Business Irish

Thursday 20 July 2017

Danny McCoy: Failure to invest properly in higher education will damage our future economic prosperity

As a result of a lack of investment, we are seeing poorer education outcomes, overcrowded lecture halls and labs, deteriorating facilities and high student dropout rates. These will have severe economic and social consequences for decades. (Stock image)
As a result of a lack of investment, we are seeing poorer education outcomes, overcrowded lecture halls and labs, deteriorating facilities and high student dropout rates. These will have severe economic and social consequences for decades. (Stock image)

Danny McCoy

An unwillingness by Ireland's current parliamentary structures to take difficult decisions is demonstrated by the Government's latest proposal to plug the higher education funding gap with a 40pc increase in the levy paid by employers to the National Training Fund (NTF).

Apart from imposing additional costs on business at a time of economic uncertainty, the proposal does little to address the scale of the funding crisis facing higher education institutions. It is no more than a quick and very inadequate 'fix'.

Funding of our higher education system is of critical importance to our future economic prosperity. Last year, the report of the Expert Group on Future Funding of Higher Education, chaired by Peter Cassells, warned funding cuts and demographic pressures are seriously threatening quality within the education system.

Failure to invest in education now will place an entire generation of students and the future of this country at an unfair and significant disadvantage.

Over a decade ago, the Organisation for Economic Co-operation and Development (OECD) advised the government it was impossible to have quality higher education by relying on State funding. At that time, it suggested the introduction of tuition fees and an income-contingent student loan system.

This is more relevant today than ever before. The higher education system supports economic growth through the provision of skilled graduates. This cannot be achieved by relying on State funding alone. Between 2008 and 2014, total funding per student fell by 22pc and increasing student numbers are putting strains on the system. Ibec supports this recommendation as the situation becomes much more serious.

As a result of a lack of investment, we are seeing poorer education outcomes, overcrowded lecture halls and labs, deteriorating facilities and high student dropout rates. These will have severe economic and social consequences for decades.

While international rankings are an imperfect measure, the decline of universities will damage our reputation with international investors at a time when many companies are in search of a new home post-Brexit.

It also undermines our ability to attract international students and academic talent. Ibec believes there is an alternative approach to the Government's proposal to increase the national training levy paid by employers.

A redirection of a relatively small proportion of corporate tax receipts to higher education investment would deliver the same result, but more effectively.

This approach is derived from Ibec's broader analysis of the future of Ireland's corporate tax base. This base has become increasingly volatile in recent years, with significant windfall gains being brought about by new OECD base erosion and profit shifting (BEPS) rules. We are now calling on Government to ring-fence the burgeoning corporate tax receipts for investment the country needs, including in higher education.

While the higher education funding crisis has provided the impetus for the Government proposal, it also raises serious issues around the governance and use of the NTF. The fund raises €400m a year to upskill employees and jobseekers, but in reality it is little more than an earmarked tax. Despite the employer contribution, most of the programmes it supports have no employer input and are not measured for their impact on upskilling that is directly related to the labour market.

The businesses Ibec represents have suggested a number of measures with regard to the education programmes that are supported by the NTF. These include a cost-benefit analysis of the programmes; better governance structures, whereby employers have a direct input to decisions on training priorities and funding allocation; and a reorientation of the fund to demand-driven training schemes.

These could include a new cost reimbursement scheme which would enable employers to choose suitable training services to upskill their staff from individual accredited education and training providers. Also, programmes that have a proven track record in upskilling, such as apprenticeship schemes and Skillnets, should be expanded.

As the recovery gathers momentum, talent and skills are becoming more critical for companies that want to compete domestically and internationally and those looking to scale up. The ability of our education and training system to support this ambition is critical.

Business is willing to play its part in helping to solve the funding crisis. But the only credible solution requires that graduates, the State and employers share the costs. It also requires a commitment by Government to use the National Training Fund to support upskilling and labour market needs effectively.

Danny McCoy is CEO of Ibec

Irish Independent

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