Mr. Peter Cassells:

It is understandable.

I have dealt with the question as to why one would invest significantly in higher education. The investment should be made because of the role of higher education as a key enabler of future development and because of the scale of investment needed. Before the break, I was commenting on the funding options. I have already talked about the predominantly State-funded system which would see State funding of 80%. The question if this model is adopted is whether there should there be a breakdown and sharing of the cost between the individual who benefits and us as a society benefitting.

The second option is the continuation of the current system. As we need the €1 billion, this would require a significant increase in investment by the State and a continuation of the student contribution of €3,000 and the waivers for students who do not qualify for the student grants, which, as mentioned earlier, account for 50%. This model increases the State's contribution from 60% to over 70%. It delivers a balance between the State and the student and it is already in existence. However, there are a number of issues with it which the committee needs to consider. First, it does not deliver free higher education at the point of access. It does not deal with the impact of the €3,000 fee on some families, particularly those above the threshold. As I said earlier, we found in the work we did that significant personal borrowing is taking place, particularly from the credit unions and in situations in which more than one member of the family is in higher education. People on moderate incomes are taking out fixed-term loans. If a person does not benefit from or complete a higher education course, he or she must still repay the loan but does not have the earnings to do so. In addition, this model deals neither with the fairness of the grant system, which, as I mentioned earlier, is key, nor with the lack of supports for postgraduate or part-time students. These are the pros and cons of the second option.

The third option is a new system of deferred fees supported by income-contingent loans. This model would require increases in State funding and the student contribution, so the State's share of the investment in higher education would continue to be over 60%. The fees would be charged to all students, but payment would be deferred, as I said, and supported by an income-contingent loan. The repayments would therefore be linked to the benefit of higher education, future salary levels and one's ability to pay. One would not be liable for repayments during any period in which contingencies arose such as unemployment, maternity and so on. The loan expires after a period if not repaid. We modelled two possible fee levels in this scenario: the current €3,000, an increase to €4,000 and an increase to €5,000. We indicated, given the experience of what has happened in Britain, that the fee level needs to be regulated and should remain moderate and affordable. The question whether there would be a different fee level depending on the cost of the programme - for example, medicine - also came up, and we considered this. The system allows for such differentiation. It was brought in in Australia, but we did not go down that road. We are not saying it should not happen; we are saying the system we have come up with allows for it to happen if desired. We had enough individual issues in the report to deal with at the time without exploring the matter further. This model would deliver higher education free at the point of access for all students. It also opens up and enables the maintenance support to be provided to a broader base of students. Again, the report is quite clear that the model should not be adopted unless the maintenance system is increased and reformed radically. Furthermore, as I said, with future repayments being linked to future earnings and ability to pay, the report raises the point that the model should not be a deterrent to participation as a result of one's family circumstances.

However, the report also highlights a range of concerns raised with us during the consultation process. One is debt aversion. There is a sense that people from particular backgrounds may be averse to taking on debt even though it would be repaid in a particular way. However, as I mentioned earlier, we discovered that significant numbers of such people are borrowing money for the €3,000 contribution at the moment anyway and repaying it. The impact of emigration was also mentioned to us. The answer to this question is that the debt is the same as any other debt. If one emigrates, it does not evaporate; it remains and must be repaid at some stage. The question of the future graduate debt burden and the need to take on debt at different stages of one's life - for example, for a house - together with the level of default and the possible implications of this are matters about which the Department of Finance will want to talk to the committee. One matter we did examine, because it was raised with us, is that if the State is to set this up, it needs to borrow the money to do so. We clarified that this can be done within the EU fiscal rules, just in case this is raised with the committee. With Dr. Aedín Doris's help, we also did some initial modelling of the likely cost to the graduate and to the State across a range of fees and repayment parameters.

The last point we made was that whichever model the committee recommends should be underpinned by a new employer contribution to higher education. We did not make the point just because we saw this might be an easy source of money. The argument in the report is that if one takes the guiding principle of balance and fairness between the various beneficiaries and a better sharing of the cost among the main beneficiaries, in Ireland we do not have a high level of philanthropy. However, equally, we are investing in higher education as a way of ensuring we have high-end jobs and people available to take them. Therefore, there should be a contribution. There is the National Training Fund, which helps with Springboard but nothing else in higher education.

At the moment there is more than €350 million in the fund. Therefore, if we expanded the fund to provide support for programmes in higher education with, say, a 1.1% increase, that would raise an additional €50 million. That is how we came at the issue. It also opens up options in regard to how these programmes can be supported.

The main point about the options is that they need to be considered together. Each of the options has strengths and weaknesses, and these have to be taken into account. Each obviously has a negative aspect. With the first option, it is significantly increased taxes. With the second, the fees would still continue and people would have to borrow to pay them. With the third, there is the question of student debt repayments, or there is a combination of all three. Some people in the debate are sticking to their first preference, but if everybody sticks to their first preference, there is no way we will be able to come to an outcome and we will end up back at the status quo. As I mentioned earlier, the status quois probably the worst place we could end up. The three options need to be considered together rather than saying one option is being ruled out because it has a negative aspect to it. All the options have negative aspects and some positive aspects, depending on what one wants. We cannot cite the negative character of any one option in isolation as if there was another way of funding it other than that. These are overlapping circles, so we could end up with a hybrid system, and there is nothing to rule that out.

In a sense, the report has a home but it does not have the home which it normally would have, with a Minister promoting it. Therefore, I have been asked by the Department to stay involved in explaining the report. So far, from the feedback I have been getting, there would certainly appear to be general agreement on the investment requirements but, obviously, some level of understanding that the universities and the institutes of technology need to be more responsive to the needs I mentioned earlier. However, it is when it comes to the funding requirements that the divergence occurs because people go to their first preference. That is why I think it important that we do not end up back at the status quo.

It is important for the committee to realise that the status quois not a cost-free option and it will actually leave us with deep costs in terms of the student experience, as I mentioned earlier. At the moment, it also excludes a lot of young people from disadvantaged areas going to education, so by keeping the status quo, we would be saying that is what we are providing for.

Ultimately, obviously, it will affect the career opportunities of Irish graduates because we must remember we are operating in a European labour market. Most of these companies people talk about are recruiting people across Europe, not just in Ireland, so they are competing against students from other countries for positions, particularly those in the newer companies. There is then the overall contribution of higher education to our social and economic development which would also be affected.

The report concludes that we now have an opportunity to recommit ourselves and to reinvest in higher education. Obviously, this committee has the opportunity to set a new level of ambition that would restore higher education, further education and apprenticeships as the key enabler in getting us from where we are now onto a much better trajectory. The report concludes that whatever is done will require a comprehensive and fundamental change to our funding model, and we should have an open and considered debate on that. Ultimately, we need to come to decisions and, in some way or other, they will have to be bold decisions, requiring decisive action.