COMMISSION ON THE POWERS AND ELECTORAL ARRANGEMENTS OF THE NATIONAL ASSEMBLY FOR WALES

 MINUTES OF PROCEEDINGS

 of the

EVIDENCE OF:

Roger Williams and Steve Martin

HIGHER EDUCATION FUNDING COUNCIL FOR WALES

held at

THE HILTON HOTEL, NEWPORT

on 23 MAY 2003

In Attendance

Lord Richard, Chair, Richard Commission

Tom Jones, Richard Commission

Paul Valerio, Richard Commission

Vivienne Sugar, Richard Commission

Dr Laura McAllister, Richard Commission

Peter Price, Richard Commission

Sir Michael Wheeler Booth, Richard Commission

Ted Rowlands, Richard Commission

Roger Williams, HEFCW

Steve Martin, HEFCW

 LORD RICHARD: Good morning. Thank you very much for coming. I am very grateful to you for giving us this opportunity to meet with you. I wonder if, before we start, you could identify yourselves for the purposes of the transcript and then if you would like to open up the discussion for us for perhaps five or ten minutes, and then we can pursue what it is you think we ought to pursue.

ROGER WILLIAMS: May I begin? Roger Williams, Chairman of the Higher Education Funding Council for Wales. If I can, perhaps, just briefly say that I have been Member of the Council since 1995 and served under the two previous Chairmen; I became acting Chair in the summer of 2000 on the death of Sir Philip Jones, and was appointed to the Chair about a year ago. My substantive career was in the academic world and I was Vice-Chancellor of the University of Reading, which was from 1992 to September of last year.

We are delighted to have the opportunity to explain our circumstances and problems and issues to you. I think the main feature of our particular sector is that in one sense devolution does not change the fundamental parameter and that is that the UK higher education system is a whole. Indeed, it can be argued that higher education internationally is a whole in the sense that the very best academics can move, particularly in the English-speaking world, without hindrance, and they do. That is not to say that all academics can do that, because their market values would not allow them to move freely around. But the very best do.

Indeed, it is a perfectly normal part of an academic career for people to spend some time in North America, in the United States. The problem is often, at the end of that, persuading them to come back because, sadly, the United Kingdom has not been kind to its academic community for the last 20 years. Salaries are poor and the unit of resource which the UK has sought fit to place with universities has steadily declined over that period. There has been some levelling off in the last two years but we are now below where we used to be.

The system in the UK is a whole and that means, in effect, that from the point of view of the academic - and really, I think, from the point of view of most students too - whether you go to university in England or Wales is something you barely notice. It happens to be where the jobs or offers are. Obviously, if you come from a part of the UK and you want to return there, you will be looking for a university in that part of the world, but the great number of academics are cross-flexible as to where they locate.

 LORD RICHARD: Do you include Scotland in that?

ROGER WILLIAMS: Not quite to the same extent, which is why I did not include Scotland in it. It is largely true of Scotland as well, but the Welsh and English systems are totally integrated. There is some sense in which the Scottish system has a degree of difference. There are still plenty of Scottish academics in English universities and English ones in Scottish universities and salary structures and so on are the same.

Dr LAURA McALLISTER: Is that more relevant to the teaching side than the research side, because there is a crossover on the research front?

ROGER WILLIAMS: By "the best academics" one tends to mean strongest in research and they are the ones who are mobile within the UK and mobile internationally.

So from our point of view a fundamental of our situation is to ensure so far as we can that the development of higher education in Wales keeps in step with that in England. This does not mean that there are not things we can do differently, and we like to think better, in Wales - and you might want to take up examples of that sort.

I have one particular one in mind: as a former English Vice-Chancellor I feel very strongly that Wales teacher education is rather better than England. We, the funding Council, have responsibility in Wales; in England a separate agency, the Teacher Training Agency, was established. If you will allow me, I can speak at long length, as would most English Vice-Chancellors, about that agency.

 LORD RICHARD: Shortly.

ROGER WILLIAMS: We can do things in Wales differently and we can do them better.

The other point to make at this stage is that as I look at the UK HE system at present, it seems to me on the threshold the largest change of any I have known in my career in HE, which stretches back to the mid-1960s. Arguably, the expansion at that time is a step of comparable kind, but the English White Paper published after a good deal of political discussion (so I understand) at the beginning of this year foreshadows a great many changes which we in Wales will have to note and to which we will certainly have to respond - not least, it portends the introduction of larger fees than the fees which were introduced in 1997, fees of the order of £3,000.

At the present time the position in Wales is that fees will not be charged during the time of this Assembly but some issue will certainly arise, and relatively soon, as to how institutions in Wales are to be funded if it is not through fees. That assumes, of course, that the fees will actually come about in England - I know there is still debate in Parliament about that - and it also tends to assume that most English institutions will elect, if allowed, to apply those fees. But if those two conditions apply then there will be a major issue which Wales will have to confront at that point.

TED ROWLANDS: Can I ask as a matter of fact, having seen those figures, what assumption is being made that if these fees are being introduced, how much money do the English universities expect to bring in to their coffers?

STEVE MARTIN: May I answer that? Perhaps I should introduce myself - I am Steve Martin, Chief Executive of the Council.

There is speculation about fees. It is quite difficult; there are so many parameters that determine it and I think it is just speculation at the moment. Assumptions range from 60-70% of institutions charging fees to a proportion of those charging a full fee; there is already a campaign running by some to have the fees at a higher level than the £3,000.

TED ROWLANDS: But there is no order officially?

STEVE MARTIN: No-one that has any authority.

ROGER WILLIAMS: Again, it would depend on how the other aspects of the university funding were left. If the Chancellor clawed more back because universities were taking fees, then the benefit would be less. So there is no hard and fast figure that everybody agrees upon at this point. The assumption in universities is very much though that this would be a significant new source of finance.

STEVE MARTIN: There is one other factor in this, which is the decision in England to create the Office for Fair Access (OFFA), which will have the power, subject to legislation, to have agreements drawn up by universities which OFFA will approve. One of the principal conditions that is intended in the English proposals is that those conditions should include major provision for bursaries. So, again, it is difficult to know what the net effect of the various changes would be on the income available to the institutions. The Assembly Government has made it clear that it does see the need for a regulator of that sort in Wales but would leave that task to the Funding Council.

SIR MICHAEL WHEELER-BOOTH: We have seen a report that the Clarke White Paper was produced without consultation with you in Wales. It is apparently the case; the article was by an academic in Oxford, but it did sound rather convincing.

STEVE MARTIN: May I comment on that? I cannot say what may have gone on behind the scenes between the Department of Education and Science and the Assembly Government. That may or may not have happened.

 LORD RICHARD:

But you were not consulted?

STEVE MARTIN: We were not consulted, no, though many of the ideas, obviously, in that White Paper were the subject of public debate and, indeed, of private discussion between ourselves. We have a very close relationship with the English Funding Council and certainly we were talking about the issues. How much that has an influence on what happens in a White Paper, I do not know.

SIR MICHAEL WHEELER-BOOTH: It is rather different being aware of the issues to being consulted about a draft White Paper.

TED ROWLANDS: You have observer status?

STEVE MARTIN: Yes.

TED ROWLANDS: You can sit in on their meetings?

STEVE MARTIN: Not only can we, but we do.

ROGER WILLIAMS: The fees issue is one. The same point you have been asking about is illustrated by a second issue in the White Paper and one which also concerns us in Wales, and that is a matter of research concentration. The distribution of research funds in the UK is a function in part of the distribution of grants by the Research Councils and charities and so on - in part, the consequence of an exercise conducted about every five years, called a research assessment exercise, which involves all the departments in all the universities.

It is open to the separate Funding Councils, when they have got the results of the research assessment exercise, to fund differently, and we do. So that, for example, after the last exercise (the results of which were published in 2001) England decided not to fund departments graded 3a and 4. In Wales we decided that we would fund such departments for the time being, although we would expect eventually not to do so as well.

The reason for that is that we have been concerned for the last eight or nine years - in fact before I joined the Council as a member - to improve the research in Wales relative to that in England. It needed such improvement. On a pro rata basis you would expect Wales to take about 5% of the total funds of the Research Councils, for example. Ten years ago it was nearer 3% - there was a large gap to be made up. We have had policies as a Funding Council to try and make that gap up, and we have had a lot of success. We have decided that because we lag in that sense, for us it would be good policy to continue funding 3a longer than England funding 3s. However, the White Paper, it seems to most commentators points to a still greater concentration of research in England than hitherto.

On one interpretation indeed - and I know that Vice-Chancellors outside the south-east would feel this - it concentrates research funds in the elite institutions in the south-east - Oxbridge, UCL, Imperial. We have our share of 5 star (which is the highest-ranking department) in Wales, but we would be hard put, with further concentration in England, to hold that position. If concentration in England depends in part on the size of departments, then again we would be disadvantaged because overall our good departments tend to be somewhat smaller than those in England. It is not absolutely uniform, but I think you see the problem.

Those are two aspects of this White Paper which seem to represent - indeed for the UK as a whole, not simply for Wales - major challenges as regards the future. The particular interpretation we put on them will determine the future of HE in Wales.

I should probably stop at that point and let you put your questions.

 LORD RICHARD: Can we take them one at a time? We will take funding first. What actually is the state of play on this between the Assembly and Westminster?

STEVE MARTIN: Sorry, I am not sure I quite understand. Do you mean in terms of relativities of funding, or how funding is determined?

 LORD RICHARD: How far has it got?

STEVE MARTIN: Over the years, from the lifetime of the Funding Councils back to the early 1990s, there have been ups and downs in the funding relativity per student. These calculations are also complicated by the fact that Wales educates a lot of English students and England educates a lot of Welsh domiciled students. But just taking the raw numbers, as it were, differences in the unit of funding have been mainly at the margin for most of that period. Most of the time Wales has been either slightly ahead or slightly behind - it has never been precisely the same.

TED ROWLANDS: The figure of 2001/2 was 5,323 in Wales and 5,281 in England. Is that still roughly the unit?

STEVE MARTIN: That is an historic figure. The point I was going on to make is that on the published figures from the last public expenditure round, the expenditure gap would now open up between England and Wales unless there was further action in Wales to make good that gap. That has not been true in the past, and that is obviously an issue that we are addressing with the Assembly Government.

I perhaps should add that one of the things that makes these comparisons so difficult is the amount of in year change there tends to be. So just as you think you have caught up, or England has caught up - for instance, after the last research assessment exercise, we were actually much better placed than England, because of prudent financial management, to make sure that the very much-improved performance by Welsh institutions was supported at a good level. In England they really struggled with that. Perhaps partly as a result of this kind of competitive environment, England has now got to the point where it has actually made good that gap and is now threatening to go past us significantly.

It is further complicated by the fact that in Wales the Welsh Assembly Government has produced the Reaching Higher strategy, which is the first strategy for higher education in Wales. It does say that the core to funding for higher education in Wales will be maintained at a level not higher than in respect of GDP increases year on year, and that additional funding will only be made available for reconfiguration and change which will make the sector more competitive for the future. The Assembly Government has already provided very substantial addition resources for that reconfiguration.

We are now going through a process with institutions; we have got three major merger proposals that are being considered, and the Assembly has said it will fund in response to that. This goes back more than a little to the point that Professor Williams was making just now about the issue of competitiveness and its relationship to concentration, particularly in research - and also in teaching. How do you get economies of scale? Wales has, relative to its size, a larger number of institutions than you would expect compared with England, and there is an issue about that, which the Council is addressing.

 LORD RICHARD: Your position is slightly on a tightrope, is it not? You are funded by the Assembly but what you need to spend money on is affected by decisions taken nationally upon which you are not even consulted. Is that really the position?

STEVE MARTIN: I think it would be too stark to say we are not consulted. To go back to the point I made, we have a number of relationships which mean that consultation is not something that simply happens at the time people are contemplating producing a White Paper. There is a dialogue of ideas, interaction of events, which is going on all the time between ourselves and the Assembly Government, between the Assembly Government and the Department of Education, and between our sister Funding Councils and ourselves.

 LORD RICHARD: Are you part of that?

STEVE MARTIN: We can be on occasions, but not normally directly.

 LORD RICHARD: But you have an input, so to speak, in to the Assembly’s negotiating position?

STEVE MARTIN: We have a very close relationship, both with the Ministers for Education and Lifelong Learning and, indeed, day-to-day with the officials. Access is not an issue, and on the whole I would say that that relationship works very well.

PETER PRICE: Can I follow through and try and understand the causes of the gap which you have described as opening up now and what implications this has in institutional terms? First of all on the causes side of it, you have described this as having happened since the last research assessment exercise, the last round of the Chancellor’s public spending review. That review should, in block grant terms, have led to the Assembly having the same sort of proportion of money as was going in England and therefore if a gap has opened up would it be right to say that this is a matter of choice of distribution of funding by the Assembly, or is there something I have left out of that equation?

STEVE MARTIN: First of all, the pluses and minuses that make up how Barnett works each year are many and various, but I am sure the Commission is aware that what they produce is an aggregate figure for the Assembly’s expenditure. It is then a matter for the Assembly to decide how it wants to carve that up. We, like every other public body that uses public funds, is in there pitching, making a case for the levels of expenditure we want.

I go back to what is said about the "Reaching Higher" strategy, which is that the core grant is not expected to change by more than GDP year on year but that for reconfiguration and collaboration, and for those things which will make reconfiguration and collaboration a success, there is a promise of extra investment. What has not happened is that that investment has been made recurrent at present. What we do have for future years is significant extra money in the indicative baselines - I stress "indicative" because there is no promise that we will get the money at the moment - but those do not match the levels of recurrent increase which have been published for England. That is the gap that I am talking about.

PETER PRICE: Are we then talking in terms of England of extra sums beyond inflation because of the Government’s target of 50% in higher education? Is it for the increase in student numbers that the English universities are getting more money?

STEVE MARTIN: It is a mixture of factors. That is one, although there is not a massive growth of student numbers in England at the moment. It is always easier, in a system as big as England, for them to redistribute and to have a competition for additional student numbers annually - which we do not have in Wales. But it is also a recognition, and these are, I think, the biggest factors of two things: firstly, the downward pressure on the unit costs becomes unsustainable and there is a need to address issues like academic salaries; secondly, that the investment that is needed in research for the UK to be internationally competitive must be raised.

PETER PRICE: But the salary aspect: you are on common salaries throughout certainly England and Wales - is it Scotland as well?

STEVE MARTIN: Yes.

PETER PRICE: So when you talk about extra funding for addressing salaries, you are saying that extra money is there at the moment not for student numbers, the extra represents money to fund extra salary increases and extra research expenditure effectively?

STEVE MARTIN: For the most part, yes.

ROGER WILLIAMS: You also asked about the impact. Up to now, the differences between the two countries has been in the noise level, and I do not think it matters because one year one is ahead and the other year it is the other. On the figures this year, the uplift in England is around 6% and in Wales about 3.33%. I would not want those figures to be taken as gospel because by the time you make little changes here and there they begin to get a little vague. But the order of magnitude is certainly right - it is of that kind of order, 2% or thereabouts - and if that were maintained for any length of time there would be a relative decline in the Welsh system as compared with the English.

 LORD RICHARD: Is this accidental or deliberate?

ROGER WILLIAMS: It is very difficult, from the point of view of the Funding Council, to know why it has all happened. We can only see the result with which we have to deal in the onward distribution of grants.

 LORD RICHARD: So there are no arguments on the other side, for example?

ROGER WILLIAMS: We make our representations, as you can imagine, and very strong ones - I will be making them this week - that this is a situation that cannot be allowed to continue without damage resulting from it.

 LORD RICHARD: We are not quite sure why it has happened.

ROGER WILLIAMS: No.

PETER PRICE: Another of the fundamentals in the equation that you were pointing to earlier was the number of higher education institutions in Wales. The number of institutions is one thing; the number of student places is another. Is this reflected in terms of the Welsh Assembly Government needing to make larger provision because we have got, shall we say, an inefficient distribution of places within too many institutions and need mergers, or is this a problem that we actually have greater student numbers that need to be reflected in the budget?

STEVE MARTIN: The issue of the number of institutions is much more an issue about being competitive now and particularly in the future. There is no doubt that there are some administrative savings that can be made, but they are at the margin of the total; it is not that they are not important, but they are not going to make a huge difference.

Wales does have, pro rata,more student places than England, and that obviously is an issue. However, of course, you have to set against that the contribution that universities make and the multiplier that comes from the investment that is made in them. So in terms ofthe pay-off for Wales, there is quite a lot of evidence which shows there is actually a very significant pay-off from that extra investment which is made.

 LORD RICHARD: Pay-off in what terms?

STEVE MARTIN: Pay-off in terms of jobs, in terms of local spending, and after all we have in Wales very significant numbers of English students who are coming and spending in communities, which is particularly important in some of the communities in the west - Bangor, Aberystwyth and Lampeter and so on. These are very important factors.

I think it is also fair to say that, as an engine of economic growth, it is arguable that investment in higher education is one of the most significant things that government can do. It is crucial to enabling the things which are going to generate the sort of indigenous research and development the relative lack of which is at the heart, I think, many would accept, of where we have economic difficulty.

TOM JONES: On the point of research, you mentioned the research funding being concentrated in the south-east. As we look at the powers of the National Assembly, one of the phrases is divergence in policy in Cardiff and so on. To meet the needs of the developing policies in health and social care and so on, to what extent is the research capacity in Wales or elsewhere moving towards the needs of those divergence policies?

ROGER WILLIAMS: In that sense, I think Wales is like many of the regions of England, in that although considerable research strength exists - for example, in the north-west of England - the problem must be that the more you concentrate research funding through a formula or some other provision the greater the risk that you pull out from the regions, and therefore from Wales as a whole, a disproportionate amount of the highest quality of research. That must be a risk. I think those Vice-Chancellors in England, quite apart from Wales, who have complained about this policy are complaining about precisely that.

It is a matter of judgement as to the kind of concentration you need in the United Kingdom as a whole. As I understand the Royal Society’s position, for example, it is that the present level of concentration is about right and most Vice-Chancellors would sign up to that. I would imagine that those who were Vice-Chancellors of the most successful institutions in the south-east would not, but in general if you believe there should be a departure from the present pattern, what you risk doing is putting the research capacity out of some of the parts of the UK. The same risk plays in Scotland.

TED ROWLANDS: Can I follow Peter’s point in relation to the nature of our terms of reference? You have used the word "reconfiguration". Reconfiguration means re-organising the universities; mergers of one kind or another. Does that actually require any additional formal powers for the Assembly to achieve, or if you can negotiate it, by the power of the case that has been made, and really the funding case and the competitive case you would be making, does it actually require new powers to achieve those results?

STEVE MARTIN: We have already made significant progress in terms of reconfiguration - I am going to tell a story about where we have got to, as it were, as an illustration of what can be achieved with the powers we have got. The movement over the past year, since the publication of Reaching Higher, has been pretty staggering. We have moved from a position where, frankly, the majority but not all institutions were tending to wish to preserve the status quo or something like it, and certainly to preserve their independence, to where we have two major merger proposals, namely Cardiff and the Medical School - that has been in gestation for some time - and much more recently the University of Wales Institute, Cardiff and Glamorgan; those two are now very seriously proceeding with proposals for merging. The Council has indicated that it will back them and the Assembly has been as good as its word in making available the first tranche of money that will enable those kinds of mergers to proceed.

We also have a range of important feasibility studies that the Council is funding, for instance between Bangor and the North-East Wales Institute, and also in west Wales. Not all of these amount to full merger; some of them are about rationalisation, for instance between various departments, and some of them amount to various forms of collaboration, for instance between Aberystwyth and Bangor, and between a network of institutions in relation to research in the genetics and biomedical fields.

I tell that story for this reason. Particularly in relation to the mergers, a year ago only Cardiff and the Medical School looked like something that was likely to happen. That situation is now changing. Why has it changed? It has changed because - let us be clear about this - the propositions was I was describing earlier within the Reaching Higher strategy are pretty firm ones. As I said, "No money, apart from GDP, unless you change". Institutions have responded to that. The Minister has been and met the governing bodies and senior staff of all the institutions, the message has been loud and clear and it has been loud and clear from us too.

There is no doubt that the power of the purse can take you a long way in terms of changing behaviours, and that has been demonstrated by what I have described. Do we need to go further? The same document, Reaching Higher, does propose that the Funding Council should have formal planning powers, which we do not have at the moment.

What that would mean in practice is something that everyone is still thinking through. What does it mean? It is actually not that straightforward. It was put very well by a colleague of mine, who says that any fool can merge two empty departments. You do have to work with the grain, given that academics are mobile and unless you actually create enthusiasm for these changes they are unlikely to succeed.

VIVIENNE SUGAR: Where does the power of decision actually lie? I know that there are complications over charters and the legal status of individual institutions, and I do not know if those are unique to Wales or whether that would apply to the organisation in England. Where does the decision-making actually lie and what are the process you have to go through?

ROGER WILLIAMS: The responsibility lies with the Vice-Chancellor and governing body. I think I would answer the question by saying that I would hope, with the powers that we already have, that we could achieve at least the two mergers the Chief Executive has referred to. If we cannot, in two or three years time I might want to revise my answer, but as a former Vice-Chancellor I would be sorry to see the existing autonomy of HE institutions significantly diminished.

 LORD RICHARD: Who takes the initiative nationally, throughout the UK? Who decides it is a good idea for Lampeter and Carmarthen to get together, for example?

ROGER WILLIAMS: The ideas, in a sense, are around for some time before anything comes of them I remember, for example, as a member of staff of the University of Manchester, advocating strongly in 1987 a merger between Manchester and UMIST and it fell on stony ground. It has taken 16 years to come round and it will now happen. The idea for Cardiff and the Medical School has been around, as I am aware, for a good four or five years and it looks now as if it will happen. It is a matter, I think, of different individuals coming together and seeing the logic of the situation; being confident that one particular route is better than another. In the case of both the mergers in South Wales, I believe that to be very clearly demonstrated, as does my Council. The issue now becomes what are the roadblocks? What are the problems in achieving what most people, on reflection, think is a very good idea for Wales?

VIVIENNE SUGAR: Do DFES have any more powers in relation to England than the Assembly has for Welsh institutions?

ROGER WILLIAMS: No.

VIVIENNE SUGAR: It is that they are autonomous and it is purely a question for them about how they partner with other people?

ROGER WILLIAMS: It is indeed, and I think it is worth noting that the level of merger and consideration and possibilities of merger which is going on in Wales is way ahead of any other part of the UK at the moment. That has happened over the last year, and there is no doubt that it is a direct consequence of the Reaching Higher document.

 LORD RICHARD: Your power is the purse, which is quite often a determining factor. Do you actually look at it and say that you want to encourage them to get together?

ROGER WILLIAMS: I think I am right in saying that the only context in which that has definitely occurred historically in either England or Wales is in Cardiff some 15/16 years ago. The financial situation of Cardiff was such that basically it could not be funded in its present form. That is a crisis situation, which none of us would want.

The thing had got to the point where it was impossible to go on funding Cardiff and something had to be done by the Department. I do not think there has been another case quite like that. There have been instances (but I believe that these things are usually kept under wraps) where the English Funding Council has basically told the governing body it ought to be thinking about a new vice-chancellor. There are circumstances, I am sure if we were worried enough, where we would be doing the same thing - but we have not. We exercise our powers very carefully.

STEVE MARTIN: We are only talking about 13 higher education institutions in Wales. We actually have a very close relationship with all of them. Therefore, there is a dialogue going on all the time. It is actually not difficult, but we are very respectful, not least for those good, practical reasons that there is an overwhelming consideration - and I know this is the view the Assembly Government is taking as well - that it is right that a pattern of collaboration, and indeed where it needs to be emerging, is one that works rather than one that is imposed from without. There could be circumstances that might change, but we want to work with the grain and so far I have to say that is going very well.

ROGER WILLIAMS: Can I stress the much closer contact which the Chief Executive referred to? As a Vice-Chancellor in England I did not have a visit from a Chief Executive or a senior figure in the Funding Council in the whole nine years that I was there. I had a regional agent who would come round once a year to check that all was well, but no-one else came. I had a visit from ministers only when I personally requested it - and there were two occasions when that happened.

In Wales, by contrast, we see the Vice-Chancellors on a very regular basis. They actually come in front of the Council at least once every two years. The Minister goes round. The contact is far, far closer - and it can be, with the small number of institutions involved.

May I make another point, and that is about our small size as an organisation. It has been a constant concern for me that the number of full-time employees of the Higher Education Funding Council is between and 22 and 23. We borrow some staff or share some staff with our sister council, the National Council, but we are less than a tenth the size of the English Council and, as the Chief Executive said, we have two major mergers at an advanced stage now with others coming along. Pro rata, that would be about 20 to 40 in England and if the English Funding Council were faced with that it would collapse. We carry a large burden.

SIR MICHAEL WHEELER-BOOTH: Can I ask two questions? The first is about the research assessment categories awarded in Wales. We all know research assessment is a deeply fallible instrument, but it is what we have got. How many subjects have got the highest rating in Wales?

STEVE MARTIN: I have not got all the figures here. We have got 20-odd at 5 and 5 star in terms of departments.

 LORD RICHARD: You have got 20 but those are not institutions, are they?

ROGER WILLIAMS: No, no. I think it would be best if we put in a reply on that point when we have calculated it properly.

SIR MICHAEL WHEELER-BOOTH: The second point is also factual. What percentages overall in Welsh higher education come from the various sources of financing and (kind of a ballpark figure) what percentage comes from government, what percentage comes from fees, what percentage come from endowments?

STEVE MARTIN: Again, we can give you a precise figure, but just to give you an indication to the extent to which the institution is reliant upon the Funding Council: in the case of the Medical School it is as low as 23%, and that is because they have strong access to other sources of funds. Obviously, all of them have support for students, the income that comes from that. They also have support from charities, for research, from the Offices of Science and Technology----

PETER PRICE: The Office of Science and Technology?

STEVE MARTIN: Yes, which is part of the Department for Trade and Industry, and it is that body that oversees the work of the Research Council. At the other end of the spectrum, there is a figure in the paper which we did table with you - just looking through it now, we have institutions, the Royal Welsh College of Music and Drama, which is reliant on the Funding Council for 73% of its income. So the pattern varies very widely. On average it is 43%.

Dr LAURA McALLISTER: Can I ask you about the question of student support? It has been raised in passing, but I wonder if you could clarify for us the status of deliberations so far as you understand them with the the Secretary of State in London, and particularly what precise powers are actually being discussed, because obviously there are a number of different ones that could be there? That is the first point.

The second point is I wonder if you could comment about the implications in the future should the National Assembly acquire powers over student support? I am just thinking about scenarios where, for example, the Welsh Assembly Government decided to abolish up front tuition fees and introduce something which is based on post-graduation threshold payments and so on. What might be the situation then in terms of the cross-over between English and Welsh students?

The third point is what will happen with institutions like Cardiff who belong to the Russell Group? In yesterday’s Times there was an article which referred to the Russell Group already discussing £10,000 as a potential tuition fee. What would be the potential between Cardiff and its role in Wales and Cardiff in its role on the Russell Group?

STEVE MARTIN: If I may begin with the issue of negotiations. We are not party to those. Our understanding (which I think is reflected in the paper we have put to you) is that those cover the full range of student support - they are not limited in any way. It is quite difficult to take one strand and separate it from the others, but whether that will eventuate in all those things being transferred - these are very detailed and complex discussions. That is as much as I can say; I am not being at all coy, we are genuinely not part of that process - although we have made some points, obviously, about their general importance. It is not for us, we believe, as a funding council, to say exactly how the Assembly should choose to fund things. We will repeatedly make the point that the Chairman was making earlier that we must have a situation where higher education in Wales is not disadvantaged financially compared with England for comparable purposes.

ROGER WILLIAMS: If I may make a point specifically on our success in policies we have pursued with regard to research, one of the indicators that the Council follows very closely is the percentage of Research Council funds which find their way to Wales. As I say, that percentage was too low - it was nearer 3% than the 5% it should properly be. On the other hand, it is difficult to know what it really should properly be because it ireally depends upon the composition of academic activities in Wales as compared with those in England. You might not expect it to be 5% because of the composition.

However, we had a policy for improving it and we follow that policy, it was followed for some two years before I joined the Council - Sir John Cadogan in effect began it - and I sort of inherited the research concern in the Council and followed it thereafter. It gave me a certain wry pleasure to pursue policies in Wales which, if they succeeded, would put Cardiff in particular ahead of the university which in England I was responsible for.

Those policies did succeed and Cardiff undoubtedly made enormous strides - in part, of course, because it was well run by its Vice-Chancellor and governing body. Cardiff, in consequence of that, became a member of the Russell Group, and we are very clear we want to see it stay there. It is absolutely essential to Wales that we have a representative in that group.

It follows that whatever formula applies in respect of funding for those, we would want to see applied to Cardiff - or at least we would want to see the money arrive on a comparable level. Otherwise, it would inevitably drop out of the Russell Group of universities, and that would be a catastrophe.

 LORD RICHARD: Who would take that decision?

ROGER WILLIAMS: As to the method of funding, the Assembly would take it. We can only operate within the monies made available to us.

 LORD RICHARD: If, as The Times said yesterday, the Russell Group raised fees to £10,000, who would decide Cardiff?

ROGER WILLIAMS: It would be the Assembly that would decide it. We would have no other means of making up the difference that £10,000 would make. I think it would be difficult to make up the difference of £3,000. The first year when it is introduced in England, of course, it will apply only to the first year students and therefore the true cost will not settle down for some time. So I do think there is time to get this right, but I find it difficult to believe that in the long run it will be possible for Wales to be significantly different in its mechanism in this respect.

STEVE MARTIN: We are talking about broad estimates. One can say this, that we are talking about a shortfall, if Wales does not have some other means of funding, if student fees are not to apply, of some tens of millions of pounds.

TED ROWLANDS: That is the question I was to trying to search for earlier. Could Cardiff stay in the Russell Group and not charge top-up fees as long as the Assemble was funding the operation by a different means?

STEVE MARTIN: Yes.

TED ROWLANDS: It is not going to be a condition of the Group that you have to have these £10,000 fees?

STEVE MARTIN: No, not at all.

TOM JONES: You have said a couple of times now that you are not party to negotiation on certain issues. What we are looking at is the capacity of the Assembly since the establishment devolution of important changing policy. Are you satisfied that it has got capacity within the Assembly now to provide the backup to develop policies?

STEVE MARTIN: There is no doubt that the Assembly’s resources devoted to various purposes have increased, of course, substantially. I once worked in the old Welsh Office, pre-devolution, and I think we had something like just over 2,000 people - I gather it is something over 4,000 now. But that was an inevitable and proper consequence of developing that policy-making capacity Even sothe Department for Education and Science is a huge machine by comparison. We are never going to be able to compete with their numbers, even if the issues are just as difficult and require just as much cerebration and effort as they do across the whole of England.

What we can do, which I think is probably more difficult in England, is work together. We do have, as I said earlier, a very close relationship with officials. For instance, on the Reaching Higher document there was an awful lot of discussion that went on between us before that was published and we would like to think that we were significantly influential in its content. Ultimately, of course, it is not our decision and somebody else is calling the shots, but we do have that opportunity.

To give you an example of the comparison with England, England are advertising at the moment for a very senior post - I think second only to the Permanent Secretary - which they expect to fill with a very senior figure from higher education - almost beginning to parallel the work of the Funding Council. We do not see anything like that so far happening in Wales, and it does mean that we are able to have that direct dialogue with what is a handful of officials, I have to say.

ROGER WILLIAMS: The last move was, in a sense, in the long trend that there has been for over 30 years in the relationship between the State and HE. Before 1967 the UAC did not look at the books and a lot of the Vice-Chancellors said it was going to be over their dead bodies that it did so., That happened. Then in the middle of the 1970s came the end of quinquennium grants. Progressively since then the State has involved itself more and more in HE policy.

I would say in particular when the University Grants Committee gave way to the University Funding Committee there was a change in mood, and when the separate Funding Councils for separate countries began to gear up and operate there was a further change. You asked earlier what influence we had had on the English White Paper. The English Funding Council will probably say it was not exactly the White Paper it wanted, and there was no reason for us as a funding council to be consulted at all because it does not apply to our system, it applies to England. That is a process which culminates (as the Chief Executive mentioned) in the fact that England is about to appoint a kind of shadow Chief Executive of the Funding Council inside the Department. They have explicitly said they would like to appoint a vice-chancellor. This will give them further competence to oversee the development of HE policy. These are very significant changes if you view them in that sort of context.

 LORD RICHARD: One of the things that occasionally one has heard is if Wales pursues policies different from England and it has the effect of not bringing in the revenues to the Welsh Assembly which was going to go into establishments, that will be reflected in a reduction in the grants, will it?

TED ROWLANDS: The effect of Barnett on all those changes.

STEVE MARTIN: I cannot say I have, actually. I suppose it could happen. I think is important that we set alongside what we have said about the UK system the importance of us being sensitive to particular Welsh needs. You talked about a tightrope earlier and that is what we are trying to walk. It is very important, for instance, that Cardiff and the Medical School, are up there with the absolute best in the UK and internationally, so that they can then use that strength to serve Wales and work in wider networks, as they do already in the biomedical field and in gene research and so on, with other institutions. This is one of the principal reasons why the Council has carried on as far as it can funding institutions at the research grades 3 and 4. In England 4s are being cut off as well.

 LORD RICHARD: I can see the argument for that.

STEVE MARTIN: It is because of the importance of local economic development. There are other ways in which we might do that in the future, but we have got to try and maintain these things always in balance. What is absolutely clear is that unless the system in Wales is internationally competitive it will not be able to do those local things.

VIVIENNE SUGAR: Can I ask a question about your reference to the UK system? Are there mornings when you wake and wish you were in Scotland? Is there anything about structures or powers or anything in the Scottish model which actually, if it was transported, would be advantageous to the Welsh higher education system?

ROGER WILLIAMS: I did not want to suggest at all, I should say, that Scotland was not part of the UK in this sense. It is just that the connections between England and Wales are closer. Most mornings I wake up and would like to be Scottish as far as the funding is concerned, because they get substantially more money. England and Wales have an equal grievance in this respect. The Scots are much better off, and how long that state of affairs can be maintained is up to our Scottish colleagues.

STEVE MARTIN: There is one other thing. The Assembly has, in relation to the area we touched on earlier, namely planning powers, said that they would like the Council to have those and they have included this in their annual bid, to the Westminster Government for primary legislation. They have also said that they would like to provide a relatively simple power, one might think, to enable the National and the Higher Education councils to provide services one to another, because frankly it is a pain in the neck at the moment and we have an arrangement under which that is not possible.

In Scotland, by contrast, they have decided to merge their higher and further education councils - I make no comment on the merits of that but they have decided to do it, and of course it is within their powers to do it. They have also already used their devolved powers to set up their own system of student support.In Wales, even where the issue is simple and practical we have to wait for the opportunity for Westminster legislation.

TED ROWLANDS: If in fact we could be seeing a more long-term change in the balance of funding from central grant expenditure to student fees - and presumably there is going to be a significant shift if these things go ahead - then the Chancellor is going to be thinking in his overall PESC terms about his figure, that is when it would not impact on the Barnett formula. If the Chancellor was saying "This year I’m going to do X because I know you are supposed to be collecting Y from fees" and we only get the percentage of the balance of that lower figure, this is where Barnett could be affected.

ROGER WILLIAMS: As I understand it, that is right.

STEVE MARTIN: That would be right if there were not some mechanism for taking that into account. Barnett is there but Barnett does not determine everything. We have just had a special arrangement under which the Treasury has provided funding for the extra pension costs of employees in former public sector higher education institutions. We are still negotiating about exactly how much money we should have had, but that is not anything to do with Barnett.

TED ROWLANDS: That is Barnett extras, but this is where gradually you would affect the basic formula, would it not? If the Chancellor of the Exchequer is assuming so much money has been raised in fees and therefore his base contribution to higher education takes that into account, we would only have the percentage of that lower figure.

STEVE MARTIN: That is on the assumption, of course, that the Chancellor were to net sums off. The purpose of fees is to provide additional funding. The historical experience is not altogether encouraging.

PETER PRICE: Can I take up an issue you have referred to a couple of times in different contexts, economic development? It is something within your purview of funding you have clearly taken as important driving force, but you are not the only source of research funding. To what extent is funding in Welsh universities’ research determined elsewhere in the UK bodies and is there a problem in terms of reflecting Welsh priorities overall, and specifically economic development priorities?

STEVE MARTIN: The principal source of Government funding (if we can stick to funding from Government sources for the moment at least) is the Office of Science and Technology and the Research Councils. As Professor Williams was saying earlier, we have actually had some success in recent years in raising the take of institutions in Wales from the Research Council. The last figure stood at 3.9%, which is still lower, as it were, than a 5% share for the UK if you do it on population relativities. But we have had that significant increase over the years.

We also, with the Office of Science and Technology, invest in the science research infrastructure, and there are very substantial sums coming in, to the sector in Wales as a result. It is done by a formula again, which is based primarily on the quality of research - because it is absolutely vital, obviously, that money is focused on where the best quality is - but also takes into account the success of institutions in gaining income for research from other sources. Actually, Wales does proportionately well in the latter respect. At the moment the forward plans for SRIF (the Science Research Infrastructure Fund) mean that whereas for the last few years we had a share which was, I think, under 4%, it will go up to nearly 4½% over the coming few years. So, again, it is an improving situation.

The other thing that is happening is, of course, we have, as you would expect, a close and indeed increasingly closer relationship with the Welsh Development Agency. The Regional Development Agencies in England are really very, very keen on supporting higher education, and if you look at the Manchester/UMIST merger, for instance, I think the North West Development Agency is putting in £20 million. In Wales, it is difficult to do direct comparisons but there is significant investment by the WDA in Technia, companies associated with higher education, and there is a developing dialogue where we hope that the WDA will be interested in supporting investment in higher education in view of the economic benefits for Wales.

 LORD RICHARD: I am not being a very good Chairman and there is an issue we have not even touched on yet and we are running out of time, which is your actual contact with the Assembly and the way in which you are accountable to the Assembly.

ROGER WILLIAMS: I think we are very well connected in that respect - our activities, our operations are regularly examined by Committee, they are regularly examined by civil servants. We have very regular meetings with---

 LORD RICHARD: Do you appear at Committees?

ROGER WILLIAMS: Yes.

 LORD RICHARD: Do you?

ROGER WILLIAMS: Yes.

 LORD RICHARD: About how often?

ROGER WILLIAMS: At the last session we had a particularly good and probing and extended session. Yes, I think that aspect of it is really very good indeed.

 LORD RICHARD: Is it twice a year or something?

ROGER WILLIAMS: Yes. I would say impressive, actually, in my experience of it. Of course, it is the degree of detail and regularity that, again, with many more concerns does not happen in England.

 LORD RICHARD: Do you have a regular cycle of remit letters and so on?

ROGER WILLIAMS: We do indeed, yes.

STEVE MARTIN: We would love remit letters to be earlier but they have got tighter; they have got less prescriptive - less prescriptive as to means, more prescriptive as to outcome - and that seems to us to be exactly right.

I think it is worth saying this. One of the reasons, I believe, that the sessions that we have had with the Education and Lifelong Learning Committee have been so productive is because they actually devoted over a year to doing a major study of higher education. The members are pretty well saturated - there has been quite good continuity of membership - in those issues. They devoted a huge amount of time and it was their report which led then subsequently to the Assembly’s strategy Reaching Higher that I referred to earlier.

 LORD RICHARD: Do you think the Assembly lacks the powers which would make your life easier?

STEVE MARTIN: There are two things really. I think to the extent that even minor things require primary legislation, that has to be a break on just doing the sensible thing.

 LORD RICHARD: Give us a quick example.

STEVE MARTIN: My example was this issue of one council, the National Council providing the services to the Higher Education Council, and vice versa. It is a small thing in a way, and yet it would just ease the rules. When you identify something like that it seems a bit daft that you have to wait for primary legislation to do it.

The other thing I would say is that it would seem to me to make a lot of sense for the Assembly to be able to look at issues in higher education in the round and not to face, as it were, artificial barriers between what things it can take a view on and what it cannot, because they interact - student fees interact with the generality of its policies for higher education, for instance. At the moment there are barriers to its taking that overview.

SIR MICHAEL WHEELER-BOOTH: There is another subject, is there not, impliedly referred to by Prof Williams, which is the whole funding arrangements for Welsh devolution, because if it was not Barnett plus - if it was not - and that is within the terms of reference of this Commission, that would include significant improvements to be made. It is a question, not a statement.

ROGER WILLIAMS: I think I would answer that not directly but in this way. It behoves anyone who is a member of a public body to question their own existence and how much worse or how much better the world would be if they did not exist. What would be the case if the Funding Council did not exist? Historically, we have been there to articulate policy from the centre to the institutions and from the institutions to the centre. There is, I think, a new dimension and that is as a direct consequence of devolution.

I believe we have a sensitivity to the consequences in detail of a policy in England which would not be picked up as quickly if we were not there. It is our responsibility, therefore, to monitor the kinds of changes which are occurring, either explicitly or possibly in England as a result of changes occurring there. That is a new thing for us to be doing and I think we have to be very responsible about it.

TED ROWLANDS: There is no restrictions on you, for example? We have heard from the Chair of the National Council that she could not amble up and chat to people in the Department of Education without reference to the Assembly. Are you free to develop your English contacts without any direct reference to your Assembly opposite numbers?

STEVE MARTIN: There is a general requirement - and it seems to me a very reasonable requirement - that we should not directly approach the Department of Education, that we should talk to Assembly officials, and it is certainly possible to go in joint delegation if one wanted to do that. Actually, through informal means, we do not often find that is necessary. By our observer status, which we religiously exploit, on the Higher Education Funding Council for England, we are talking regularly with their Chief Executive, with their senior officers; there are direct links - they are only in Bristol, which helps as well.

TED ROWLANDS: There is not an observer status on the learning skills side, is there?

STEVE MARTIN: No, the National Council sought that but the Learning and Skills Council was not keen. We had this sort of observer status between the predecessor bodies, namely the Further Education Council for England and Wales, which worked very well.

 LORD RICHARD: Can I say this is the first set of witnesses we have had where I have actually got to say that I am terribly sorry, we have run out of time. Thank you very much indeed for coming.

ROGER WILLIAMS: Thank you very much.

 LORD RICHARD: It has been a very interesting morning. If we have any further points we will come back to you.