Mr. Ned Costello:

Thank you, Chairman. I read the transcript of last week's proceedings with the HEA and found it very interesting. I thank the committee for the opportunity for myself and colleagues to address it here today. By way of brief introduction to the proceedings, we are here to talk about the impact of the universities and higher education more generally and the challenges and opportunities facing the sector in regard to its future impact and sustainability. We surfaced and debated many of these issues at our international symposium, to which the Chair referred, 21st Century Universities. I thank the clerk for his attendance at the symposium on behalf of the committee. Time precludes us from going over all the ground covered on that day, but we will address the main themes. I should say that matters have progressed since the symposium following the commencement of the work of the expert group on the future funding of higher education, chaired by Peter Cassells. That group produced the first of its background papers and recently held a highly interactive consultation session with a wide range of stakeholders including enterprise, the trade unions, regional authorities and higher education. Where relevant we have drawn on the evidence from the background paper that was presented for that initial consultation. There will be two further consultations, I understand, as the group progresses its work.

Our testimony to the committee is structured as follows: following my own presentation where we will address the sustainability and future challenge aspects, my colleagues, academic affairs director Lewis Purser will talk about human capital impacts in conjunction with Sinead Lucey, who is our international education manager. Then, Dr. Larkin and Qiantao Zhang will address the economic impact of higher education, a piece of work they have been doing under the Tionchar project. It is good to be able to report on the positive financial and human impacts of higher education. No aspect of human endeavour is perfect and in any event, in a world where change is endemic, we must constantly strive to progress and to improve. What we aim to show here today is a snapshot of the outputs and the impacts of higher education. To secure those outputs and impacts we need inputs in the form of talented and motivated students and staff and we need the appropriate financial and regulatory environment.

The legacy of experience of higher education during the economic crisis as we face into a period of economic growth leaves us with a number of challenges and conundrums that I will talk about. The first of these is summed up by the intersection of the movements of student numbers and staff numbers. According to the Cassells expert group, the higher education participation rate has been relatively steady over the last years, and any future rise in the higher education student cohort will be driven primarily by growth in the primary and secondary school population. High birth rates in Ireland over the last 15 years have led to a very substantial increase in the numbers going through the school system. Both increased numbers, and an increased retention rate at second level, result in projections for second level enrolments growing from 338,000 in 2014 to a peak of some 405,000 by 2025. As a result, the latest projections suggest that by 2028 the number of new entrants to higher education will increase by 29% over 2013 levels. We have charted that out in our background submission. These projections are based on participation rates remaining constant at 56% over the period. The relevant chart is included in our submission.

While new entrants into higher education have increased, core staff numbers have fallen in consequence of the employment control framework. The net effect of this - of rising student numbers and decreasing staff numbers - has been a change in a negative way in the student to staff ratio. Pre-crisis, the ratios in Irish universities were already on the high side by international standards at circa 1:16 or 1:17 on average. During the crisis, ratios have increased quite significantly from 1:20 to 1:23 in the universities - that is an increase in the ratio and a deterioration of 12%. These are very significantly higher - and I would just pause on that figure of 1:23 - than the OECD average which stood at 1:14 in 2012. To put this into context, the president of UCD, Professor Andrew Deeks, has remarked that in comparison to his former university, Durham in the UK, he had the same staffing complement there as he has here, but UCD has ten thousand more students than Durham.

I mentioned the word conundrum and this is because this change represents a gain in efficiency in pure statistical terms, but it also has implications for quality and for sustainability in terms of the long-term ability to support such large class sizes. This evidence suggests that we have a sustainability problem now arising from the ratios which needs to be tackled. This is before we get to the matter of future demographic impacts which, if nothing is done, would push the ratios very significantly higher, given the scale of increase in the student population that is projected. It should be noted also that the projections referred to are based on holding participation rates steady at 56%. All things being equal, improving access from socio-economic groups that are currently disadvantaged would increase participation rates further and further increase enrolments.

I will now briefly address the funding context for these developments. The expert group paper sets out the current annual funding of public higher education institutions which unsurprisingly is in decline since 2007 - 2008. Despite an increase in the student contribution of €1,925 or 233% — from €825 in 2007 - 2008 to €2,750 in 2014 - 2015, total income per student decreased by 22% for the higher education system overall.

Increases in student contributions along with general reductions in overall State funding have resulted in a steady reduction in the proportion of total recurrent funding for core activities of higher education institutions funded by the State. That reduction is from 78% in 2008 to an estimated 64% in 2016, because there is a further decrease in our allocations in the estimates for this year. This compares to an OECD average of 68%. For universities specifically, the core recurrent grant allocated to universities declined by €261 million between 2008 and 2014, a decline of just under 53%. When we look at the fall in the unit of resource, which includes not only the core grant but also fee income, the unit of funding went from €8,734 in 2007 - 2008 to €6,970 in 2013 - 2014. The cumulative decrease in the unit of resource in this period has been in excess of 21%.

Looking at university funding in an all-island context, we recently undertook a comparison of the unit of resource per student in an IUA university vis-à-visa student in one of the Northern Irish universities. For the academic year 2014-15 the funding per undergraduate student in a typical non-lab discipline - that is, arts, humanities and social sciences - is £7,997 in Northern Ireland or approximately €10,663 at current exchange rates. That compares to €6,876 in an IUA university – a difference of 55%. We understand that the Northern universities would not consider themselves to be particularly well funded by UK standards.

In addition to that, we should also mention the matter of capital funding. Capital funding for universities effectively ceased in 2008. That was partly as a result of the need to build new schools at primary and secondary level for the demographic bulge that was happening there.

Over the period of the financial crisis, apart from the run out of some Programme for Research in Third Level Institutions, PRTLI, investments, there has been no capital investment of any significance in universities. When one takes planning and build time into account, that means that even with a decision to start funding capital in universities now, it would take a number of years for funding to come on stream and we could be looking at virtually a decade of no capital investment.

Dr. Larkin will mention in his presentation that methodologies for evaluating economic return do not deal with the matter of efficiency. In that regard, I have already commented that our system is highly productive and while productivity and efficiency are not entirely the same thing, they are sides of the same coin. In regard to the efficiency of operations and costs to the State, one of the significant features of recent years is that universities have grown non-Exchequer income. That income, excluding research, has increased by 24% from €695 million in 2008 to €865 million, helping to offset the significant reductions in public funding. Total income, excluding research, per staff member has remained largely stable, increasing marginally to €155,000 while non-Exchequer income, excluding research, per staff member, has increased from €71,000 to €93,000, an increase of almost 30%. Staff are doing significant amounts to improve the non-Exchequer financial position of universities. Significant work has been undertaken on shared procurement under the aegis of the Office of Government Procurement, OGP. Significant internal changes have also taken place, including a revised academic contract and a performance management and workload allocations system but more needs to be done on the HR toolkit to ensure the competitiveness and efficiency of universities is maximised. I know that Mr. Bowman spoke about that last week in the context of the generation of overseas income.

Finally, regulation is important for the purposes of financial probity, accountability generally and to underpin public confidence. However, for regulation to be effective, it must be well considered and proportionate. Regulation in a university context has a particular perspective for several reasons. Universities are producers of both public and private goods and their funding reflects this. In addition, unlike the majority of the public service, universities are in an internationally traded marketplace, both in terms of students and staff. There is a high expectation for universities to be innovative and to contribute to national and global stocks of knowledge. Part of that innovativeness is based on academic freedom and an appropriate degree of university autonomy. Trends in this regard are monitored by the European University Association, EUA, through its autonomy score card process. As part of our symposium we requested the EUA to update the score card for Ireland. It found as follows:

This 2014 update of the Autonomy Scorecard for Ireland reveals a decline of university autonomy, in particular in staffing matters. In some areas it is quite subtle and can only be captured partially by the scorecard metrics. It appears clearly though that there is an entrenchment phenomenon, with governmental control over human resources and finances having been consolidated over the period considered. The measures that the government took at the beginning of the economic crisis have neither been halted nor reversed.

I must stress, in conclusion, that this is not about a blanket approach to deregulation. The IUA has put forward proposals to strengthen institutional governance and has welcomed the HEA system performance report and appraisal process. It is, rather, about ensuring that institutions whose contribution to the economy and society depends on agility and flexibility are appropriately empowered to make that contribution. The two key issues are the need for sustainable funding and sensible regulation. I will now pass over to Mr. Lewis Purser, who will deal with the question of whether that funding is justified and who will also talk about the human capital impacts.