House of Commons - Welsh Affairs Committee

Cross-border provision of public services for Wales: Further and higher education - Welsh Affairs Committee Contents

Memorandum submitted by Higher Education Wales

ABOUT HIGHER EDUCATION WALES (HEW)

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.[23] The HE sector in Wales:

— had a turnover of over £1 billion in 2006-07;

— 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.

INTRODUCTION

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 service—locally 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 research—where 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 boundaries—within 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 years—a 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 Scotland—which operate on an "arms length" basis—then 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 England—but 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,[24] 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[25] 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 altogether[26]—against 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" sciences.[27] 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 policy

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 document—A Science Policy for Wales (2006)[28]—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.[29]

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.[30] There are also clear precedents where the UK Government has invested directly in strategic science projects in regions of England in recent years,[31] 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.[32] 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 investment—above and beyond the Barnett formula—by the UK Government to enhance collaborative research in the form of a new Northern Ireland Innovation Fund.[33] 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[34] should also justify strategic investment measures from the UK Government—as has been the case in English regions (eg Daresby) on occasion.

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 research—funded by the Medical Research Council at a UK level and by the NHS at a devolved level—is 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 (OSCHR—which was set up in the wake of the Cooksey Report[35]) 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.[36] 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.[37]

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 and Wales".[38]

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 in England[39]) and the Scottish Government,[40] 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[41] 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.[42]

(v) HE Funding—A 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 level—be 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 funding—with 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.[43]

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 Wales—which 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 coordination

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[44] 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 HEFCW—issued 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 issues—especially 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 processes—this 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.

CONCLUSION

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 that—as crucial decisions are made about the future of the HE sector by the Assembly Government and the UK Government—Ministers 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 in Wales.

http://www.assemblywales.org/bus-home/bus-committees/bus-committees-third-els-home/bus-committees-third-els-agendas.htm?act=dis&id=66756&ds=11/2007.

http://new.wales.gov.uk/docrepos/40382/40382313/293077/40382322021/res-productvar.pdf?lang=en

http://bookshop.universitiesuk.ac.uk/downloads/size_and_shape.pdf

http://www.assemblywales.org/bus-home/bus-committees/bus-committees-third1/bus-committees-third-els-home/bus-committees-third-els-agendas/el20080416qv.pdf?langoption=3&ttl=EL%283%29-10-08%20%3A%20Transcript%20%28 PDF%2C%20190kb%29

http://www.dius.gov.uk/speeches/denham_hespeech_290208.html

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

24 The "Government Office for Science" based in DIUS-formerly the Office of Science and Innovation. Back

25 The "Research Assessment Exercise" which measures research excellence according to peer review and other indicators. Back

26 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

27 http://new.wales.gov.uk/about/departments/dein/publications/science-policy-2006?lang=en Back

28 http://new.wales.gov.uk/about/departments/dein/publications/science-policy-2006?lang=en Back

29 http://www.assemblywales.org/606d2dc8f8b45dc7c9854cfec2b0d5ae.pdf Enterprise Committee Report "A Review of Science Policy in Wales", page 50, point 10. Back

30 Indeed, the North West Development Agency-a mere regional quango-has established its own Science Investment Fund in recent years. Back

31 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

32 The interim Assembly Chief Scientific Officer (CSO) has primarily been charged with scoping the role of a permanent Assembly CSO. Back

33 See HM Treasury Press Release 35/07:
http://www.hm-treasury.gov.uk/newsroom_and_speeches/press/2007/Press_35_07.cfm Back