Monday, 25 November 2013

Welsh tuition fee policy under scrutiny

The Welsh Government's tuition fee policy was recently revealed by
the Wales Audit Office to have cost more than expected.
But does that headline tell the whole story?
(Pic : BBC Wales)
Last week, serious questions were raised about the Welsh Government's tuition fees policy, whereby they subsidise tuition fees for Welsh-domiciled students regardless of where in the UK they choose to study.

The Wales Audit Office (WAO) revealed the policy's cost – to date - ~£150million more than expected. That's because - in shorthand terms - the tuition fee cap was higher than the financial assumptions the Welsh Government used to base its final policy on.

In a related matter, Education Minister Huw Lewis (Lab, Merthyr Tydfil & Rhymney) recently ordered a two year, cross-party review into higher education funding.

The opposition have welcomed the review, albeit with reservations. Plaid Cymru have agreed to participate but would prefer to draw up their own long-term plans. The Lib Dems and Conservatives questioned its timing, as it was confirmed the review won't report back until after the 2016 Assembly elections, which could impact individual party's ability to draft alternative policies. However, the policy is effectively locked in until 2017 anyway.

The Assembly's Finance Committee are currently undertaking their own inquiry into Higher Education Finance. So this is likely to be a key education issue through 2014.

It's worth looking into the WAO's report closely, because - as I read it - it's perhaps not quite as serious a situation as it's been made out to be.

The Key Findings of the WAO report

You can read the report yourself here (pdf).

1. Policy appraisal concerns.

At the time the policy was being drawn up, 51% of students studying at Welsh universities were Welsh-domiciled, while 47% were English-domiciled. Around a third (34%) of all Welsh-domiciled students study in England too, making cross-border movement more important in terms of planning to the (then Labour-Plaid) Welsh Government than elsewhere in the UK.

The WAO say the Welsh Government wanted to "respond quickly" to Westminster's decision to raise the tuition fee cap to £9,000 per year. As a result, WAO say there was "limited engagement" between the Welsh Government and funding body, HEFCW, in terms of formulating a response.

Officials drew up six scenarios, each of them – except one – based on £9,000 tuition fees in Wales, England and Northern Ireland.

The Welsh Government only expected "elite" universities to charge the maximum £9,000; or universities to charge £9,000 for high-cost courses (like sciences), and £6,000 for low-cost courses (like liberal arts).

Officials decided a financial model based on a £7,000 average fee would, therefore, be appropriate. The Welsh Government's chief economist agreed, albeit with some concerns about the strength of the evidence.

However, HEFCW weren't given the opportunity to challenge the figures, and believed the £7,000 assumption was "too optimistic". They were proven right.

So there was a mismatch between the financial models originally drawn up (based on a £9,000 fee) and the £7,000 average fee assumption the Welsh Government decided its final policy with. Subsequently, the WAO claim the "appraisal (of the six options on the table) failed to conform to best practice."

The Welsh Government have since updated their models, meaning the policy will cost £809million between 2012-13 and 2016-17 - £156million more than originally forecast.

2. Issues with tuition fee policy implementation

WAO say both the Welsh Government and HEFCW have implemented the tuition fee policy "effectively", but they have concerns about :
  • Changes to part-time tuition fees – These haven't progressed "as the Welsh Government intended", but there was wide support to put decisions on hold. WAO say there needs to be longer-term certainty as part-time tuition fees are currently unregulated.
  • Processing student finance applications – Welsh Government plans to centralise student finance through the Student Loans Company (currently on hold due to problems in England) need to address weaknesses in the system. It was investigated as part of the Higher Education (Governance and Information) Bill (due to pass next week), and there are concerns about possible fraud depending on how "ordinarily resident in Wales" will be defined and enforced.
  • The role of HEFCW – WAO say HEFCW handled the tuition fee policy well, but some of their work – like keeping a limit on non-Welsh UK and EU-domiciled students, and cuts to postgraduate course funding – has led to criticism from universities.

3. Financial health of Welsh universities

I think it's worth pointing out that the main headline finding from the WAO report seems to have flown over people's heads : the finances of Welsh universities are said to be "in good health" and "generally sound". That's the most important thing, and is perhaps good news for the Welsh Government. Good news is hard to sell though.

Income at Welsh universities is up year-on-year, mostly as a result of higher tuition fees. Although surpluses are said to be falling - which could put Welsh universities at a competitive disadvantage in the medium-term – Welsh universities are set to continue to have strong cash resources and reserves.

The Key Issues

Because the higher than expected costs have been absorbed by the Welsh Government - seemingly without any major problems - then this perhaps isn't as serious as it could've been.  It's fairly normal for government departments to run up unexpected cost overruns, even with the best plans and estimates in place.

As the - then - Education Minister, Leighton Andrews (Lab, Rhondda), said himself (and it's there in the WAO report) officials knew about the financial impact a £9,000 cap would have and planned for it. Though they rushed the process, you can see why they wanted to work with averages if time was running out to come up with a response.

Perhaps the most important issue - which doesn't seem to have been mentioned elsewhere - is the absence of key input from HEFCW, who were clearly concerned about the "optimistic" use of an average £7,000 tuition fee when finalising the policy. HEFCW are effectively in charge of distributing HE finance, so brushing them off seems a poor decision.

Another issue surrounds whether the whole cabinet knew of the potential financial risks of a £9,000 cap when the policy was decided, though the report says Leighton Andrews and other "certain cabinet members" knew. According to Toby Mason, that includes former Deputy First Minister, Ieuan Wyn-Jones. It should've been made available to the whole cabinet though in order to them to make a properly informed decision.

Sticking with the policy as it was seems both commendably stubborn (Leighton Andrews trying to do good by Welsh students) yet regrettably short-sighted - to the tune of £156million.

So the heart was there, the head was not. It was clearly rushed policy, but not without some thought behind it. This isn't an AWEMA or a RIFW, though it's no doubt very embarrassing for Cathays Park.

The principle of the tuition fee policy is fine (if controversial), and in some respects quite commendable. However, in straightened time, such policies should perhaps only apply to Welsh-domiciled students studying at Welsh universities; though a reduced subsidy for Welsh domiciled students studying elsewhere might be appropriate (or a full subsidy applying to certain key courses, like medicine and nursing).

It's for the forthcoming review and Finance Committee inquiries to ultimately decide, I suppose.
UPDATE : 26/11/13 : BBC Wales report that the First Minister has published the cabinet papers and minutes from the day the tuition fee policy was decided in November 2010. It appears the final decision was based on a £7,000 average fee assumption, with passive references to the prospect of higher fees being set immediately.

That pretty much corroborates what Leighton Andrews has said and it doesn't really change anything. But you still have to ask whether the cabinet were able to make a fully informed decision based on the information that was presented to them?


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