Ireland: budgeting in hard times

Whenever the Irish government announces its annual Budget, public and media attention focuses in particular on changes in taxation and benefits; and that is understandable. For higher education the far bigger story, which tends to get buried in the news coverage, is the announcement of the annual expenditures – the sums of money the government proposes to spend on public services and departments. This used to be known as the ‘Book of Estimates’ and, until recently, it was published separately in advance of the Budget.

Yesterday the Irish government produced the Estimates alongside the Budget, and the details can be found here. To see the higher education story, you ned to turn to pages 152-3. During 2014 current expenditure on higher education will be €1.45 billion, or around €62 million less than was allocated for 2013, roughly amounting to a 4 per cent cut. Elsewhere in the Budget documentation some of that is explained by suggesting that universities have surplus cash balances. It is also worth noting that capital expenditure for higher education will be €32 million, which is probably payment for already committed projects and, in practical terms, suggests a zero capital investment in the sector.

Elsewhere in the Estimates there is a cut of 7 per cent to the ‘Innovation’ budget in the Department of Jobs, Enterprise and Innovation; this is likely to mean a drop in spending on research and the promotion of industry R&D.

These are of course still difficult times for Ireland. But there is a marked difference here between the way higher education has been handled in the Irish Budget and the way it has been addressed recently in the expenditure plans of the Scottish government. A small economy relying to a major extent on inwards investment cannot afford to starve higher education. Making Irish higher education competitive with those economies that could also attract high value investment should be a priority. It must be hoped that this goal is not being abandoned.

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Irish higher education and the 2012 Budget

Throughout my time as President of Dublin City University the annual statement of public expenditure – the so-called Book of Estimates – was a nail biting event. It was also an odd one, because this was how I found out, nearly three months into the financial year, what allocation I could expect from the government for that year. It was never a process that made much sense.

Anyway, here I am in Scotland, but there goes the process again back in Ireland: yesterday the government announced, as the first stage in the annual Budget dance, what the public expenditure estimates are to be for the coming year; though on this occasion it has also announced what sort of thing will happen in the two years to follow. And overall it is not a pretty picture for the universities.

Last year the government allocated €1,177,032,000 to the sector. For 2012 the allocation is €1,119,694,000, which represents a cut of 5 per cent. This is a larger cut than that applying to education overall, at 3 per cent. The government has also announced that there will be further (albeit smaller) cuts in the two subsequent years.

The government has also declared that the ‘student contribution charge’ will go up by €250, but this will not come anywhere near compensating for the funding cut.

Irish higher education is already dangerously under-funded. Every survey conducted has found the same thing: that substantial additional money is needed to allow Irish universities to compete on an international stage. We have now been told that there will be continuing cuts over the coming three years. It has to be emphasized that this is not an environment in which Irish higher education can carry out the tasks necessary for economic and social revival. To avoid a major collapse in morale, the government needs to declare now how it intends to handle higher education through the rest of this decade, and how it will enable the sector to meet expectations made of it. Otherwise Ireland will slip into a third world higher education system by stealth. There is very little time.

Irish Budget 2011: the key higher education figures

The impact of the Budget and Estimates on higher education can be worked out here, and may be summarised as follows.

• Overall the Education and Skills vote is down 2.6 per cent compared with the expected 2010 outturn (but marginally up on the Estimates figure this time last year).
• The higher education vote is down substantially: 7 per cent, from €1,194,183,000 to €1,112.717,000. Although I have not yet been able to track how the new student contribution is being factored in, I suspect this means that the increase is being clawed back by the government – though this in turn may mean that the net position to  universities is less severe than the above figure implies.
• PRTLI expenditure for 2011 is being estimated at €55m, which suggests that most of the investment for Cycle 5 will be taking place after the next 12 months.
• The science and technology development budget in the Department of Enterprise, Trade and Innovation for 2011 is €320m, which presumably takes in Science Foundation Ireland. The sum is a 9 per cent increase on 2010.

More analysis later.

Assessing the Budget and Estimates

Now that the details of the Budget and the Book of Estimates have become clearer, it is possible to say that, on the whole, it could have been worse. Even after all details have been accounted for, higher education will still have been treated less generously than primary or secondary, but that is often the case at times of pressure on public finances. It now appears that the revenues generated from the increased student registration charge will be available to the universities and colleges. This will mean that, overall, the aggregate income between fees, recurrent grant and registration charge will leave the universities with more or less the same income from the State as last year – which, however, means a cut in real terms of over 6 per cent.

There is, as I have noted previously, a fairly generous increase in capital spending, but for the moment I do not know what it is for, and I suspect a lot of it is for building projects already authorised. I also understand that PRTLI Cycle 5 will be announced shortly, although expenditure under it will not be possible for over a year.

The one item about which I confess I am disturbed is the decision to compel the Irish Universities Quality Board (IUQB) to transfer its business to a new State agency created from a merger of three existing ones – HETAC, FETAC and the NQAI. I believe that this move is a mistake, and could lead to an unacceptable bureaucratisation of quality assurance. But I suppose I should withhold judgement until I know more in the way of detail about these plans.

The year ahead – or more likely, the years ahead – will be tricky for universities, and it will be hard to innovate. But we shall address the situation positively in DCU.

The Budget and Book of Estimates – what awaits us?

On Tuesday of this week we will know our fate for the coming year. Or rather, we’ll have a bit more information about our fate. Of course we all know the difficulties faced by the Government in putting some order back into the public finances after the major erosion just experienced of tax revenues. And we have been told to expect that we will be badly hit.

For those who may not be aware of the distinction, on Tuesday the Government will announce both the Budget for 2009 and the Book of Estimates. The former deals with changes to fiscal policy and related matters, while the latter sets out what the Government proposes to spend from tax revenues in the coming year. In the past, the two were announced separately, with the Estimates coming first, followed a few weeks later by the Budget. Last year the Government put both together in one announcement, and this year the same was planned again, and was to take place in December. But because of the rapidly deteriorating position of the public finances, and because of the global financial and economic crisis, the Government brought this forward to October 14.

Whatever is to happen on Tuesday has already been decided as I write this – but I hope that it will not undermine the viability of Ireland as a knowledge society. Much depends on that, and in particular our ability to escape from a longer term economic downturn and the erosion of high value, knowledge-intensive investment.

I believe that the Estimates in particular will also clearly demonstrate the futility of the view that Irish higher education can successfully be funded by the taxpayer alone. We need to raise the ambition levels for Irish universities, and to do so with a level of funding that the taxpayer simply cannot afford.We cannot aim to be a leading knowledge economy while maintaining universities funded like those of a developing country.

Keeping out of recession: the role of universities

Last week the Irish Government announced a key measure in its programme to deal with the downturn that has overtaken the economy and which has had such a dramatic effect on public finances. The announcement of the annual Budget and of the Book of Estimates (which sets out the public spending programme for the coming year) has been moved from December to mid-October. This decision is designed to show a determined approach to the management of the economy and also to convey a sense of urgency. It was generally praised in the media.

One of the consequences of this change in the calendar of events is that anyone who might have hoped to lobby the government on expenditure r Budget measures can now forget it – the timetable is too short for any such lobbying to be capable of having a practical effect. From the point of view of the universities, therefore, whatever has been decided on university funding is what we will get; what we say now won’t have much further effect. We don’t of course know what has been decided, but we can have a pretty shrewd guess. We know that, in common with all parts of the public service, we are to cut our pay bill by 3 per cent. And we know that fees (paid for students by the government under the ‘free fees’ scheme) are to raise by a small amount, significantly less than the rate of inflation. So we can guess that the other main component of public funding, the recurrent grant, will also be cut back significantly.

The government is in a difficult position, and must act decisively to correct the problems that threaten to undermine public finances. But it must also ensure that it takes the steps to enable the economy to avoid recession and to resume significant growth. Two of the key elements of that aim are the stimulation of new inward investment, and the encouragement of indigenous business through entrepreneurship and innovation. All of this needs to happen within a high value knowledge economy; we cannot any more return to a cheap labour market or low cost services.

The most important ingredient in all this is confidence: confidence in a consistency of policy, and confidence in the capacity of the institutions in Ireland to deliver high value. All of this requires strong and ambitious universities; if doubts emerge about the capacity of the universities to deliver highly skilled graduates and world class research, then it is unlikely that we can succeed in attracting business activity of the kind we now need. The Irish universities already operate on budgets which are typically half (on a proportionate basis) or less than are available to universities in the UK and the US; but we need to be able to persuade potential international investors that we are as good as those other universities. If our resources are cut even further that will become impossible.

It is, I suspect, difficult to make this case without it sounding like special pleading. But it is nevertheless true that, to a much greater extent than was the case in previous economic cycles, Ireland’s prosperity is now tied up with the health and confidence of the university sector. Much progress has been made on that in recent years, but it is now at risk, and if it falters it cannot be corrected quickly and easily. Universities are willing and eager to work with the government and with bodies such as the IDA to help lift us out of the economic downturn, and to do so while managing our resources prudently. But we also need the government to work with us, so that we can achieve these ends.

The right decisions need to be taken in October.