Good morning, and welcome, Minister, to this final part of Universities UK’s annual residential conference. We are delighted that you have been able to include us in your busy schedule.

I take up my Presidency of Universities UK at a time of new beginnings. We have a new Chief Executive, Nicola Dandridge, and a powerful new Government department to work with. 

Back in June, those of us discouraged by the omission of the word ‘Universities’ in the title of this new ‘super-ministry’ took comfort – in this acronym-laden sector – in realising that, wherever you put the word, the result could  have been some version of ‘DUBIUS’...

There is no doubt, however, that we have some challenges to face, working with our new department. BIS has been born in difficult economic circumstances, and together we face the certainty that there are going to be some tough decisions to make about public spending for many years to come.

On Tuesday it was reported that we are ‘tumbling down the league tables’ in terms of graduation rates. In fact we are bang on the OECD average of 39% and ahead of our major competitors in the US, Canada and Germany. The figure also excludes vocational HE. But the point is that other countries are not standing still. Since 2000, while our graduation rate has increased by just 2 percentage points, the OECD average has seen an 11 percentage point increase.

We’re also consistently behind on the proportion of our national resource that we invest in HE, spending just 1.3% of GDP compared with 2.9% in the US and an OECD average of 1.5%.

So, this morning, I want to set out what I see as the role of Britain’s universities in a time of economic uncertainty.  This will be an address about the future not about problems in the past. I want to argue that universities are increasingly central to meeting our shared aspirations, in all parts of the UK. I would go so far as to say that no government, or incoming government, in any part of the UK, can achieve their core goals without a  thriving, strong university sector. Universities are essential, not optional, for future social and economic success.

UK universities are unquestionably one of the UK’s outstanding international successes. We have four UK universities among the top 10 in world rankings, a further 5 in the top 50, and a total of 17 in the top 100. We generate £4 billion in export earnings for the UK each year, we are increasingly international in our character and focus. Already 10% of our total student population comes to the UK from outside Europe. In our teaching and research we have considerable reach, producing nearly 14% of the world’s most highly cited research papers, second only to the US.

In 2007-8 higher education institutions in the UK provided ideas and services worth £2.8billion – the highest level on record and a rise of 6.5% on the year before.  We supported some 2,000 graduates to set up new businesses, and created over 200 new companies based on university intellectual property. Across a range of activities, universities are doing more than ever to support the wider economy – in the last year alone we have seen an 11% increase in continuing professional development activity; a 25% increase in income from our consultancy support for small and medium-sized enterprises; and a 12% increase in the income we generate by providing companies with access to our state-of-the-art specialist facilities.

All of this underlines the fact that locality is important, even within a globalised economy. Skills, knowledge and industry are often concentrated in the area local to the university.  This is not simply our assertion; it is one of the core conclusions of Lord Sainsbury’s Review ‘The race to the top’.

And today I can announce that new UUK figures, to be published next month, show that the sector’s economic  output now amounts to over £55 billion a year, a massive increase of £10 billion since 2004. We now calculate that our universities generate about 2.3% of UK GDP, and employ 1% of the UK workforce.

And I should stress that this figure does not include any attempt to calculate the value created in the wider economy by our graduates, our research and our business interactions, our contribution to the health of the nation or the attractiveness of the UK as a place to live and work.

And perhaps more important than anything else are the doors we help open for our graduates. In the last two years alone we have seen an increase in the number of undergraduate acceptances of 72,000. And, as we have been acutely aware this summer, 2009 saw the largest-ever number of applicants – some 620,000 by the beginning of September, representing 56,000 more applicants than in 2008.

Evidence shows these students get a world class experience – our student satisfaction surveys and completion rates bear this out. The new OECD figures show that only 2.2% of  our graduates between the ages of 25 and 64 were unemployed in 2007, placing us 7th in the OECD. We were also delighted that a recent CBI survey found that over 80% of employers are satisfied or very satisfied with the graduates they recruited in the last 12 months.

But we cannot be complacent.  We know that quality is our most valuable asset. The recent report by the Financial Sustainability Strategy Group has shown that quality will come under increasing pressure unless we can find a way to resource better our teaching activity. We have to deliver, and to be seen to deliver. We cannot afford to compromise.

This is particularly important because, despite the figures we can quote about outputs and multipliers, income from spin-outs and consultancy and so forth, the major value we create leaves universities in the heads of our graduates. It is their ability to enter the workforce - whether as employees or entrepreneurs - and generate bright ideas that puts us ahead of the game.

To paraphrase James Dyson,  if our balance of payments risks making us a third world nation, our ability to lead the world in ideas and technology gives us our best chance of retaining a seat at the table of the big eight economies in the world.

That’s why quality matters every bit as much as quantity if our universities are to be central to economic recovery and long term growth.

As we enter an autumn of reviews – the much-awaited HE Framework, the independent review of fees, the aftermath of the Jones review of HE in Wales, outcomes from Scotland’s Tripartite Advisory Group – I am acutely conscious that the external environment in which UUK is operating is fast-changing.

The recession, and the inevitability of cuts in public spending, generally coincide – one could say collide – with an increasing recognition across the UK of the importance of higher education to economic recovery.

Minster, we must acknowledge that this recognition of the centrality of HE did not just happen. It was generated by a political commitment to higher education as a priority, founded on a firm belief in the importance of university-led research, backed by a substantial increase in funding, and driven by a conviction that education is a cornerstone for both economic success and social justice.

Every pound spent on higher education could have been spent somewhere else. The introduction of fee legislation in 2004 took political courage, and was driven through at the expense of considerable political capital. Whilst the unit of resource for teaching may have declined by around 36% from 1988 to 1998, that decline has not continued in the last ten years. UUK will make as an absolute priority the maintenance of that unit of funding. In England, Scotland and Northern Ireland the issue is maintaining the unit of resource; in Wales the problem is far more acute with HEFCW data showing a gap in the unit of teaching resource of around 14% against the figure for England.

Minister, it is clear to us that we cannot take for granted that the political prioritisation of higher education will continue. I want to be equally clear. We will not argue merely that HE should be protected from cuts. We will argue for growth in investment in teaching and research, not despite the current economic crisis, but because of it. We will make this case for all parts of the UK, not just England. This is a case for all students, not just the full-time 18-21 year olds from ‘middle England’. This is a case for all parties, not just this Government. This is a case for the future, not the past, and for our society, not just our economy. It is a case that recognises that the UK’s universities are not costs to the tax payers but investments in our shared futures. We are a national asset, not a drain on public finances, the essential bridge to future social mobility, social inclusion and economic prosperity.

With that in mind, Universities UK has identified five policy priorities for the year ahead, with clear indications of where we want to work with Government. These are:

1. Economic recovery and public funding: We will continue to demonstrate the centrality of universities to economic recovery. We will develop options and scenarios for future funding and management and contribute to the review of fees.  We’ll make sure we go on working effectively with business and industry.
2. Quality, standards, and reputation: UUK’s priority is to support high quality learning and teaching; address public concerns about standards; and defend the autonomy of the sector. The UK has a Quality Assurance architecture (not just the QAA, but crucially, external examiner arrangements) which far exceeds that of our competitors, and all the evidence is that high quality and autonomy go hand in hand. The message which we must get across is about building on our strengths and addressing areas which could be improved. We expect HEFCE’s sub-group on quality, chaired by Colin Riordan, to make similar points in their report due at the end of this month. Critically UUK has to ask how we can more visibly lead the quality  agenda, and so we have been working with HEFCE, QAA and others to produce concrete proposals for improvements to our quality assurance arrangements in England and Northern Ireland. And I can announce that on Tuesday, the UUK   Board approved our proposal that, with Guild HE and the QAA, we lead a UK-wide review of external examiner arrangements to ensure that it is a robust system which delivers on expectations.
3. Social mobility: We will continue to work hard to enhance transparency, fairness and professionalism in our admissions processes and in our outreach activities. Crucially, we welcome the recommendations of the Milburn commission on social mobility, and its recognition that the key blockage to widening participation occurs at 16 not 18. Our challenge is continually to note that Fair Access and Widening Participation are different, that they relate to vastly different numbers of affected individuals (3000 versus 360,000 a year), and that many commentators continue to be fascinated by one of these, which they see as more politically salient. I will personally continue to work to advance the social mobility agenda through the work of the National Council for Educational Excellence. And UUK will continue to support the improvement of Information, Advice and Guidance. We will continue to work with the Department to raise awareness of the potential to provide apprenticeships within universities – indeed we’re finding that there is already quite a bit going on in this area. Crucially, we would like to examine the Milburn Commission’s proposals on how we can objectively take into account more of the context in which learners achieve. That is not the easy option, but it is the right one.
4. International competitiveness: Our focus will be on influencing and implementing the new student visa system and managing the impact on the sector of changes in Home Office policy.  We will also continue to fly the flag internationally and play our role in building strong diplomatic links through our alumni networks wherever possible. Indeed, UUK would like to work with all governments in the UK to market our outstanding HE provision, in all its various forms.  We need a joined up policy across government to optimise the UK’s position in this vitally important export earner to ensure that immigration and other policies optimise rather than damage our competitiveness. The HE brand is strong, and we should do more to promote it as a world class sector of our economy.
5. Research funding and governance: We fully recognise the need for research to demonstrate impact and translate into real benefits socially and economically.  Fortunately, as Sainsbury has shown, this is happening across institutions and across disciplines.  Our work here will concentrate on the future funding of research and the maintenance of QR and the dual support system; analysing the future needs of the research base; promoting the case for funding for Humanities and Social Sciences research. It also involves discussing openly what degree of research concentration is best for each of the parts of the UK.

Finally, there is another priority, which deserves a special emphasis. Our institutions have a unique role in educating, researching and sharing knowledge to enable us to tackle the key challenges of our age, notably climate change, social inclusion and sustainable development. We will have more to say on this at our December meeting. But for now let me be clear: if universities are not going to provide the solutions to these problems, where else will evidence-based solutions come from?

All this work is designed to demonstrate the value of our universities, and to enhance what we are able to provide collectively. It is, I believe, work that Universities UK is uniquely placed to do. Only UUK can speak to the public, to politicians and to all stakeholders on behalf of 133 universities in the UK.

Our timeframe is long term. Universities embrace change:  in our research activities, in our commitment to social mobility, we are ourselves agents of change – but we are also in it for the long run. Recessions do end and our commitment to teaching and learning, to discovery and scholarship, go beyond the economic imperatives.

We were particularly encouraged by your speech earlier this summer, Minister, on the importance of the arts and humanities and of the non-economic benefits of higher education. Lord Drayson’s passionate commitment to science in its widest interpretation was also tremendously encouraging. We must continue to show that universities provide not simply passports to jobs, but lessons for life.

Of course, we cannot pretend that we have convinced all politicians that we have earned their trust. We will never be complacent but we do agree with Lord Mandelson that the picture painted in the recent IUSS Committee report does not reflect the universities we know.  We take issue with the report on a number of grounds.

But we are committed to taking an open and sensible approach to public concerns. Where there is evidence of a problem, we will lead the way in making proportionate improvements. But we also need to explain ourselves better. Above all, we must show that we can continue to be the stewards of high quality and high standards: that we deserve our autonomy so that it does not become a casualty of those concerns.

Our sector has, for me, two main distinctive features: its diversity and its excellence. It is a blinkered vision that sees our universities as arranged in a vertical hierarchy, with one institution at the top and the rest in second, third, 133rd, position. Instead I suggest it is better to think of universities as arranged horizontally, with a series of very different overlapping missions.

In each of these mission areas, there are examples of excellence, be it in widening participation, in world leading research, in the work of our excellent small and specialist institutions, in outstanding employer engagement, or in cutting-edge flexible teaching for mature and part-time students. Our challenge is to be able to celebrate this diversity without falling into the great British trap of equating diversity with hierarchy.
 
I would like to conclude by asking one simple question, and then suggesting an answer: how important are the UK’s universities to the future of the country? My answer is resoundingly clear: they are fundamental to achieving social and economic progress, and to establishing the kind of country that can compete and prosper in the future.

To put it bluntly: If we want to compete in the global knowledge economy, which institutions create the inventions, the intellectual property, the spin-outs, better than our universities? If you want to attract international customers, then the UK’s universities are an outstandingly effective export industry. If you want a highly skilled workforce, capable of getting the jobs of tomorrow, not the jobs of yesterday, who better than the universities to achieve it? If we want to call ourselves civilised, which institutions are better at delivering that mission than universities? If you want a society that exhibits the critical features of tolerance and social cohesion, what else creates those values better than our universities?

Universities can deliver a range of outcomes that no other part of society can deliver and – critically - governments cannot deliver their core economic and social policies without a vibrant, autonomous and well-resourced university system.

The nature of the emerging university environment will differ within each of the constituent parts of the UK, and UUK will work with all administrations to promote a university sector that reflects differing societal, political and economic needs.  I also believe that the Funding Councils play a crucial role in helping to broker the partnership between Government and the sector. We believe that you value their role as highly as we do.

As Lord Sainsbury memorably put it, we have to win the ‘race to the top’ The alternative is not a very edifying prospect: it would involve trying to win a ‘race to the bottom’ by propping up failing industrial sectors and chasing lost jobs and skills, as Universities Scotland’s excellent ‘What Was/What Next’ report points out.

But for the UK to win the race to the top, the university sector needs investment. UUK’s position is that we need to establish that case before we get into discussions about where the money comes from. Let us win the economic and political arguments about the centrality of the UK’s universities before we award ourselves the luxury of debating the sources of that additional funding not just with political parties and the NUS but also with the public, though it would be unrealistic for us to think that the investment can come from the tax-payer alone.

That is not special pleading for more resource; we are not asking for more resource because universities are good to have or because we want more money for our institutions per se. Instead, ours is an evidence-based, logically constructed argument for why the health of the UK’s universities and the prosperity and success of the UK itself are inextricably entwined. For me the crucial point is that we can show, by using the arguments of NINJ, of the Sainsbury and Leitch Reports, that investing in the UK’s universities is not a drain on resources, it is possibly the very best investment that our society can make for its future. Universities are not just an optional add-on to a government’s economic and social policies, they are essential to its achievement. The logic of Leitch’s and NINJ’s predictions about what jobs will exist in the future, and the logic of the race to the top’s implications for the nature of the emerging knowledge economy are what drive our analysis.

So, Minister, you, and your counterparts in Edinburgh, Cardiff and Belfast, have difficult decisions to make. But we urge you to maintain the necessary political will to ensure that the UK remains an intellectual superpower well into the 21st Century.

Currently, we are second only to the US, which spends twice as much as we do as a proportion of national income.

So to summarise, and in no particular order:

• First: Quality is paramount. Help us protect and promote it;
• Second: I have argued that the UK’s universities are a notable success. That success is founded on autonomy. As autonomous institutions, we can be strong partners, working with you to achieve our mutual aspirations.
• Third: Let us work together more actively to promote the excellence of the UK HE brand internationally;
• Forth: to achieve all of these, whatever you do, protect the unit of resource.
• And finally – especially in the light of the recession and what the future looks like, surely we, the UK, should be spending at least the OECD average on higher education.

Think of the consequences for the UK if we don’t.

You see, I passionately believe that the UK’s future depends on a successful university sector; its universities are the route to that future, since they are the most effective ways to promote social mobility, to ensure social cohesion and to create both the jobs for the future and a work force with the skills that the knowledge economy requires. Just as UUK is the essential voice for the UK’s universities, our universities are the essential bridge for our countries’ journey to the future. 

Thank you.