Why first-time students have to come first

Reallocation of education funds is about social justice and augmenting the national pool of skills, says Bill Rammell. The Government's decision to funnel £100 million away from students taking second degrees and other qualifications to those entering higher education for the first time is socially just and supports the need to improve our skills base.

First, we are not doing this to save money. This is not a cut. Funding for higher education has increased more than 25 per cent in real terms since 1997, and we now spend about £10 billion a year. Government funding will continue to increase in real terms over the next three years, with the full details announced in the Comprehensive Spending Review as The Times Higher went to press. Spending reviews are not just about increasing spending. They are also about spending existing money in different ways and changing the financial incentives in the system.

All of the £100 million will be redistributed to support our priorities, including the challenges posed by Lord Leitch around increasing skills in the workforce. We want more people from all ages and backgrounds to enter higher education. The biggest challenge is to go from 29 per cent of the workforce having graduate-level qualifications to more than 40 per cent. Many of these potential entrants to higher education will want to study part-time at evening or weekend classes. This means allocating money for those students who are not already graduates. Put simply, in most cases first-time students have to come first.

There is also a question of fairness. At present, students who take a second degree cost the taxpayer about £100,000 on average across the course of their education. This compares with about £55,000 for someone who leaves school at 16 and about £85,000 for those who do one degree. In many cases it hard to justify this to taxpayers and to those who haven't yet benefited from higher education and got a first degree.

Let me stress that these changes will not affect existing students, only those starting second degrees from 2008-09. The pace of change will be fairly slow in 2008-09 (accounting for about 0.2 per cent of the money that now goes to higher education), but it will increase after that.

There will be exemptions for some subjects where making sure there is a good supply of graduates is in the national interest - medicine, for example. We have asked the Higher Education Funding Council for England to consider whether other categories of students should continue to attract funding when studying for a second degree or other qualification at the same level. But in most cases, the subjects that are popular as first degrees are also popular as second degrees, so we do not expect much change in the overall supply of graduates in different subjects.

Crucially, we will also support students doing second qualifications, provided the costs are co-funded by their employers, as Lord Leitch recommended. That goes for public sector as well as private-sector employers.

Does all this add up to an attack on lifelong learning or part-time students and the institutions that teach them? Not in my view.

I make no apology for changing the financial incentives in the system, and all higher education providers will need to think about how they respond. Everyone needs to understand that our policies will increasingly direct funding at students (part-time or full-time) entering higher education for the first time, progressing to higher qualifications, studying subjects of strategic importance, and those whose employers are prepared to help design and co-fund the courses on offer.

We are also asking Hefce to consult on the detail of the changes to ensure that institutions have time to adjust.

There is another argument that has been put to me - that this is a back- door way of lifting the cap on fees. This is not the case. Fees are already unregulated for full-time undergraduate students doing second degrees, as they are for part-timers and postgraduates. Regulated fees for full-time undergraduate students doing a first degree will remain unchanged and capped at £3,000 in 2006 prices.

Retargeting £100 million in this way is a fairer use of taxpayers' money, and it should start to make a difference to the importance that institutions attach to increasing the proportion of the workforce with graduate-level qualifications. The institutions that do this well, including those with large numbers of part-time students, stand to gain both money and reputation, and all will now have an incentive to respond positively to this agenda. After all, there is going to be £100 million on offer, with more to come in the spending review.

- Bill Rammell is Minister of State for Higher Education.