Mr. Tony Donohoe:

I thank the joint committee for this opportunity to address the members on what is a critical issue for business. IBEC has supplied a more detailed submission, therefore, I will make some general introductory comments.

It is almost six years ago since I presented evidence to the Joint Committee on Education and Skills on this same subject. We were discussing the findings of Report of the Expert Group on Future Funding for Higher Education or the Cassells report. The expert group was unequivocal in its assessment of the scale of the challenge. It stated:

The funding system is simply not fit for purpose. It fails to recognise the current pressures facing higher education institutions or the scale of the coming demographic changes ... These pressures are now seriously threatening the quality within the system ... A decision to accept the status quo or to make minor tweaks to it are incompatible with our national ambition ...

Since the report was published, we have witnessed some momentous global events but some things have not changed. Public funding for the higher education sector has not even returned to pre-financial crisis levels and rapidly increasing student numbers has resulted in an almost 50% increase in the funding per student.

The impact of the funding shortfall is most plainly seen in the declining performance of Ireland’s universities in international rankings. Thirteen years ago, there were two Irish universities in the top 100, with one in the top 50. Today no institutions are in the top 100. Rankings are selective measurements and, in themselves, do not represent a full picture of the quality and diversity of higher education. However, whatever about their limitations, they cannot be ignored. They can have an impact on the ability of Irish HEIs to attract international students, academic talent, research partners and benefactors. From a business perspective, they also have the potential to damage our reputation with international investors.

It is a great pity that lack of funding is undermining some of the significant reforms that have been made in recent years. The recently created TUs have the potential to act as an anchor for innovation and high-tech skills development in the regions but delivering this transformation requires a targeted and sufficient capital investment programme across physical, teaching and research infrastructure. The recently created National Apprenticeship Office also has the potential to drive reforms in a critical area but increased funding for advanced degree level apprenticeships, in particular, could provide alternative progression pathways for students and improve alignment between further and higher education.

Employers contribute directly to higher and further education through a 1% levy on reckonable earnings collected through the PRSI system into the National Training Fund, NTF. In recognition of the value of highly skilled graduates to industry, this levy increased from 0.7% in 2017 to 1% in 2020 and NTF income is expected to reach more than €850 million this year. The increased funding has underpinned important new programmes such as the human capital initiative, which has facilitated innovative projects such as a national framework for microcredentials. This will boost opportunities for lifelong learning and industry-academic collaboration. However, in recent years, the funding has also been used as a short-term fix due to the lack of a credible and more sustainable solution for higher education funding. The priority for the NTF must remain in supporting businesses to engage with education providers to address acute and emerging skills needs and to incentivise higher levels of employee learning.

There are compelling social and cultural reasons for investing in higher education but this should also be seen as investment in the economy’s productive capacity. A report by the economic consultancy, Indecon, in 2019 estimated that the university sector alone contributes the equivalent of about €9 for every €1 spent by the State.

It is more than five years since the Government asked the European Commission’s structural reform support programme to prepare an economic evaluation of the Cassells report proposals. We have still not heard anything tangible from that process since. We cannot continue to prevaricate. Obviously, there are competing demands on the public purse, which can more readily attract public and political attention but we should be aware the third level funding deficit is an invisible crisis that has already damaged our international reputation to attract research and business investment, and is silently eroding our competitive edge.

I thank the committee for this opportunity and look forward to answering questions.