Thank you to the IPPR for hosting this event. Your Commission on the Future of Higher Education is well timed given the huge changes being put through by this Government. We are paying close attention to your work and we will consider your findings in the context of Labour’s Policy Review – our biggest since Tony Blair became leader in 1994.

I want to start by paying tribute to Nigel, his fellow Vice Chancellors, and all who work tirelessly to make our university sector the success story it is. The facts in this respect speak for themselves:

We have nearly a tenth of the top 100 global universities (including my university – Manchester) in the UK, second only to the US; the sector is our seventh biggest export industry; and, you are a force for economic progress the length and breadth of our country.

In my last major speech on Higher Education, I lamented the massive and unnecessary disruption to the sector by this Government, and the huge uncertainty for students and institutions. This pre-dated the Budget, so before the concept of ‘omni-shambles’ came to prominence. But, in many ways, H.E. was the original case study in shambolic policy making and execution. It revealed the Government’s misplaced priorities and unnecessary, unfair and unworkable proposals.

This administration has shown a degree of carelessness with a sector which is a proud part of our national heritage and essential to our future. It is easy to launch ‘Maoist’ revolutions. It is much harder to build constructive and considered processes of change that address real challenges that the sector faces.

For me, the starting point must be clarity of purpose which is why last year I set out four principles to guide our policy development:

•   Fairness for students;

•   Autonomy for universities;

• Sustainable funding; and,

•   Universities playing a central role in our economic as well as cultural life, and in our regional and national economies.

Today I want to focus on H.E. in the context of the long term challenges facing our economy and to explain why our universities are so central to Labour’s vision for the future. It is why Higher Education must remain at the heart of the Department for Business, Innovation and Skills.

Speculation on the location of H.E. policy in Whitehall is rife. The Education Secretary Michael Gove has made no secret of his desire to launch a land grab and acquire H.E. for his department – which some of you have told me fills you with dismay. Vince Cable has told me in Parliament that H.E. will remain within BIS. It needs to.

Moving H.E. will cause another layer of disruption and uncertainty. A time of stalled growth is not the time to break up the so-called ‘Department for Growth’, with H.E. treated as a political football by the Lib Dems and the Tories, and the sector’s future being dragged into an internal battles of egos and political turf warfare.

For Vince Cable, Nick Clegg and the Liberal Democrats, this is a test. If they let BIS lose responsibility for Higher Education, it would provide more evidence of them being in office but not in power.

And it would be the wrong change to make. BIS is the right place for a university sector deeply engaged with industry; it is the right place for a university sector developing the people that our economy needs; it is the right place for a university sector at the heart of the economy we need, as we seek to meet the big long term challenges facing our country.

What are those challenges? They are to:

• Build a more resilient economy where growth is more broadly based – across sectors, and between and within our regions.

• Build a more competitive economy, given the challenges and opportunities that arise from the pace and extent of technological change, and fundamental shifts in the global economy.

• Build a more inclusive economy, where the benefits of future growth are more widely shared – an economy that can underpin the kind of cohesive, inclusive society that we want to see.

These are the big issues we need to tackle.

And the waters are very choppy. Our economy is in a recession of the Government’s own making. The full impact of the troubles in the Eurozone have yet to feed through. And the rise of the emerging economies is massively increasing competition. It is worth noting that the increase in the number of Chinese graduates in 2020 compared with 2010 is almost as large as the total number of expected graduates in 2020 in the US and the EU combined.

But, that said, I am optimistic about our national future. We will have to raise our game to compete - but we can do it. I see huge opportunities for us - within the next two decades, the size of the global middle class will almost triple to 5 billion people. That’s a whole lot of new demand we can meet if we start to prepare our economy to do so now.

There is one view about how to do this advanced by our political opponents and well captured by Adrian Beecroft in his report, now being promoted by the Prime Minister. This view says employees are costs to be minimised, not people with potential to be realised. Whatever the question, the unfettered free market answer is the right answer; government is the problem and should get out of the way. This offers only a destructive race to the bottom.

The alternative is bolder and far more ambitious - it is, as Ed Miliband and I have argued, to build a more productive and responsible capitalism:

• Encouraging business to focus on long term value creation, not short term profit extraction.

• Engaging employees as partners in business success and investing in their skills.

• Giving employees the security to invest in the future success of businesses by developing their own skills, and offering fair rewards to those who do.

• Fostering strong independent institutions, like our universities, that can strengthen collaborative ties.

• Viewing active government as a partner and an ally in this endeavour, not an enemy across the water.

This path sees the solutions to the challenges for our economy – of resilience, competitiveness and inclusiveness – as intimately related, and replete with opportunity.

No one can predict the future with certainty. But there is value, both social and economic, in having a clear view of the kind of economy we need, making the most of the talents of all. Just as we need productive businesses to succeed, so we need active government to back their ambitions, foster shared visions, and build the national capabilities we will need to succeed. This is what I mean when I talk about a modern industrial strategy.

I have no doubt the successful societies of the future will be those engaged in a constant process of learning; developing and applying new knowledge; adapting organically to the challenges they face. They will be the societies that view social and economic progress not as separate projects, but as mutually reinforcing goals.

These are big ambitions to transform our economy, and they raise big questions. With the quality of our universities we start from an enviable position of strength. I want – with you and others– to develop a compelling story about our national future, of rising and shared prosperity, with an ambitious role for H.E. We need you to be both the authors and agents of change.

So I will divide the remainder of my remarks into three areas on this theme, and lay out some of the difficult questions I hope the Commission will address.

First, on the importance of the H.E. sector as a successful world beating industry in itself;

Second, on the role of H.E. in equipping our nation with the knowledge, skills and capabilities we need; and

Third, H.E. as a direct driver of our economic success in specific sectors and regions, technologies, materials and applications.

The H.E. sector is a global success story, as the rankings show. As well as its role in the success of other sectors, it must also be recognised as a successful sector in its own right, with its own development needs.

Its success reflects the quality of the ‘product’ itself, but also builds on our rich heritage and takes advantage of important national advantages - like the English language, our culture of openness, tolerance, and diversity. And it can be a significant source of our future influence in the world - the ‘soft-power’ that comes through making others familiar with our culture and our values. Critically, every overseas student that studies here is paying fees and contributing to UK Plc - H.E. is one of our main export industries – and it brings spending to local economies too.

The chaos and uncertainty this Government has caused is damaging enough to domestic students, but it also sends out all the wrong signals to students from abroad. It is a testament to the quality of the sector and its reputation that the number of students from abroad is still up on last year. But, this is a growing market, with demand likely to explode in the coming years.

Instead of supporting the growth of the sector, this Government is creating unnecessary obstacles. More than 60 Vice-Chancellors have argued that Government changes to immigration policy are impacting on legitimate students who contribute billions to the UK economy and help support jobs. Bogus colleges and fraudulent student visa applications should not be tolerated and there are important issues which need addressing – like the numbers of people on student visas who are not enrolled on courses. So address this problem. Stop the abuse of the system; don’t stop its legitimate use, jeopardising jobs in this country.

We want to work with you to actively support the global success of the sector. I hope the Commission will add to our understanding of what we must do to keep our universities in the top rank globally. What further support is needed from government? How is the sector adapting to technological change, such as on teaching and learning methods? And how can we ensure that this focus on global success doesn’t unbalance or undermine other important domestic objectives for the sector? Big ambitions, big questions.

I will turn now to H.E.’s role in developing the people our economy needs, and extending opportunity.

If we want an economy based on high value, long-term wealth creation, and a more cohesive society, we must make the most of the talents of everyone. Extending opportunity to everyone is an economic imperative and a social goal.

That’s why the Government’s changes to student finance are so damaging. Applications are down 10% in England with worrying falls in many STEM subjects and from students over the age of 21. The core and margin system means that good courses are being cut, with their replacements allocated on price not quality. We’ve been told it also works against the provision of courses that could cost more and need long term certainty so universities can make the investment in things like laboratories or training facilities.

So the Government’s reforms are going in the wrong direction on extending opportunity, are jeopardising the progress made on access, and are risking collateral damage to local economies where universities provide an important boost to local demand.

Given where we are now, our alternative would preserve the principle that H.E. is a social as well as a private investment, giving universities the certainty they need while doing the most to extend not limit opportunity. If we were in government now we would cut fees to £6,000, with an additional £1.1 billion paid to universities to make up the difference. It is costed, with around half coming from students who subsequently earn above £65,000. It would be fairer to students; it would preserve the autonomy of universities; and it would be sustainable. It could be implemented now, avoiding the uncertainty of the core and margin system.

As I have laid out, we are looking at the whole university sector as part of our review and will be drawing on your thinking as we move forward.

We want to maintain the distinctiveness of universities but we need to forge closer links between H.E and F.E. at the level of policy as well as in practice too. We need what both H.E. and F.E. can bring, but within a coherent framework, based on a parity of esteem. This must facilitate learning throughout life – in later life as well as youth, post-graduate as well as undergraduate, technical and academic. My recent fact finding visit to Germany further reinforced my view on this.

There is much to be gained from encouraging greater cooperation and coordination between different types of institution. This is territory ripe for innovation.

My predecessor, John Denham, used to point out that in the USA, his local universities - Southampton, Solent, Portsmouth and Winchester - would almost certainly be the State University of Hampshire. Still with Southampton as the centre of world class research, Portsmouth of applied science and technology, Winchester the liberal arts college, and Solent the vocationally focussed and widening participation college. Such a university would enable students to study across the sites with a degree tailored to their talents; it could enable students to study at home and more flexibly, and, surely, enable the offer to business to more flexible and varied.

So the challenge is this: how can we establish a greater coherence – both in policy and practice – between H.E. and F.E., enabling us to do more with the money we have? What is the role for other models like co-financed degrees with savings on maintenance costs as students are employed and courses are tailor made for business? How can we create a more seamless approach to the development of all– our national human capital – while maintaining institutional distinctiveness and reputational autonomy? How can new technologies be harnessed to help? Again, big ambitions, big questions.

Third and finally, I turn to the role of H.E. as a direct driver of our economic success in specific parts of our economy.

I know I’m not the first to talk about this, with reports going back to the early 90s, including the testimonies of Sir Richard Lambert, Lord Sainsbury, and just this year Professor Tim Wilson.

This focus has made a huge difference, both to our understanding of the roles that universities can play within innovation systems, and in starting to realise that potential. As Prof. Wilson has said, in the last decade “there has been a huge change in both the quantum and quality of business-university collaboration”.

HEFCE recently highlighted the excellent examples in both research and teaching universities, with commendations for Cranfield, Exeter, Hertfordshire, Manchester, Newcastle, Oxford, and Staffordshire Universities.

Every £1 of Higher Education Innovation Funding creates returns of £6 of additional KE income, a proxy for impact on the economy. I saw the value with my own eyes at the Warwick Manufacturing Group. Shabana has been singing the praises of UEL’s efforts to promote entrepreneurship.

So I come not to criticise, but to encourage. My sense though, in talking with business and industry, is that we are still only scraping the surface of what could be achieved.

I want universities to be seen – and to see themselves – as embedded parts of regional economies, hubs around which industry can thrive, connecting smart people and good ideas, critical to the continuing success of our strongest sectors, and constantly pushing at the knowledge frontier. This is not to distort from your mission to educate, but to extend it – to increase the flow of good ideas into industry, as much as the flow of good people.

And with RDAs gone and LEPs still maturing, there is a vacuum at the heart of many regional economies. As much as we need your ideas, we need your leadership too.

For the Commission, I would ask: What has made the big difference to the increased level and quality of business-university collaboration? What is holding it back? How can we align the levers that government controls so that all reinforce this goal – the performance metrics and other rewards, the way money is allocated and so on? How can we improve the alignment with the needs of business, and the ability to leverage private resources? Big ambitions. Big questions.

So, in conclusion, today I’ve tried to outline the longer term issues facing our economy, the approach Labour will take to shaping our nation’s future, and the central role of you and our universities within it.

Rather than disruption induced uncertainty and as you argue, an immigration policy that puts a ceiling on your success, you are entitled to a government that will listen to you and put its weight behind you. We should be proud of your industry and back your ambition.

You hold the keys to developing the people our economy will need. You have shown what can be achieved and in these examples we can see glimpses of the future, but we need this future for all.

With your ideas and leadership, we need you to write yourselves into the story of our nation’s economic future as central characters in a tale of research led competitiveness and innovation led growth.

This is a big ambition, and it raises many questions. I wish the IPPR’s Commission every success in trying to answer them. It is a debate for us all, and I look forward to working with you all in the sector in shaping our national future.