Thursday, 13 April 2017
National Training Fund
I thank the Cathaoirleach for selecting the matter and I thank the Minister of State for giving his time today. The national training levy is crucial source of revenue in the context of the ongoing national debate on the funding of third level education. As the Minister of State will be aware, the Cassells report released last year has painted a bleak picture of the state of our higher education sector. The report has made it clear that we must act decisively to save a third level education sector which is in serious financial trouble. I firmly believe that the national training levy must play a central role in our response to this crisis.
The report correctly identified employers as major stakeholders in and major beneficiaries from higher education. Our highly educated workforce is a major structural advantage for Irish businesses and enterprise, and it is logical that they would contribute towards its funding. I welcome the public consultation process currently under way in the Department of Education and Skills on a proposal for an increase in the levy from 0.7% to 1% and strongly support such an increase.
I note that the consultation process is specifically framed with the intention of responding to the Cassells report and the challenges facing the higher education sector which include funding issues such as the poor spend compared with other OECD states and the lower spend in comparison with primary and secondary education, but also the STEM skills gap and the growing demographic of students expected to attend higher education, with a 27% increase expected by 2028.
It is welcome that the Department is aware of and preparing for these issues. However, since the Government recognises that the national training levy will be a key part of our response to the third level funding crisis, it is crucial for us to understand the administration of the revenue generated by the levy since its introduction in 2000. How much has been allocated for expenditure? Where has the money been spent? What money has not been spent and why? How are such decisions made? What does the Government plan to do with the increased revenue? It is important for us to properly examine the record of the levy and the national training fund. We need to ensure the fund is fit for purpose and is being managed well for the benefit of citizens.
I have a number of questions for the Minister of State. How will the additional income generated by an increased levy be distributed? None of us wants Irish businesses to play a direct role in higher education policy and decision making, and demanding that their skills gaps be prioritised above other important factors. Given that we need the arts and other such subjects to be supported just as much as STEM projects, how will this be managed?
Will the Minister of State consider investing the increased revenue in capital infrastructure in higher education institutions, as universities are not ready to respond to changing demographics or opportunities that may arise as a result of Brexit? Will the Minister of State give a commitment that this funding will come as an additional resource for the higher education sector and is not used as a replacement for the loss of any existing revenue streams?
I note that section 2.4 of the legislation provides that the Minister shall manage and control the investment account of the fund.Can the Minister comment on what investment return the fund has achieved in the last five years? What is the investment strategy? Finally, can the Minister explain why there are unspent moneys in this fund, given the current condition of the education sector?
I look forward to engaging with the Minister on this issue. I have also provided a more detailed submission under the submission process.
I thank the Senator for raising these important questions and for agreeing to postpone this matter from last week for me.
The National Training Fund, NTF, is resourced by a levy on employers of 0.7% of reckonable earnings in respect of employees in classes A and H employments, which represents approximately 75% of all insured employees. The levy is collected through the pay as you earn, PAYE, and pay related social insurance, PRSI, system and funds are transferred monthly to my Department. Funding from the NTF is allocated by me, with the consent of the Minister for Public Expenditure and Reform, in accordance with the provisions of the National Training Fund Act 2000. While the NTF does not form part of the Vote of my Department, the allocation for each scheme is determined as part of the annual Estimates process. The NTF is included as an annex to the published Estimates of the Department and such funding has been included in the overall expenditure ceiling for my Department since 2011.
Prior to 2012 income from the NTF levy had fallen from a high of €413 million in 2008 to €299 million. However, since 2012, receipts from the NTF levy have increased annually, due to improved employment levels. The NTF levy generated €299 million in 2012, €317 million in 2013, €338 million in 2014, €364 million in 2015 and €390 million in 2016. It should be noted that the operation of the EU fiscal rules and the inclusion of the NTF in the Department of Education and Skills overall annual expenditure ceiling mean that, in the absence of an increased rate of contribution, additional expenditure cannot be sourced from the NTF without a corresponding drop in Exchequer expenditure.
The accumulated surplus in the fund has been critical in maintaining expenditure levels, particularly in the provision of training for the unemployed, in the years when receipts fell below the expenditure levels required. It is considered prudent to continue to maintain an adequate surplus in the fund to meet demand in future years and it should be noted that, while the current surplus of €232 million represents a very significant sum, it would only cover seven months of NTF expenditure at current levels. The surplus remains available for investment in education and training programmes to meet skills needs.
NTF funding is used to raise the skills of those in employment, to provide training to those who wish to acquire skills for the purposes of taking up employment and to provide information relating to existing or future requirements for skills in the economy. The majority of the funding is expended under the broad headings of training for employment and training in employment. Training for employment provides a range of training programmes for jobseekers, including training for early school leavers and for people with disabilities and targeted skills programmes such as Springboard and ICT skills conversion. Training in employment funding supports the training of employed people, primarily the apprenticeship programme and employer-led and contracted training through the Skillnets model.
There has been a shift recently in the focus of investment with more funding allocated to training those in employment and less allocated to training jobseekers, due to the upturn in our economy and growing numbers of people in employment. In 2017, I am providing funding of €366 million from the NTF. As part of this allocation, I have provided an additional €24 million to training those in employment to meet demand which will arise mainly in the expansion of apprenticeship opportunities. I am also reviewing the allocation of funding to programmes in the further education and training and higher education sectors as between NTF and Exchequer sources in terms both of the appropriate emphasis required on training for employment and training persons in employment and of satisfying the needs of enterprise to meet strategic skills requirements.
I hope I have answered the Senator's questions. There is a consultation process and she is more than welcome to contribute to that. I would appreciate her contribution. If I have omitted to mention anything, I will get that information from the Department. I will also be delighted to provide the Senator with any further information she requires.
I have one or two more questions which I will send directly to the Department because the Minister will not have access to the information here. I wish to clarify whether I understood the Minister of State correctly. He said that additional funds cannot be allocated unless there is a reduction in the Exchequer fund. Will the increase be a replacement and not additional?
From what I can gather, it balances with the Exchequer all the time. Whenever funding is spent on something, if one overspends or underspends one is required to deal with the Exchequer. I will find out what the position is. I have contacted the Department of Finance to ask for a detailed analysis as to why that is the case and I will forward that to the Senator.
I have another question. Obviously, much of the additional spend in previous years has gone to filling skills gaps at jobseeker level and third level funding has not received a great deal from the national training levy. Will the percentage increase be directly for third level? If so, and this ties in with the Cassells report, is it expected that the Department would not decide where that money is spent and that it would go to the core fund of the Higher Education Authority, HEA, which would be aware of where the gaps are in third level?
How best to allocate the money, be it to higher education and so forth, will be part of the consultation process. I know the Senator has a great interest in this so I would value her contribution to the consultation process in respect of how she believes it should be spent. After the consultation process this will come back to the Houses for discussion. I urge the Senator to let the consultation proceed. I probably have almost the same view as the Senator as to how the funding should be spent. It is a balance of skills, apprenticeships, higher education and so forth. I ask the Senator to wait for the consultation process to conclude, after which I will refer back to her.