Liam Fitzgerald (Fianna Fail)

I welcome the Minister whose contribution I found interesting. Some points were more interesting than others. She emphasised at the outset that this was a major report into third level education. While I agree with some of its conclusions I have reservations about others. Senator Ulick Burke referred to a number of issues about which he has concerns. I am sure the Minister will address those in her concluding remarks.

As an independent review of higher education in Ireland, this is an important report. It is probably one of the most comprehensive evaluations made in a generation. It would be remiss not to compliment the OECD on the high-powered team it engaged to carry out the task, people of high calibre and international experience. This reflects the degree of seriousness it gave to the task as well as the central importance of higher education in the priorities of the Minister and that of her predecessor, Deputy Noel Dempsey, in charting future social and economic progress in Ireland. The Minister pointed out that Ireland was at a stage of transition as regards economic development and the world market and is facing rapid change. Our broad strategic objective is to make Ireland a world leading knowledge-based society. In that sense this report is timely.

For over 40 years, as the Minister said, the OECD has played an important role as a catalyst for change in Irish education. Its 1960s review is widely regarded as a defining moment in Ireland's recognition of the vital link between education and the social and economic development of the country. There is widespread consensus that the Celtic tiger would not have emerged in the absence of a well-educated young population. There were many other factors, but that one was of central importance. Even though the report identifies enormous challenges facing higher education in Ireland, it must be acknowledged that great progress has been made in recent times. The whole higher education landscape has changed beyond recognition, in many respects.

Ireland was one of the first countries in Europe to grasp the importance of the link between education and the economy. In 1965, for example, only about 11% of those completing second level education went on to third level. At present the percentage is in the order of 57%, so that a significant sea change has taken place. This change has been accompanied by an almost threefold improvement in average material living standards.

Although we have made great progress, the Lisbon Agenda and Ireland's strategic objective of placing its education system in the top rank of the OECD necessitated an in-depth evaluation at this time. We all acknowledge the critical role education, research and innovation have played in our social development. Our priority is to sustain education as the driving force behind the engine of that progress, socially and economically.

The report sets out the nature of the challenges that face the country, the Government and even the Minister. These challenges are to ensure that our education system is properly placed to perform its key role in the knowledge society. It tells us very clearly that higher education is at a crossroads. If we are to have the capacity to respond to the new challenges, notwithstanding the great progress that we have made, the system has to undergo a number of changes. One of these is the quantum leap in funding.

The funding issue is central to where we go and the obvious prescription put forward by the report is the re-introduction of fees. The Minister has taken that off the agenda. We had a big debate on that last year in the House. The Minister's predecessor was strongly in favour of the re-introduction of fees, but the current Minister has seen that there is no support for such a move. She has rightly decided to talk to the heads of education establishments about diversifying investment sources. That is very important and I commend her in that regard.

The recommendations are set out against the background of a high wage economy in Ireland. They make clear that if we are to retain our new found wealth, we must develop into an innovative, knowledge-based economy. We can no longer compete for high volume manufacturing jobs with the low cost economies of Asia and eastern Europe. We must therefore concentrate on attracting higher value activities rather than higher volume. Our ability to attract inward investment will depend to a growing extent on the ability to offer access to a highly skilled labour market. An example of this is the fast pace of change in the needs of the world market. We can no longer be sure of the skills we will need a few years from now. In the next decade, five out of six jobs created will be for third level graduates with degrees, diplomas or certificates. There will be a greater demand for degree holders and, by 2015, they will represent the largest group in the new economy. The pace of change means that skills and occupations can become obsolete within a few years.

The challenge for the higher education sector is its capacity to upskill its workforce. To deal with these changes, the higher education institutions will have to restructure internally. They will have to show enough flexibility to succeed in a new and constantly changing environment. A number of these institutions have already embarked on internal reform in preparation for the new challenges they are already facing. I commend the Minister on the way in which she is supporting them in their attempts to reform.

Senator Burke referred to UCD and the fact that it is in debt for the first time in its history. I commend UCD on the manner in which it is attempting to reform its structures. There are a number of institutes across the country that are doing likewise. This approach is consistent with one of Ireland's key objectives during its Presidency of the EU, which was the promotion of the Lisbon Agenda on competitiveness. It acknowledged that lifelong learning has a key role in ensuring that the workplace is adaptable and capable of reacting to frequently changing demands. Wealth creation for the future will be based on our ability to produce and to apply knowledge. The recommendations reflect those of the Government enterprise strategy group. People are of the view that there is no strategy, but I believe that the recommendations reflect the views of the enterprise strategy group set up by the Government, as well as the national action plan for promoting research and development until 2010.

The fundamental message coming from all sectors and from the report is the same. Our key competitive resource is knowledge and our higher education sector has a critical role in delivering that national resource. The call for a quantum leap in funding has been seized as a stick with which to beat the Government. It is claimed that inadequate action has been taken recently. That is totally contrary to the facts as we know them. There has been much investment in research and the development of infrastructure in the higher education sector. It has been transformed to an unprecedented extent since 1997.

Funding has doubled in the higher education sector. Student numbers have increased from 104,000 to 137,000. Participation rates have increased from 44% to about 57%. At the same time, the research and development programme has changed beyond recognition. The programme for research in third level institutions, which was launched in 1998, has funded 33 new research centres across a range of disciplines. To date, it has supported 1,400 research posts and 90,000 sq. m. of dedicated research space. In addition, the Government set up two new research councils — the Irish Research Council for the Humanities and Social Sciences and the Irish Research Council for Science, Engineering and Technology. These councils support individual research projects across the various disciplines and they have a combined annual budget of €23 million. Science Foundation Ireland was set up to fund strategic areas of research in ICT and biotechnology. Between 2000 and 2006, it has an investment budget of around €646 million.

Despite all this investment, the issue of funding the increasingly critical role of higher education has to be confronted. It is a central, critical issue and the report sets that out. The main prescription for that is the reintroduction of fees. Having considered that throughout last year, the Minister and the Government have quite rightly taken that off the agenda.