course accreditation can help - students, employers and universities. When academics and industry representatives can agree on necessary skills, knowledge and standards for degree programmes, it not only boosts their mutual confidence; it tells prospective undergraduates that they are applying for a rigorous degree that will stand them in good stead with the profession the course relates to.

So employers finding it hard to recruit could benefit from making themselves more accessible to students. And Government can support that through a more effective IAG framework, including our proposed all-age careers service. But there is something else we can do to ensure the best fit between graduates and jobs. Last week, KPMG announced an expansion of its student sponsorship programme to cover two more leading universities - Exeter and Birmingham. Students on this programme will gain a trusted degree, a professional qualification and valuable work experience, while having their university charges paid and receiving a salary of around £20,000 each year.

KPMG hopes that, in time, this route will produce over 400 trainee chartered accountants each year - the majority of its intake. This is a model we strongly support, not least because of the benefits that accrue when global businesses and our world-class universities work together. Because these student places are wholly funded by KPMG and there is no call on the public purse, they are outside the student number controls - so there is no limit to what we could achieve.

I began today by highlighting the links between the Coalition’s HE reforms and social mobility. It’s an appropriate place to end as well. For a transparent system, in which clear information is available to all students about courses, qualifications and careers is one in which more people can really make the most of what higher education can offer: socially, financially, academically, intellectually. That is what we’re intent on achieving.

Published 16 March 2011