Memorandum submitted by Higher Education
HEW represents the interests of Higher Education
Institutions (HEIs) in Wales and is a National Council of Universities
UK. HEW's Governing Council consists of the Vice-Chancellors and
Principals of all the HEIs in Wales. HEW provides an expert resource
on all aspects of Welsh higher education.
Universities in Wales represent a fast growing
sector of the economy contributing an increasing share of our
national economy. For every £1 million invested in HE by
the National Assembly in 2005-06 universities contributed £5.3
million to the Welsh economy.
The HE sector in Wales:
had a turnover of over £1 billion
generated a £2 billion output
to the Welsh economy including direct multiplier effects;
gained export earnings for Wales
of £170 million, including £65 million from EU/overseas
research grants and £104 million in fees and "knock-on"
expenditure from international students; and
earned £121 million in total
research grants for Wales and over £205 million from contracts
and other income streams.
1. HEW welcomes the opportunity to give
evidence to the Welsh Affairs Select Committee's inquiry on the
provision of cross border services for Wales. In many respects,
Higher Education represents the paradigm of a "cross border"
public servicelocally delivered by institutions grounded
in their communities but with horizons focused beyond the borders
of Wales and the UK.
2. Higher Education Institutions (HEIs)
in Wales see their local, national and global missions as being
complementary and mutually enriching. Higher learning thrives
on cross border and interdisciplinary researchwhere ideas
and concepts are tested and cross-fertilised. It is to the manifest
advantage of all that learning, knowledge and scholarship are
no respecters of national boundarieswithin or without the
UK. Diversity in a university faculty and the student body brings
significant advantages in fostering an outward facing learning
and research environment. It is in this positive vein that we
offer our evidence to the Welsh Affairs Select Committee inquiry
on cross border services.
3. The intrinsically cross border nature
of higher education has intensified as a result of the rapid internationalisation
of HE in recent yearsa trend which will accelerate rather
than abate. Many universities in Wales now recruit a third or
more of their academic staff from beyond the UK. Global charities
and foundations are increasingly important sources of research
income. Multinational corporations are increasingly footloose
when locating their global research and development centres. Universities
have entered a new age in which cross border activities are absolutely
pivotal to their long term success. Universities in Wales have
embraced this process and have welcomed the opportunities that
cross border working provides in helping to build a knowledge
based economy in Wales.
4. As our "About HEW" section
above demonstrates HE in Wales is, on many key indicators, performing
very well for Wales in securing cross border income from business
and other external sources. However, this success has been achieved
in spite of, rather than because of, the HE investment policies
of successive Assembly Governments since 2001-02 as section (v)
of this submission shows.
5. The Higher Education Funding Council
for Wales's (HEFCW) evidence to the Select Committee has provided
much of the background statistical evidence on the cross border
elements of Higher Education in Wales. HEW will therefore focus
on six cross border policy issues and put forward specific proposals
to ensure that these issues are handled in a more effective manner
by policy makers in Wales and across the UK.
(i) Cross border issues in research policy
6. HEW wishes to emphasise the importance
of maintaining the dual support system within the UK higher education
system. This dual support system has two elements. The "Wales
end" of the dual support system is government investment
in teaching and research, channelled through the Department for
Innovation, Universities and Skills (DIUS) in England and the
devolved administrations in Wales and Scotland. The three national
HE funding councils in Wales, England and Scotlandwhich
operate on an "arms length" basisthen allocate
grant to universities in their territories. The devolved administrations
receive funding as a result of Barnett formula "consequentials"
related to the level of DIUS HE spending in Englandbut
are then free to decide how much or how little investment to channel
to HE through their respective HE funding councils. Allocations
to universities from the national funding councils are distributed
largely by formula in the areas of teaching, research and economic
development (often called Third Mission).
7. The "UK end" of the dual support
system is investment allocated to universities and national research
institutes by DIUS across the UK through GO-Science,
the Technology Strategy Board and the seven UK Research Councils.
UK Research Council funding is not allocated according to a
formula but is based on a rigorous grant application process.
DIUS science funding is allocated to universities across the UK
through the respective national HE funding councils, though
according to an agreed UK funding formula. This UK funding
was allocated until 2008-09 in the "Science and Research
Infrastructure Fund" (SRIF) and from 2008-09 such funding
will be allocated via a new "Capital Investment Fund".
8. Universities in Wales therefore have
two sources of research funding under the dual support system.
Firstly, they have formula-based allocations based on RAE
scores distributed by HEFCW. Secondly, universities in Wales apply
competitively for funding with universities across Britain for
research grants (totalling £2.8 billion a year) from the
UK Research Councils (eg the Medical Research Council and the
Economic and Social Research Council). Funding for the UK Research
Councils comes from the UK Government alone.
9. Despite this division of responsibility
there appears to have been a culture in some Whitehall departments
that aspects of HE policy which are legally devolved but have
an essential UK dimension do not require consultation with
the devolved administrations. For example, there has been a recent
tendency by the UK Government to take unilateral decisions in
relation to research assessment policy, which though devolved,
can only be organised on a UK basis to be effective. In March
2006 the Treasury announced a radical change of policy in relation
to research assessment policy (which had been conducted as part
of the RAE process) in which peer review was to be removed from
the assessment system altogetheragainst
the advice of most independent policy specialists. This decision
was reached without consultation with the Assembly Government
or the Scottish Executive. Though neither Wales nor Scotland could
be compelled to join such arrangements, the nature of UK research
assessment left Wales and Scotland little option but to participate
in a system the devolved administrations had little role in designing.
10. Since this announcement on a new research
assessment system in 2006 the UK Government has gradually adjusted
its policy on research assessment in the wake of an "evidence
based" critique from many quarters. Indeed, DIUS announced
recently there will be a peer review element to research assessment
across all academic disciplines including the "hard"
This is a welcome development but as this illustration indicates,
a policy making process that involves consultation with the devolved
administrations on matters that have clear cross border ramifications
can help to improve the policy making process.
(ii) Cross border issues in relation to science
11. Responsibilities for science policy
in Wales are shared between the UK Government and the Welsh Assembly
Government (WAG). On the one hand WAG funds research conducted
in science departments in Welsh universities through HEFCW (via
"Quality Related" grant, the Research Infrastructure
Fund and the Reconfiguration and Collaboration Fund). This investment,
strictly speaking, comes under the heading of "HE research",
which is devolved and as such, WAG receives a Barnett formula
"consequential". On the other hand "science policy"
in a stricter sense is a UK Government responsibility for which
the Assembly Government receives no specific Barnett formula monies.
12. Despite this joint responsibility for
science, the Assembly Government issued its own strategic documentA
Science Policy for Wales (2006)that
set out the Assembly's vision for science in Wales. This Assembly
science policy set out certain key priority areas for science
research in Wales. However, this new Assembly science policy lacked
any additional funding for the science base in Wales from the
UK or Assembly Governments. This situation has not altered in
the three year budget allocations (2008-09 to 2010-11) announced
in the Assembly Budget confirmed in January 2008. This lack of
a strategic science fund to underpin the Assembly policy was agreed
in spite of the clear recommendation of the National Assembly's
Enterprise Committee in 2006 that significant additional investment
in the science infrastructure in Wales was necessary.
13. Assembly Ministers have stated that
lack of a new science investment fund to support the new science
policy is due to the fact that science policy is not strictly
devolved. This would not prevent WAG from establishing a science
investment fund using its general executive powers.
There are also clear precedents where the UK Government has invested
directly in strategic science projects in regions of England in
for which Barnett "consequentials" would not have come
to Wales. Moreover, we are not aware of equivalent investments
by the UK Government in Wales.
14. HEW therefore believes that the Welsh
Assembly Government (WAG) should be working closely with DIUS
to explore the potential for a joint WAG/DIUS science investment
fund and/or the location of a DIUS "strategic science site"
in Wales (as has been developed in the North West and in Oxfordshire).
HEW does not believe that sufficient policy collaboration in this
area of cross border policy responsibility is occurring between
WAG and DIUS, despite the recent appointment of an (interim and
part time) Assembly Chief Scientific Officer.
This need for strategic investment by the UK Government is especially
important as Wales has a very low number of UK Government funded
National Research Institutes compared to parts of England.
15. Northern Ireland has recently been granted
significant new investmentabove and beyond the Barnett
formulaby the UK Government to enhance collaborative research
in the form of a new Northern Ireland Innovation Fund.
This investment will total £500 million over a number of
years. No equivalent "above Barnett formula" investment
on innovation from the UK Government has been forthcoming for
Wales, despite the fact that Wales has lower Gross Value Added
per head than Northern Ireland. While appreciating the political
reasons for pump priming research in Northern Ireland, the fact
that Wales is the poorest part of the UK and the least productive
part of Britain
should also justify strategic investment measures from the UK
Governmentas has been the case in English regions (eg Daresby)
16. Such a joint WAG/DIUS approach to science
policy in Wales is particularly important because the One Wales
Government's first budget (approved in January 2008) does
not contain indicative allocations even in 2010-11 for the One
Wales commitments to establish a National Science Academy
or a National Institute for Health Research. Without additional
investment, these new entities will either have no impact or have
to be created from resources "top sliced" from the existing
(and deficient) HE budget in Wales. In particular we are concerned
that the Assembly Government's interim Chief Scientific Officer
has not been charged with looking at how the Assembly's science
policy can be implemented in concert with the extant DIUS policies
on science and innovation, or look at how a new National Science
Academy could develop the Welsh science base.
17. Higher Education Wales is therefore
concerned that the cross border policy responsibility for science
in Wales is not receiving the necessary fiscal priority from either
the UK or Welsh Assembly Governments to enable a step change in
the development in a knowledge based economy in Wales. This issue
needs to be addressed urgently by the two governments given the
overlapping nature of funding and legal responsibilities in this
crucial area. In summary, HEW is asking that WAG and DIUS Ministers
to work together to explore the potential for a Strategic Science
Fund for Wales in order to develop the science base in Wales.
(iii) Cross border issues and health policy
18. HEW would wish to see a greater degree
of policy co-ordination between the UK administrations on the
issue of workforce planning for health professionals given that
there is, in effect, a single labour market for health professionals
across the UK. Proposals to radically reform medical education
in England, for instance, must be made in consultation with those
organising medical education in the devolved administrations if
the NHS, as a coherent UK entity, is to remain.
19. Cross border coordination of health
researchfunded by the Medical Research Council at a UK
level and by the NHS at a devolved levelis also vital for
universities in Wales. NHS Wales Research and Development in Wales
(funded by the Assembly) runs at about half the proportionate
level of that in England, putting Welsh clinical departments at
a competitive disadvantage when bidding for other UK and European
research grants. In this area it is also important that the new
UK Office for the Strategic Coordination of Health Research (OSCHRwhich
was set up in the wake of the Cooksey Report)
takes the views and priorities of health researchers in Wales
fully on board before recommending its strategic approach to clinical
research across the UK.
(iv) Cross border issues and student flows
20. Welsh universities are particularly
successful in attracting students from the rest of the UK and
increasingly successful in retaining graduates in Wales.
HEFCW's evidence to the committee outlines in detail the current
position in relation to cross border flows of students. As HEFCW
notes, HEW is jointly conducting research with the funding council
on reasons why students apply to universities in Wales and monitoring
any emerging trends in cross border student applications and acceptances.
21. Cross border flows of students have
the potential to benefit the Welsh economy. Universities in Wales
do well for our nation by attracting a net 9,000 students from
the rest of the UK into Wales in 2005-06. Once student expenditure
and multiplier effects are factored in these 9,000 students generated
a £52 million output to the Welsh economy.
22. It is also worth noting that Wales's
success in attracting students from across the rest of the UK
and beyond will become increasingly important as the effects
of demographic change in the 18-21 age group takes place. According
to newly published projections England is the only part of Britain
that can expect any growth in home full time undergraduate student
numbers (+3.3%) by 2027 while Wales and Scotland will face reductions
of -2.0% and -3.6% respectively. As a Universities UK commissioned
report on demographics concludes, this relative change "may
lead to increased cross border flows especially to HEIs in Scotland
23. Given these projections, it is important
to bear in mind the potentially negative consequences of policy
measures to engineer a more "insular" Welsh undergraduate
student market, as this could lead to considerable difficulties
in maintaining overall student numbers at universities in Wales.
This point is also particularly important because, unlike DIUS
(which has announced 60,000 more funded full time student places
and the Scottish Government,
the Assembly Government has announced no policy of expanding full
time funded student places. The Assembly Government has also expressed
scepticism about the need for adult skills targets as recommended
in the Leitch Report
and has referred the issue to its new Wales Employment and Skills
Board for future consideration. As the Leitch skills targets have
the potential to drive policy and investment decisions in Wales,
Higher Education Wales would be concerned if Wales did not adopt
a high level skills participation target at a time when England
was pursuing targets that are even more ambitious than those set
out in the Leitch Report.
(v) HE FundingA cross border "cost
base" tied to diverging investment policies
24. A very large proportion of the cost
base for universities in Wales is determined by collective agreements
made at a UK levelbe they in relation to pay or pension
costs. Universities in Wales therefore manage a paradoxical situation
whereby their cost base is largely fixed at a UK level while their
funding allocations are agreed at a Wales level. This particular
challenge has occurred at a time when there is an increasing divergence
across the UK in the relative levels of HE fundingwith
Scotland and England pursuing a policy of investing in HE while
the Assembly Government has chosen to freeze the HE unit of resource
in real terms since 2001-02.
25. This divergence in HE funding has led
to the emergence of a growing investment gap between universities
in Wales and those in Scotland and England. The size of the gap
has grown to such an extent that it now represents 19% of total
HE grant in Wales. An even larger investment gap exists between
Wales and Scotland. A position of equal funding between the HE
sectors in Wales and England in 2001-02 has rapidly deteriorated
and developed into a substantial HE investment gap which totalled
£61m in 2005-06 (the latest available figures) according
to HEFCW statistics.
26. The magnitude of the investment gap
is set to grow further up to 2011 as a result of recent HE investment
decisions in the three home nations. A Universities UK analysis
of the HE settlements in Wales, Scotland and England as a result
of CSR 2007 demonstrates that, for the third consecutive CSR period,
the HE sector in Wales will receive the worst HE settlement in
Britain. Given the nature of this recent HE settlement in Wales
it is quite possible that the teaching unit of resource for universities
in 2008-09 will be cut in real terms. At the same time, DIUS has
guaranteed that the unit of resource in England will increase
in real terms throughout the CSR period 2008-09 to 2010-11.
27. When all universities are facing an
unprecedented series of cost pressures from increased pension
costs, the costs of pay modernisation and a new pay settlement,
the relative financial burden of the increasing "cross border"
cost base on Welsh universities will be highly disproportionate
as a result of the escalating investment gap. Such persistent
underinvestment from the Assembly Government will significantly
frustrate the ability of universities to create a knowledge economy
at a time when Wales's economic performance is lagging well behind
the rest of the UK.
28. An important example of where differences
in national HE policy could have an important impact on the ability
of universities to thrive in the future is in the area of fundraising.
In 2006 the UK Government announced that universities in England
would benefit from a matched fundraising scheme under which donations
to universities would be partly matched with monies from DIUS.
The total financial support for fundraising in English HEIs would
total £200m over the CSR period.
29. The Assembly Government has yet to announce
a similar matched fundraising scheme in Wales. Cross border impacts
of the decision to support giving to universities in England but
not Wales may become clearer as the DIUS scheme comes into being.
There are fears that charitable foundations or donors who may
have considered giving to universities in Wales may not consider
donating because their contribution would not be matched by government
funds, whereas a donation in England would attract that support.
This might have the effect of displacing donations from universities
in Waleswhich would be a highly undesirable unintended
consequence of choosing not to adopt a similar scheme. If the
Assembly Government does establish a matched fundraising scheme
in Wales it is crucial that funding for the scheme is not "top
sliced" from existing Assembly investment plans for HE but
is truly additional to planned expenditure.
(vi) Cross border issues and general HE policy
30. In an area of public service delivery
that has a crucial UK dimension the need to a develop policy with
cross border ramifications in mind is essential. Devolution means
that decisions on policy should rightly be made in Wales taking
into account Welsh needs, but this should not discourage voluntary
policy coordination between the UK administrations where
the nature of the policy area concerned has crucial cross border
elements. As we have seen, decisions in Scotland, Wales and England
have clear mutual impacts which merit discussion and careful consideration
before major decisions are taken.
31. Though we note that the three HE Funding
Councils meet regularly and frequently, we understand that there
are not formal regular and frequent meetings of senior HE officials
in DIUS, WAG and the Scottish Government at which emerging policy
developments in the three home nations are systematically discussed.
This does not seem to be a sensible state of affairs and we hope
that the Welsh Affairs Committee will recommend that proper formal
channels between UK HE policy making officials are established
as soon as possible. The nature of the UK Civil Service should
allow such confidential discussion to take place.
32. The result of a wholesale review of
Higher Education in England announced by the DIUS Secretary of
State, John Denham, in February 2008
will doubtless have a huge cross border impact on Welsh universities.
With ten major strands of work covering all aspects of HE, the
DIUS review is both in-depth and wide ranging. Without proper
input from the devolved administrations there is a danger that
the DIUS review of HE in England may stray into areas of UK competence.
This holistic HE review in England will also take place alongside
the major review of the level of permissible "top up"
fees in England beyond 2010. This decision on top up fees alone
will have an enormous impact on universities in Wales and it is
crucial that the impacts on, and potential policy responses to,
such a decision in Wales should be considered very soon by the
Assembly Government and HEFCW.
33. We have, as yet, had no statement or
indication from the Assembly Government about how it will interact
with or feed into the DIUS HE review. The Assembly Government's
Remit Letter to HEFCWissued in March 2008 (after the DIUS
HE review was announced)also makes no mention of the DIUS
HE review or how WAG may contribute to or monitor the review.
This is clearly a cause for concern for the HE sector in Wales.
The involvement of the Assembly Government in the DIUS HE review
could be very timely as the Education Minister, Jane Hutt AM,
has announced a review of the HE performance targets contained
in the Assembly Reaching Higher strategy (these targets
are due to expire in 2010).
34. Direct discussions between the four
UK Higher Education Ministers is therefore a key priority to ensure
a basic level of policy coordination. HEW believes that it would
be appropriate for the four HE Ministers to meet regularly and
frequently to discuss cross border issuesespecially during
the period of the DIUS HE review. The Joint Ministerial Committee
(JMC) with its "plenary" and "functional"
committees was established after devolution in 1999 to enable
cross border issues to be considered in the policy making process.
35. HEW is pleased to hear that, after a
six year lapse, the JMC has now been re-established by the Secretary
of State for Wales, Paul Murphy MP. We would suggest that the
coordination of HE policy across the UK should be a top priority
for the JMC in the next 18 months. In particular, we would wish
to see a "functional" JMC established constituting the
HE Ministers and senior officials of the four UK administrations
to consider the future of HE policy in the light of pivotal decisions
that will be made in 2009 or 2010 as a result of the these DIUS
reviews. These are not pedantic points about processesthis
seems to be the only formal and established way in which the substance
of cross border HE impacts can be fully aired and factored into
the decision making process. We hope that the Committee will echo
this point in its final report.
36. Universities in Wales see the cross
border nature of higher education both as a strength and a future
opportunity. Indeed, the success of universities in Wales is dependent,
not only on our ability to engender skills and prosperity in our
local communities, but in our ability to secure cross border students,
research funding and business partnerships which will in turn
directly benefit our communities.
37. In order to optimise these cross border
opportunities for Wales, universities need a policy framework
at a Wales and UK level that facilitates this positive cross border
activity and does not inhibit it. We trust thatas crucial
decisions are made about the future of the HE sector by the Assembly
Government and the UK GovernmentMinisters and officials
at the different levels of government will collaborate fully with
each other and the HE sector to ensure that universities are assisted
in our efforts to create a learning society and a knowledge economy
23 Other than turnover figures the statistics in this
section relate to 2005-06. The HEW evidence to the Assembly's
Enterprise & Learning Committee's Inquiry into the Economic
Contribution of HE provides more details on these impacts: Back
The "Government Office for Science" based in DIUS-formerly
the Office of Science and Innovation. Back
The "Research Assessment Exercise" which measures research
excellence according to peer review and other indicators. Back
The March 2006 HM Treasury proposals on research assessment proposed
that all Funding Council research allocations be based the results
of quantitative bibliometric indicators. Back
Enterprise Committee Report "A Review of Science Policy in
Wales", page 50, point 10. Back
Indeed, the North West Development Agency-a mere regional quango-has
established its own Science Investment Fund in recent years. Back
The DTI's Office of Science and Innovation directly invested at
least £8m of UK Government science funding money in the Daresby
Science Park, to supplement large allocations made by the UK Research
Councils. See Note 1 in the DTI press release here: http://www.interactions.org/cms/?pid=1024417 Back
The interim Assembly Chief Scientific Officer (CSO) has primarily
been charged with scoping the role of a permanent Assembly CSO. Back
See HM Treasury Press Release 35/07:
See the Report from Boddy, Prof M, Hudson, J, Plumridge, A and
Webber, D of the University of the West of England and the University
of Bath to the Welsh Assembly Government's Economic Research Advisory
Panel entitled "Understanding Productivity variations between
Wales and the rest of the UK" (Nov 2006): Back
For more information see: www.nihr.ac.uk/about_oschr.aspx Back
According to the most recent figures Wales retains a greater proportion
of graduates than seven out of nine English regions outperforming
"equivalent" regions in England such as the South West
or the North East. Also notable is the fact that more than two
thirds of postgraduates stay to work in Wales-a higher rate than
all but one English region, including London. See table 2 in the
HESA/Assembly Government publication: "Destination of Leavers
from HE in Wales" published in February 2008: http://new.wales.gov.uk/docrepos/40382/40382313/statistics/post16/post162008/sb6-2008a.pdf?lang=en Back
Estimates based data from the Student Expenditure Survey with
multiplier effects calculated according to a University of Strathclyde
econometric model. Back
See p 38 of the UUK Report "The Future Size and Shape of
the HE sector in the UK" Universities UK (2008). Back
See the DIUS Secretary of State's January 2008 Letter to HEFCE:http://www.hefce.ac.uk/news/HEFCE/2008/grant/letter.htm Back
Which announced a small increase in funded student places for
2008-09 in its circular http://www.sfc.ac.uk/information/info_circulars/sfc/2008/sfc1008/sfc1008.html,
despite a static 18-21 year old demographic cohort. Back
See comments critical of the concept of national adult skills
targets as recommended by the Leitch Report from the acting Director
of the Department of Children, Education, Lifelong Learning and
Skills on 16 April 2008 at the Assembly's Enterprise and Learning
Committee (p 22-23). Back
DIUS has announced an additional interim level 4 skills all age
attainment target of 34% in England by 2014. See:
See: http://22.214.171.124/The_Funding_Gap_2005_06.pdf Back
See the speech by John Denham MP announcing the DIUS HE review