Fees & University Funding

In 1996, the same year that China announced it was introducing university fees, Ireland informed its electorate that fees would be abolished.  The decision was taken quickly because of the political exigencies of the day. There was no consultation: the universities learned of the decision through the media. No attempt was made to explain how the decision would make Ireland a better place, or why Ireland was abolishing university fees at a time when most other developed countries were heading in the opposite direction. But the electorate demanded no explanation; the middle classes and well-to-do welcomed the decision enthusiastically. Why wouldn’t they? Now the population as a whole would be taxed to subsidise the university education of a minority: an experience disproportionately enjoyed by the children of the better off.  What was in fact a bid for the middle-class vote was vaguely dressed up in terms of encouraging access for the underprivileged. Quite a bogus concept, since low-income families already had access to a scheme that paid university fees and offered a living allowance.

The decision to abolish university fees falls into the same category as one made prior to the election of 1977 to abolish domestic rates. This was enthusiastically welcomed by home-owners who, under the circumstances, could not be expected to worry that local democracy was being undermined as its tax base was decimated. Nor was the point understood that central taxes would have to be increased to compensate for those not collected locally.

The 1977 decision to abolish domestic rates has gradually undermined and weakened local government. The decision of 1996 is now having a similar impact on Ireland’s universities.  Because both decisions are notoriously so difficult to reverse they fall into the ‘mortal sin’ category of electoral opportunism.

Weak local authorities are not good, but the reduction of Ireland’s universities to ‘walking wounded’ represents an even most serious threat to Ireland’s future prospects. Ireland’s recent prosperity was built on attracting foreign direct investment with low corporate taxes and a reliable flow of well educated talent from the educational system.  Competition in the emerging knowledge age is now a race for talent.  As other countries move to strengthen their universities and pump more resources into them Ireland, at the height of its prosperity, is doing otherwise. The universities that have played such a vital role in creating Ireland’s success and the very institutions that are so vital to sustaining it are now loosing ground to the competition.

Since fees were abolished in 1996 government core funding per student has in effect been cut by 42 percent. Not surprisingly the OECD, in a special review of higher education in Ireland, gave much advice on how the funding dilemma should be addressed if Ireland’s economic performance is to be sustained. It recommended that there be a quantum leap in funding and the reintroduction of university fees.  Since then these key recommendations have been ignored and rejected respectively.

Micheal Martin as Minister for Education and Science and Mary Harney as Minister for Enterprise Trade and Employment launched major research programmes totalling €1 billion in a creative national strategic bid for advanced investment and jobs.  The universities responded most excellently to the challenge, but to their astonishment at the same time that they were being called upon to build up international research reputations the two Ministers who succeeded Martin in Education thought otherwise, turned their back on the universities, and year after year have undermined the initiative by effectively cutting core budgets.

It can hardly be a surprise that since then Irish universities have been unable to keep pace with international competition: last year’s international ranking of universities failed to place any of the Irish universities in the top 100. Indeed only three of the seven made it into the top 500. Our competitor countries are not slow to mention to foreign investors the predicament of Irish higher education.

Given our electoral system it is quite understandable that the Government is reluctant to respond to the challenging OECD recommendation and reintroduce fees. When Noel Dempsey was Minister for Education and Science, he recognised the need to do this, but his intentions were so badly handled that his announcement, made without adequate preparation even at Cabinet level, was attacked from all sides.  His intervention made a bad situation worse and erected political hazard warnings all about the university fees issue.

This is unfortunate because with adequate preparation the case for reintroducing fees could be made either from a social perspective or from an economic perspective.  On the social side: why should the population as a whole be expected to subsidise the privileged minority who go to university and who are statistically predestined to be wealthy.  Or from the economic standpoint: why should the State intervene as it has and undermine the universities, suppress competition and market influences? Other countries have grappled successfully with the challenge of reintroducing fees, and offer models that have proven both socially equitable and effective.

The Australian funding system is perhaps the best in the world. There the universities, both public and private, receive fees from students.  But a student can elect to defer payment until one is employed and annual income exceeds a certain level. Then deductions are made through the income tax system over an extended period.  Graduates who do not reach the income threshold do not pay. But successful graduates commence to repay their debt to the state and to society when they are in a financial position to do so. The fees burden on parents is removed, the tax burden on the state is reduced, universities have discretion and resources to manage and compete, and the student, the source of revenue, brings market forces to bear on the universities.

The Australian system has been refined over the years.  It has been shown to be effective economically and socially.  The university system, that Australia considers vital to its future well being, has grown steadily in international standing. A healthy competition has emerged between the long-established public universities and the more recently-established private ones.

Because the fees issue was handled so badly previously, it is understandably that Minister Hanafin is reluctant to revisit the scene during this term of government and it is unrealistic to expect the reintroduced of fees prior to the next election.  However there is another certainty: during the coming years, as the consequence of an uncompetitive impoverished Irish university system becomes apparent and knowledge-driven investment and jobs start to bypass Ireland, the need for action will become obvious.

Time is not on Ireland’s side, and it would be wise therefore for university leadership to use the present period of neglect by government to prepare the ground for the abandonment of the current debilitating funding system and prepare attractive funding options based on those that work well in other countries. When the fees issue is revisited after the next election it would be helpful to government if it had good options for consideration that would permit it to move assuredly from current bad practice to international best practice.  I am confident that when the move comes it will be towards the socially equitable and market-driven Australian system.

If university leadership has learned a lesson from 1996, it will be proactive. Rather than waiting for government to come up with further spurious or superficial solutions, it will present government with carefully developed new funding options that have a realistic chance of being delivered politically: options that will enable the universities to fulfil their strategic roles as key drivers of growth and prosperity in the knowledge economy.

Prepared at the request of Cliff Taylor, Editor, Sunday Business Post

Dr Edward M Walsh is President Emeritus of the University of Limerick

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