lynne neagle am: Good morning, everyone, and welcome to the Children, Young People and Education Committee. I'd like to take this opportunity to welcome Suzy Davies to the committee, and to thank Mark Reckless and Darren Millar, who have left us, for their service and hard work as members of the committee. We will move on then to our evidence session on our inquiry into the impact of Brexit on higher and further education. I'm very pleased to welcome Kirsty Williams, Cabinet Secretary for Education, and Eluned Morgan AM, Minister for Welsh Language and Lifelong Learning. Can I just ask you to introduce your officials for the record, please? kirsty williams am: Bore da, Lynne, and thank you for the invitation to join you. Eluned and I are joined this morning by Huw Morris, who's the group director at SHELL—skills, higher education and lifelong learning—and Marie Knox, who is deputy director, overseeing European transition. I'd like to ask you both, if that's okay, a little bit about preparedness. But if I could start with higher education, I understand that—I don't know, it must be about 18 months ago now—Ken Skates told another committee in this place that there had been nine sector analyses done. Presumably, one of those was HE, because of the—well, Welsh Government had a presence, and still does, in Brussels, related to higher education. I don't know if you've got any comments on that research, or whether it's been brought to your attention yet. kirsty williams am: Well, Suzy, following the vote, I was very keen that we work very closely with colleagues in higher education and further education, to get an understanding from on the ground about the potential impact. So, in terms of preparedness, we started that group in the September, and that work from that group, which includes both HE and FE, has been instrumental in helping the Government form its views, which were articulated in the Government's White Paper, 'Securing Wales' Future'. There has been ongoing work being done—as the debate in London and Europe becomes a little bit more clear, then it becomes a little less clear, and then a little bit more clear, but, bearing in mind the difficulties of working in an ever-changing field, we have been refining those approaches. Each institution has been looking at their own institution, because, as you can imagine, although we have an overview of the sector, the challenges are very different for individual institutions—so their exposure, for instance, to the number of European Union students that they have at their college, or the work that they might be doing with Horizon 2020, or their success—and there has been considerable success in the HE field in securing structural funds for various projects—the exposure and the potential impact of leaving the EU, in a 'no deal' or in a 'deal' scenario, is very, very different. suzy davies am: Maybe just to use the 'no deal' scenario is probably the easiest, isn't it? kirsty williams am: The 'no deal'? suzy davies am: Well, yes, because that's the worst-case scenario, so let's look at that one. huw morris: As the Cabinet Secretary mentioned, the higher education Brexit working group's been meeting since September 2016 and has been looking at that in general. More recently, when the prospect of no deal became talked about, officials have been visiting individual institutions to talk to them about their preparedness for that. As you'll be aware, the funding for much of the activity is secured, we believe, even under a 'no deal' scenario, until December 2020; that's a letter we had from the Chief Secretary to the Treasury. I think the research you're referring to may be research that Cardiff University has been doing with the Bevan Foundation and others. suzy davies am: Well, that's really helpful because my understanding was that this Cardiff University research had superseded all those nine sector analyses. Certainly, there are published papers by Max Munday and a team at Cardiff University on the impact of Brexit on the Welsh economy, but for HE and FE and apprenticeship provision, it's as the Cabinet Secretary outlined. suzy davies am: So, are there any formal risk assessments that are available for us to scrutinise, for example? For HE and FE for that matter. kirsty williams am: Well, the Higher Education Funding Council for Wales have been doing some specific work; I can't comment on how wide they would want that to be shared. We have been doing some broad analysis, as I said, for the sector, looking at what we can do to mitigate the risk, bearing in mind that each institution is an autonomous institution, a principle that they guard really jealously, and rightly so. So, we have been, as Huw said, because the prospect of a 'no deal' has become, perhaps, more to the forefront, officers have been visiting each institution to try and make sure and to satisfy us, as people who fund part of their activity, that they have their own plans in place to deal with these scenarios. So, for instance, we continue to work with officials in Westminster around Erasmus+ provision in a 'no deal' scenario, what a UK stand-alone project would look like, the impacts of a 'no deal' on Horizon 2020. So, we look at the broader picture and we are encouraging continually individual institutions to make sure that they themselves are looking at their specific needs within that. suzy davies am: Well, if there is something that's shareable, I'm sure we'd be very pleased to see it— kirsty williams am: Anything that we've got— suzy davies am: —particularly with FE, actually, because, of course, we haven't got a HEFCW for FE; you're doing that regulation yourself. I'd expect to see that type of work evidenced somewhere from within Welsh Government, and we would be able to see that then. suzy davies am: Yes, because the student thing isn't such an issue, is it? eluned morgan am: You've got to remember that the FE colleges are much more anchored within their communities, they're much more localised, and so, for example, the number of EU students in these colleges is significantly lower. The number of staff in these colleges—I think they've analysed that there are only about 71 people. So, we're keeping in touch with them and we're letting them know what we are being told in terms of the Home Office settled status and what we can do to protect those 71. suzy davies am: What are they telling you about European social fund funding, though, because, as you say, they're locally anchored—the impact on FE of ESF funding is probably more significant than the issues we're talking about with higher education. How are you finding this out? Is this through one-to-one conversations? eluned morgan am: We are engaging with them all, and, obviously, we're engaging with ColegauCymru, who've done their own analysis, and what we found, in particular, is that the real problems are probably in relation to ESF funding and apprenticeships. But what you've got to remember is that that link between apprenticeships and the local work community is absolutely crucial. eluned morgan am: —the economy nosedives, or if there's an issue that we see—just the dislocation of companies in those areas as a result of Brexit—then that will inevitably have an impact on the number of apprenticeships that will be on offer. So, it's those kinds of things, but at the moment I think it's worth pointing out that about £15 million a year goes into the FE sector just in relation to apprenticeships. suzy davies am: Can I just come back finally on that, before handing over? In both your areas of responsibility, there's going to be an impact on Welsh Government in how it responds to that, as well. Can you tell me a little bit about the European transition team, which I think is about building resilience within the Welsh Government to deal with the impacts of Brexit? Is that a formal arrangement you have with officials? I don't really know much about this team, but it seems to meet fortnightly to get Welsh Government ready for Brexit, so could you just give us some clues on this? marie knox: Yes, in terms of the European transition team, that's the central co-ordinating group that pulls together all the leads in each department who are pulling together the work on European transition. So, I attend that group in relation to higher education and further education, and, obviously, other representatives in terms of agriculture, transport, the economy, et cetera. suzy davies am: It's great that you're on that group, but what does it actually do? That's the bit I wasn't sure about. marie knox: I guess it provides the governance structure for the Welsh Government as a whole in relation to European transition. So, individual departments do their own work, and the European transition team provides the governance structure, and, also, they lead on the discussions with the Department for Exiting the European Union, No. 10, the Joint Ministerial Committee—those kinds of ministerial arrangements. This discussion between HEFCW and higher education, these challenges in terms of how ready they are for the changes to come, and the work that the Government is doing with FE, I suspect, is happening at an organisational level. So, I just want to hear a little about where the student voice comes into that discussion and where the engagement happens in terms of the students. kirsty williams am: So, we have a close working relationship with the National Union of Students. They have been very clear, and I think there is a huge amount of consensus between the Welsh Government, what the universities are asking for and what the students are asking for. You'll have seen, only earlier this week, the very powerful campaign by NUS Wales about the importance of Erasmus+ arrangements. Many of us, I know, have had the opportunity to study abroad as part of our own studies, and there's a lot to be gained from it. We've been very clear from the outset, as have the sector and the student voice, about the importance of participation in that scheme. Our HE institutions, to a greater extent than FE, have faculty staff from the EU—it runs at about 11 per cent. They want to have the best teachers, they want access to the best learning opportunities, and we've been very clear about the importance of providing security and stability for those staff, making sure we send very clear messages that they're very welcome and we value their contribution. Again, as far as we've been able to, we've been able to give messages about the security of funding for European students for the next academic year. We're working to the limits of what I feel comfortable in being able to guarantee without further guarantees from Westminster. So, we've been working closely with the student voice, and I think, Llyr, what's very clear is there is a consensus about what is important across the Government, the institutions and student voice. So, that is making sure we send very clear messages about Wales's institutions being open for business and that we welcome both EU and international students, that we value the contribution of faculty, and that we want to be able to continue in Horizon 2020. That's especially important if we're looking at attracting postgraduate work and postgraduate students into our system, as well as Erasmus+. As I said, there's a consensus, I think, between the Government, the institutions and the students about what we need the UK Government to achieve for us. lynne neagle am: Before we move on to student recruitment, it's increasingly the view of many experts that we're heading for a 'no deal' Brexit. Can I ask both of you what specific plans you've put in place in the event of such a 'no deal' Brexit happening and us crashing out next spring? eluned morgan am: Well, I think it's really difficult for us to prepare for a 'no deal' Brexit, but obviously we need to think through very carefully what that might look like, and I think that scenario planning is starting to happen. So, in relation to FE, what we do have is funding—ESF funding—which the UK Government has said that they will underwrite until 2020. So, in March next year, if there is no deal, the immediate impact on FE is unlikely to hit in the way that we may have feared. The problem then becomes: what exactly is the deal with the EU in future, because we will have some kind of relationship, and what that impact will be on the broader economy and our ability to work with companies locally, and industries, to provide that link between training needs? So, the colleges, basically, are providing the training for lots of the apprenticeships, and so if the number of companies reduces, then that is likely to have an impact. Farming is obviously one that we are concerned about, because that could have a difference in terms of day one of no deal. Health and social care—obviously, we are concerned that there are a number of people who work in that sector who are EU citizens. What is the impact? Are they going to feel unwelcome? Are they likely, then, to return home? Where will that skills gap, therefore, be? So, that's a problem for us. So, one of the things we're doing is we've developed these regional skills partnerships where we ask local employers, 'What is it that you need in terms of skills development?' and we are now asking further education colleges to respond to that need. So, rather than them just getting people through the college system, who are easy to get in because they're doing courses that they're excited about, let's try and encourage them to do courses where we know there are skills shortages. So, that is a new structure that we've developed that is already having an impact; there's a £10 million project there. In manufacturing, obviously, if there's no deal, the rules of origin, that could have an immediate impact. Just-in-time—we could have real problems in terms of dislocation there; and hospitality and tourism. So, those are the sectors we have most concerns about, and all of them have very strong links to the FE sector. kirsty williams am: From the HE perspective, from a point of principle, we just have to keep working towards some kind of deal. Although the prospect of no deal, maybe, has risen up the agenda, we have got to be consistent in our messages to the Westminster Government: we need a deal. If that worst-case scenario was to happen, because of the underwrite guarantee, actually, for European regional development fund and European social fund programmes in the HE sector, it would be business as usual. And because of the current underwrite guarantee, the forthcoming bids for Erasmus and Horizon 2020 would be covered, but they would be the last applications that could be made. You'll be aware that there are some proposals for an extension to that guarantee, but from my understanding and our understanding of it, that would only give us third-country status for Horizon 2020 and Erasmus. What that does mean is that we would have limited access to the Horizon 2020 programme, and if you look at the activity that is currently being undertaken by the Welsh HE sector under that programme, that would mean that we'd probably lose about 50 per cent of that work, because that's the split between the bits we would still be able to access and what we are currently accessing. As I've already said, we have made a guarantee for EU student support for the next academic year, but, without clarity from the Treasury, I don't think it would be prudent of me to commit Welsh Government to anything further than that. What can we do? You'll be aware that we have been working with Universities Wales to access resources under the European transition fund, under the Global Wales programme, to look to boost international marketing of the HE sector and to talk about the strengths that we have in the sector. And we continue to look at other opportunities within the EU transition pot of money to assist the universities and the FE sector in that regard. We also continue to look to respond to the Reid review proposals, about how we can beef up our own research and continue to engage with UK Research and Innovation to make sure that, with any research money that comes out of that negotiation, Wales is in a competitive position to be able to bid successfully for that. I'm going to, because we've got a lot of questions, appeal for brief questions and answers that are as concise as possible, please. hefin david am: How does the Welsh Government account for the fact that EU student applications in Wales this year—that Wales is the only country in the UK to have seen a significant drop? kirsty williams am: Okay, well, I think the first thing to remember is that we will not get a full picture of student recruitment until, first of all, November and then the true picture, because some institutions, as you would know, have two admissions dates—we won't get the full picture until the spring. I think it was inevitable, given the change in Government policy with regard to student support, which had previously allowed European students to benefit from a tuition fee grant, and given the fact that that option is no longer available to them, that that has had an impact on EU recruitment, and there's no point trying to hide from that. hefin david am: So, together with leaving the EU, that's a double-whammy effect that's hitting Wales harder than the rest of the UK. kirsty williams am: It just puts us in the same position as EU students applying to England, but it was inevitable. It was anticipated that this could be a consequence of the change in policy, and I think we see that reflected in the initial figure, although, as I said, we won't get the true picture until the first census in November, and then, ultimately, the final picture in the spring. hefin david am: How concerned are you by that? kirsty williams am: Clearly, we want our universities to be able to attract students from both the EU and from around the world. The fact that the tuition fee grant arrangements may have had an impact on European Union students at this stage does not preclude the fact that Wales, up until now, has been successful in recruiting international students. So, the change in the fee regime should not be a barrier to the recruitment of international students, because, actually, international students outside of the EU make up a bigger proportion of students not from the UK who come to our institutions. hefin david am: That's a fair point, but it's unfortunate timing, though, isn't it? kirsty williams am: I think, from a public policy point of view and moving towards a sustainable way of funding our HE sector, then both my priority and, I would say, the priority of the institutions was to see the implementation of Diamond, which is what we have done. What about the fact that we've got a relatively imbalanced higher education profile compared to other countries of the UK with regard to high, medium and low-tariff universities? We've got one high-tariff university, and they're the ones that tend to show the growth in recruitment of EU students. Are you concerned about that balance of profile in the HE sector? kirsty williams am: As I said in answer to your question earlier, there is a difference reflected in the exposure of institutions to EU and international students. I would argue that it's not necessarily the case that institutions that are not high-tariff are not able to do very well in this sector. If you look, for instance, at Swansea University—if you look at the work Swansea University has done, that shows you what is possible. hefin david am: What is Swansea's success, then? What can we learn from Swansea? kirsty williams am: What I think is important—and this is not about any one institution—what I think is really important is that we look to—. It's a combination, I believe, for all universities, of getting their offer right—so, having a curriculum at their institution that is attractive and offers courses that people want to study. It's about that curriculum being delivered in an excellent fashion, so high quality ratings for teaching, as well as having an infrastructure that is attractive to students. So, it's all about getting the offer right and providing what students, both domestically and internationally, want. hefin david am: But the evidence would therefore suggest that that model of success that you've just outlined is happening in Swansea but it isn't happening in other institutions, and they're seeing a drop. kirsty williams am: Well, as I said, I think what we can see from Cardiff, Swansea and others is that it is possible to do very well in the sector. kirsty williams am: As I said, what we can see is that, if you get the offer right, I think we have something very special that the HE sector can market itself on. llyr gruffydd am: Just coming back to the drop in EU students, you mentioned that one of the reasons probably is the change in the funding that's available to students coming here. So, does that suggest that, under the current regime, Wales was punching above its weight in terms of attracting students and we've lost that advantage? I know we're gaining in other ways in introducing the new system, but really we're not much different to England in terms of fees now, so why would they come to Wales as opposed to going anywhere else? kirsty williams am: I think you're right; there was an added incentive, potentially, to come to a Welsh institution because of the availability of the tuition fee grant. That advantage is no longer there, which is why we need to work alongside the sector, as we're doing with the Global Wales programme, to increase their ability to market HE in the round across the world. There's something for everybody, whether you want to be in a city like Cardiff or whether you want a coastal experience in a small town like Aber. So, we've got a lot to offer and that's why it's really important that, although we have seen a change in the tuition fees, which may have an impact, we are investing with universities, for instance, in the Global Wales programme. lynne neagle am: In terms of the drop that we've seen in Wales, which is differential amongst institutions, will you be taking any specific action to try and prevent Brexit exacerbating that? kirsty williams am: We are working with HEFCW and individual institutions, as I said, to test their preparedness. We can't tell them what to do in that sense, but we can, because of our governance arrangements and HEFCW's monitoring arrangements, continue to test with them. I meet regularly with vice-chancellors and separately with the chairs of the institutions and separately again with HEFCW representatives, and the sustainability of the sector and recruitment issues is always something that is on the agenda. julie morgan am: The additional £6.4 million that went to HEFCW in the 2017-18 year, which I think you say is partly because of Brexit and partly because of demographic and recruitment challenges, what do you expect to see as a result of that spending? kirsty williams am: That funding was allocated, as I said, to enable HEFCW to deal with any short-term implications arising out of demographic changes, because we've seen a drop in the number of 18-year-olds, and the initial implications of EU transition. It was allocated as part of HEFCW's overall grant in aid, and therefore the council was given discretion as to how it was to be apportioned to the sector. The money was brought forward a year, because, in conversations with HEFCW and the institutions, they felt that that money would be more useful earlier on. So, it was money that was brought forward into the allocation for 2017-18, as opposed to 2018-19, because they wanted to have that resource earlier rather than later. With regard to additional resources, you'll be aware that we have made an additional resource of £5 million available to mitigate the freeze in tuition fees, and £5 million has been made available to HEFCW to kick-start the work on postgraduate support until we're in a position to fully implement Diamond at the postgraduate level. kirsty williams am: The financial allocation, as I said, was agreed with the funding council and it was there to help universities with any cash flow issues, but if you'd like further details I can provide those as much as I'm able. julie morgan am: I think it would be interesting if we know what the money was spent on and, of course, that money is now not available for the next financial year, so there's no way of carrying on what they were doing with it, presumably. kirsty williams am: Well, as I said, it was part of the overall allocation to HEFCW. With specific regard to dealing with the impact of Brexit, you'll be aware that we have reached an agreement in principle on the funding of £3.5 million to the Global Wales initiative. This was an application that came in from Universities Wales looking at specifically targeting and beefing up international work and international recruitment work to support them at this time, and we're currently working with Universities Wales on the exact details and outcomes they would expect from that investment. julie morgan am: And do you have any estimate of how many students you hope to attract by that? kirsty williams am: That is subject to continuing negotiations with Universities Wales before we let any contracts with them. What's important is that that work is based on research that has been done by Universities Wales to look at the optimum markets that we should be targeting, specifically the United States of America and Vietnam. julie morgan am: And will this money be used equally between all the universities? kirsty williams am: We expect that all institutions—should they have a desire to participate—will be able to be assisted, as well as the overall global branding from Universities Wales and the new Study in Wales initiative. I think we've covered the EU student fees, haven't we? lynne neagle am: Okay. Do you want to ask question 12? julie morgan am: Has the Welsh Government explored the possibility of looking at different immigration rules for international and EU students who may wish to study here? kirsty williams am: Okay. Well, with regard to immigration, clearly, this is something, at the moment, that is out of our hands, and I have to say, it hasn't got off to a great start when initially the post-study work visas were issued just for a number of institutions in the south-east of England, with no consultation with us and I don't believe with the Scottish Government either. So, we have campaigned, pushed, cajoled, lobbied, and I was very glad that in December last year, the Home Office did then make that scheme available to Cardiff and to Trinity Saint David. We continue to press the point that we do not believe that, first of all, international students should be included in any immigration targets. I think all the evidence suggests that the British public don't regard international students as immigrants, and therefore we do need to make sure that they are taken out of the targets and we can continue to press that message with the UK Government. At the moment, you'll be aware that Welsh Government has looked at a specific piece of work on whether there was any scope for specific immigration policy for Wales, although I must say that was mostly in the field of actually the workforce rather than students. You'll be aware that this week the Government's migration advisory committee—there are so many committees these days—have said that they don't believe that there is a case for a separate provision for EU students, as opposed to international students. But we want an immigration system that makes it as easy as possible for those students who want to benefit from education in Wales, and indeed the UK, to be able to do so. llyr gruffydd am: So, what are we doing from now on in then? Are we just waiting to see or are we continuing to push? kirsty williams am: No—gosh—Llyr, we continue to push the case at the official level, and at the moment, I'm trying to convene a quadrilateral, if it can be quadrilateral in the sense that Northern Ireland aren't up and running—but certainly with officials from Northern Ireland. We're trying to arrange another quadrilateral between myself, the HE Minister for England and the new HE Minister for Scotland. If I can speak candidly, I don't believe that there's any difference between our view, with regard to the status of international students, and the views of English Ministers within the department in England. So, I don't think we need to persuade Sam Gyimah about the importance of this. Jo Johnson got, I think the current Minister gets it—it's a question of whether we can persuade the Home Office of that particular case. Firstly, with regard to higher education, we heard that, even without Brexit, higher education is in managed deficit, whilst the funding announcements from Diamond and Reid are awaited. So, is that a concern to Welsh Government, and could Welsh Government take away that uncertainty by outlining a clear funding commitment to the Diamond and Reid reviews? kirsty williams am: Welsh Government is fully committed, John, to implementing the Diamond review proposals. It's a commitment that was an element of the agreement between myself and the First Minister that brought me into the administration, and we have been very clear with HEFCW about our expectations and what the implementation of Diamond will mean for grant going to HEFCW. With regard to Reid, we continue within Government to discuss how we can implement the recommendations of Reid, but one of the whole principles behind Diamond was to move us to a more sustainable funding settlement for the HE sector in the round, that is fair to students, encourages those with the ability to partake in higher education to do so, especially from those from a poorer background, as well as being able to provide our institutions with the resources that they need. john griffiths am: So, you don't accept, then, that there hasn't been a clear funding commitment from Welsh Government to those reviews—the Diamond and Reid reviews? kirsty williams am: With regard to Diamond, I would absolutely refute that. We have been very clear and we have shown HEFCW our analysis of the figures going forward in relation to what is sometimes called within the sector the 'Diamond dividend', although the Diamond dividend is never as big as people imagine the Diamond dividend to be. Now, with regard to Reid, those are ongoing discussions that form part of the normal budgetary process within the Government, but I think we have been as clear as we can be with regard to Diamond. The second question, really, is about HE and FE and it's about European funding, which, of course, has been and is on a multi-year basis, which gives, I think, a lot of security and comfort to the sectors, knowing what the budgets will be over a period of time. So, would you commit to introducing multi-year funding settlements for HE, and indeed for FE, moving forward beyond Brexit? eluned morgan am: Shall I take this and give you a little bit of a break? She's not very well. People can plan, you can get staffing in place, you can have really strategic aims and I think that's really useful for the institutions involved. So, whilst I think we would, in an ideal world, like to see a better view of what's coming our way, it's extremely difficult for us to be able to offer that without having that multi-annual funding commitment from the UK Government. Of course, it's not just about ESF and apprenticeships—it's also about ERDF funding. So, you mustn't forget that, actually, there's been a lot of ERDF funding that's gone into these institutions. Also, FE colleges—we've got Coleg y Cymoedd, the college in Blaenau Gwent. It's because of the multi-annual nature of the fact that we've been able to prepare for them that they have been able to progress. So, that will be a huge loss, but I think it's really important that we don't forget the ERDF aspect in addition to the ESF impact that there will be on these institutions. As far as further education is concerned, in your paper you state that it's a priority to support the FE sector to maintain all the learning opportunities that currently take place under European Union funding. So, would you be able to give the committee an idea of the level of resource you would estimate that the sector requires to achieve that priority, and—? I'll stop there for the moment. What we've said is that we want to maintain that range of learning opportunities that is provided by EU funding. The UK Government have made us some promises and they've made some commitments, and we need to hold them to that, and so let's keep the pressure on. The moment we start saying, 'No, it's all going to be okay, we'll sort ourselves out'—I think that would be a huge mistake. We have been promised that we will not lose a penny as a result of Brexit, and we need to make sure that we keep them to that commitment. I think it was quite interesting to hear what Philip Hammond said yesterday when he was in Wales, saying that the money that we will receive will depend on the future shape of the economy, which implies that he has no idea what's going to happen there, and that that shared prosperity fund will be designed around the deal. I think we have some real concerns about the shared prosperity fund not really following through on the commitments that were made during the Brexit referendum. But, in terms of the replacements, we'd be looking at about £15 million a year, and that would be a huge impact for us, but we're not looking at that—I don't think we should be—because they made some promises. john griffiths am: So, could you say that, if they keep their promises, then at least that level of funding would be maintained? eluned morgan am: I think that would be a minimum, but that's just one aspect of it. suzy davies am: Yes, just very quickly on the multi-annual point, obviously I recognise that we're talking about six or seven-year cycles with Europe, and I completely take the point that you don't really know from year to year what your budget's going to be, but Welsh Government does make multi-annual commitments. How are you able to do that and yet not quite feel confident that you can do that with—well, both your sectors, really? eluned morgan am: I think it's probably easier to do with capital than it is with revenue, so that's what would make the difference. The one thing we all know is that employment opportunities today—the transitional nature of employment and the fact that people are not getting the kind of contracts that we'd like them to get—that makes their lives very precarious and they're less likely, then, to be committed to those institutions. I think it's a really, really concerning thing, because what makes these institutions work well is their staff, so that makes life very, very difficult without that multi-annual commitment. suzy davies am: They also have to raise some of their own money as well—we mustn't forget that. eluned morgan am: No, I think that's right, and I think that there's more that these institutions can do in terms of their own funding and being more responsive to employers and the need for skills in their areas. lynne neagle am: So, given the precarious state of planning for the finances, are you considering letting universities charge EU students international fees? kirsty williams am: We don't regulate the ability for universities to set fees for international students. They would be in a position to—[Inaudible.] They are in a position to set international fees at a rate that, I guess, they feel is appropriate for the provision that they give to those students. I just wanted to pick up on the funding of apprenticeships and the long-term funding, because the ESF—the commitments take us to 2023, which takes us beyond any transition period. So, I just want to hear from you that there are assurances that the apprenticeship programme can be delivered as a whole, come what may. eluned morgan am: Well, we're fine until 2020, because we've had that guarantee from the Government. The issue for us is the n+2 that we would have if we do have some kind of transition deal or an agreement with the EU. So, there is a risk and there is concern, beyond 2020, that that would create problems if they don't agree to fund that, which is the expectation that we have. llyr gruffydd am: But it is a prospect that this wouldn't be achieved as you foresee. eluned morgan am: Well, we do hope, because we've had the pledges and commitments from the Government, that they will respect what we expected and what was expected by these institutions that have had the commitment of the funding. llyr gruffydd am: So, to what extent does that undermine the current work? Because institutions want to enter into agreements with providers and so on. Businesses want to know, if they're starting on some sort of journey, that they are going to get to the end of it some years down the line. eluned morgan am: Well, as I said, because the guarantee is there until 2020, I think that, for now, people are willing to go into those agreements, and I hope that we'll have a better outlook by November of the direction we're moving in. You have to remember that the number of apprenticeships in Wales is rising, while they've collapsed entirely in England. So, it is important that we do continue, and it's important that we don't create an atmosphere here that's going to undermine the confidence of our employers in committing to training in the workplace. llyr gruffydd am: Are you confident that the Government will achieve its targets in this context? eluned morgan am: Yes. But let's be clear: if there is a 'no deal' scenario, that will have an impact on the economy, and who knows what will happen then to some of these companies that are reliant on the EU. llyr gruffydd am: Talking about the impact on the wider economy, on the point you made earlier that it's not just the direct effect on these institutions, but also on the businesses that they engage with, that is a concern in this context, that means, of course, that there is a lot of pressure in this context on the work that other departments in the Government are doing, because perhaps they are the ones dealing with some of this. So, could you tell us a little bit about how you're working with Ministers and Cabinet Secretaries and other departments within the Government to safeguard these interests? eluned morgan am: So, as part of the employability programme, I have started going round every member of the Cabinet to ask what the impact will be on them—for example, in health, and, certainly, the economy, but here are many other areas. What's important for us is that we do collaborate and we do get this analysis, but we hope to do that on the ground through the regional skills partnerships. That's our way of ensuring that we can have an understanding, on the ground, of what's needed by employers. And so ensuring that people feed into that and that we respond to those requirements—that's where we're focusing our work. So, we're asking, for example, health boards to ensure that they feed into the regional skills partnerships. llyr gruffydd am: Is there a danger that we're a little bit behind in this process? Because Brexit could be upon us in no time at all, and, of course, this work is still ongoing. eluned morgan am: Well, I have been pushing and ensuring that in the direct areas facing the greatest risk, and agriculture's one of those, of course—. We have been pushing to see what we can do further, so, for example, I'm in the process of developing a policy on rural skills at present because I do think it's important that we do focus on those sectors that are likely to suffer the worst impact if the worst does happen. So, those preparations are in place as far as they can be, but, of course, it's very difficult without knowing to what extent it's going to impact on us. llyr gruffydd am: And each sector's running on its own timescale, I would presume. But, as you've mentioned rural skills, when do you foresee that that work will appear, and when will plans or schemes or whatever you're intending to put in place see the light of day? eluned morgan am: Well, we hope during this term that that will be published or announced. So, certainly, it is something that we have been discussing with people in rural areas directly, with the colleges, to see what the provision is there and to what extent we need to expand that, and to what extent we will need to change and move really quickly if there is no deal. That's something that I think we have to learn and we need to convince the FE sector about in terms of moving more quickly and to be more responsive to the demand that there is in the workplace. llyr gruffydd am: Yes, because there is the dilemma you touched on earlier about providing the skills that are required for the economy and providing the courses that are easy to fill. That is a live discussion across FE and HE, but you're confident that that discussion is taking place in a constructive and positive way and moving in the right direction. eluned morgan am: Well, it's helped that we've put £10 million on the table, because they do understand now that we are serious about our aim of ensuring that they do respond to what employers are asking for. So that has helped a lot in terms of focus and, of course, we're in the middle of a review now as well in terms of how we fund FE, and that will certainly be a part of that. Can I just go back—? kirsty williams am: Sorry, Chair, could I just clarify something? The last question you asked me about— lynne neagle am: I was just going to go back to that, yes. There could be a scenario where there are reciprocal arrangements, so, if a deal was reached with the European Union that established the principle of reciprocal arrangements, then, obviously, the ability of the HE institutions to charge international fees would be curtailed. lynne neagle am: If there's not that agreement— kirsty williams am: If there's no deal— lynne neagle am: —then it will be open to universities to charge market-driven, international rates. I should have made it very clear that the answer I gave was in the context of no deal, which is what we seem to be talking about mostly this morning, but if there was a deal to have reciprocal arrangements, then that ability, obviously, would be curtailed. Okay, well, can I thank the Cabinet Secretary, the Minister and the officials for attending and for answering all our questions? We very much appreciate your time. Members will see that there are 18 papers to note, so I'd like to suggest that we note them as a block, please, and just to flag that I would like to return to paper to note 18 when we go into private. Item 6, then, can I propose, in accordance with Standing Order 17.42, that the committee resolves to meet in private for the remainder of the meeting and the whole of the meeting next week? Are Members content? Okay, thank you.


gareth rogers: Good morning, and welcome to today's meeting of the Children, Young People and Education Committee. Unfortunately, the Chair is unable to attend today, so in accordance with Standing Order 17.22 I call for nominations for a temporary Chair for the duration of today's meeting. gareth rogers: As there's only one nomination, I declare that John Griffiths has been appointed as temporary Chair. Thank you all very much, and item 1 on our agenda today is introductions, apologies, substitutions and declarations of interest. We will move on then to item 2, and our inquiry into the impact of Brexit on higher and further education, and our first evidence session. I'm very pleased to welcome the Higher Education Funding Council for Wales here today, and Dr David Blaney as chief executive, and Bethan Owen, director of institutional engagement. I wondered if we could start off with you telling us what evidence you can see that the Brexit process has had any impact on Welsh higher education so far. dr david blaney: Can I preface the response by just reminding you that we are, by contract and by role, apolitical, and a lot of the judgments about the impact of Brexit essentially reflect where people sit politically in terms of whether they think it's a good thing or a bad thing? We're not going to go there, obviously, today, so we'll stick to the facts as we can see them, and hopefully we'll be able to help you, but there are areas where we are unable to help. But even in terms of your assessment of whether this is going to be a good thing or a bad thing, a good impact or a bad impact, some of that inevitably in the end becomes a matter of your politics on it, so we will be as careful as we can be on that. In terms of the impact of Brexit on higher education, clearly, the significance here is about the contribution that higher education can make to Wales. So, we fund provision; we don't fund providers, technically, although obviously there's not much provision without providers. So, we are interested in the sustainability of higher education providers, but fundamentally the issue is: what does the HE system in Wales do for Wales, and what impact might Brexit have on the capacity of the system to continue to deliver for Wales? So, we know that universities make annually about £5 billion of impact; 50,000 jobs. Of course, in Wales, all of that economic impact is really very significant, and uncertainty about the relationships and the arrangements with Europe is one of the most significant issues confronting university management at the moment. We can identify at the moment the extent to which the HE sector in Wales is exposed to sources of income that are located from the EU, so EU students, structural funds, and EU research funding, and so on, from the EU. We can identify some of that, but, actually, what happens in the future is much harder to be clear about. We are beginning to see some impact in terms of applications from EU students and I'll ask Bethan to share some details on that in a moment. We're also beginning to pick up, only anecdotally, some signs that there are increasing difficulties in the UK sector, and the Welsh sector as part of that, in playing in some of the EU collaborative research activities. And that, I think, just reflects the extent to which EU partners consider that British partners might be a stable partner as we go through this transition period. We don't have data on that—that's anecdotal—but there are signs that some of those relationships are beginning to become a little bit more difficult. In terms of the financial impact of that, clearly, if it is accepted that the UK is a net contributor to the EU then, presumably, some of the money—we're almost immediately straight into politics if you're not careful—but some of the money will be available back to the UK, and the extent to which Wales benefits or not from that returned money is a function of the political relationship between the Welsh Government and Her Majesty's Government. It's not necessarily the case that Wales will always lose out in that relationship, but that will become a matter of politics. There's a broader dimension, which is about the economic impact of Brexit on the UK economy and how much tax revenue there is and all of that. I think it's very hard for us to be definitive about how that's going to play out. But we can certainly anticipate some turbulence and exactly how that plays for institutions remains to be seen. We can touch later on on the extent to which they are sighted on this and preparing for it. bethan owen: This is based on the UCAS applications and the report that was published at the end of June, 30 June. The European Union-domiciled applicants to Wales have decreased by 8 per cent, which contrasts with a 2 per cent increase for English institutions, and non-EU—so international students, not from Europe—have also decreased by 9 per cent to Welsh institutions, again contrasting with a 7 per cent increase in England. Could I then just ask you what you see as the main pressures on the Welsh higher education sector at the moment? bethan owen: The funding position would be the main pressure. The recommendations made by Sir Ian Diamond in his review of higher education funding and student finance are in the process of being implemented, and the changes to the student finance arrangements will take effect from this September. However, the recommendations for re-establishing funding at Welsh institutions are expected to take quite a bit longer. That funding, when it returns to institutions, is intended to re-establish funding for higher cost provision, both full time and part time; reinstate funding for innovation; and maintain, at the very least, the research funding in real terms. Universities, in the meantime, are trying to minimise the cost reductions that they're making in order to maintain the infrastructure, so that when the funding comes they can get the best value out of it. For the research and teaching grant, though, we are still funding at a lower level—£12.5 million less—then the starting point for the Diamond report, the 2015-16 starting report. But we expect to be able to start introducing funding from 2019-20 to make a start on implementing Diamond. And it's probably important to note that the Diamond recommendations predated Brexit, therefore the challenges introduced by Brexit are in addition to those that the Diamond report was addressing. There is also the start of a reduction, both in Welsh-domiciled and English-domiciled applications to Wales. And the other pressures include pay and pension costs, not least the issues around the universities superannuation scheme pension fund, where there's potentially a significant increase in cost. Increased student expectations for modern facilities and infrastructure bring a requirement for capital expenditure and borrowing, which bring their own pressures. And finally, the uncertainty about potential consequences that could arise from the review in England of fees and funding—the Augar review. john griffiths am: In terms of European Union students and enrolment, is Wales forecast to do less well than England and, if so, why might that be? bethan owen: They are not forecasting it. It's very difficult until the enrolments are made, and it's also very hard to see—the data that we see is the UCAS data. So, now, they have to find the full fee, whereas previously they were getting the grant in the same way as Welsh students. So, I'm speculating that that might be having an impact as well on EU students' appetite to come. llyr gruffydd am: Well, that's straight into what I was going to ask, really, about what you think the factors are that led to this 8 per cent or 9 per cent drop in EU students applying to study in Wales, where we see a 2 per cent increase in England. Is that it, or are there other things that you've taken into account? What's your assessment of the reasons behind this? dr david blaney: It's very difficult to be definitive about the reasons, but I think there are probably two. The one that Bethan has already indicated, which is the change in student support arrangements for EU students, will have an effect of perturbation. That's probably relatively temporary—let's hope it is—as that settles down because, actually, the deal for EU students coming into Wales is no worse than that coming into England. Ours would be better because the fee level is slightly lower, but we do struggle in Wales in terms of the Anglocentric nature of the media and so on. The other dimension is that when you're in a highly competitive recruitment market, you have to do what you can to look attractive. Part of that is about being able to invest in facilities, and particularly buildings and kit, and the relative levels of investment between Wales and England over quite a long period of time now probably have an impact on that. Certainly, anecdotally I know, from my own family, that a lot of the choices have been made in terms of the state of repair of campuses and so on. There's something rational about that, isn't there? If you've got a system that is relatively better invested, then you're likely to have a better student experience because the resources are likely to be better. We saw a sort of similar but opposite effect when the £9,000 fee maximum limit came in, and some institutions, mostly in England—there was one in Wales—chose to pitch their fee levels really quite low, relative to that £9,000, and caught a cold in the student recruitment market because fee levels denote quality in the student mind. So, the price sensitivities work quite differently. So, again, if you've got a relatively better invested part of the system, then that might well be one of the reasons why it looks more attractive. llyr gruffydd am: That latter factor would affect the whole of the cohort, not just the international recruitment, of course. The implementation of the Diamond recommendations is crucial to that because that's re-balancing where the policy of investment goes. mark reckless am: If I heard you correctly earlier, you said that the applications from non-EU students were also down by 8 per cent or 9 per cent. So, forgive me a certain scepticism about the explanation of the fall in the EU students being that they did get the fee grant and now they do not. If that's the explanation, why are we seeing the same fall in non-EU applications? dr david blaney: Well, I think the Welsh domiciled are also now having to face the prospect of finding a loan for the whole of the fee. There's also a demographic dimension here with the downturn in the 18-year-old school-leaver profile, and that actually is happening in Wales at a slightly later point than in England. mark reckless am: But this is non-EU students, and I think you said, Bethan, an 8 per cent or 9 per cent fall in them as well. mark reckless am: All English or all Welsh? bethan owen: Well, I contrasted the Welsh position with the English position where they were seeing growth. If you look, then—and we don't have the detailed information, but, again, what UCAS publish is some analysis by tariff. They analyse by type of institution—in other words, the grades that you need to get into institutions—and there is a trend for growth being in the higher tariff institutions. So, there's a mix effect in there as well, and I think there's undoubtedly an element of perception of how welcome overseas and international students are, and that's something that we know the sector are working on with Government. mark reckless am: Why would that affect Wales more than England? Do you think there's been perhaps too great a negativity about Brexit in the sector? bethan owen: I think it's the mix of institutions that we have. When we look at the mix of institutions that we have, we will probably see a differential impact between Cardiff University and others. john griffiths am: Okay, Mark? Sorry, David, did you want to add anything? dr david blaney: I was just going to say that we would expect to see quite differential performance in the English sector, so the overall numbers are being brought up by substantial increased performance with some of that sector, and it's a question of how many of that type of institution you have in Wales. mark reckless am: So, performance is increasing amongst the English universities, but not amongst the Welsh, you think. dr david blaney: I think performance is increasing, but increasing substantially with some of the English sector, not all of it. So, you get an average for the sector that is increased performance, but actually the stronger players within that sector, with the stronger international profiles, are bringing that up, and we have fewer in Wales that have that sort of presence. darren millar am: Would it be fair to say, then, that the universities over the border in England are better at selling themselves internationally than our Welsh institutions? Or is it just this fact that we've got fewer very high tariff universities versus the English market? dr david blaney: I suspect, and this is speculation—I suspect that it's a bit of both. I would then come back to the point I was making about the Anglocentric nature of the UK media. darren millar am: But, forgive me, don't international students just look at the UK as a whole? How are we comparing to Scotland, for example, or Northern Ireland, in terms of their universities? Do you have a comparative figure for Scottish universities? bethan owen: I haven't got that one with me for now, but there will be one in the data. bethan owen: Again, it's a combination of being part of the UK but differentiating, and the ability to differentiate the strengths of Wales, so attracting those students to Wales specifically, on top of the UK draw. dr david blaney: So, in terms of the efforts that have been made, there's a programme now that is being run by the sector in Wales—it's 'Study in Wales'. But that is a determined collective effort to present Wales as a good place to study, with particular messages about what distinguishes studying in Wales from studying more broadly in the UK. In a sense, that is responding to the need to increase the presence of Wales in an international market. It will take a while to actually have an impact, but I think that's exactly the sort of work the sector need to be doing more of. mark reckless am: What are those messages on why prospective students should study in Wales? dr david blaney: One of them in particular is relative safety. We know that one of the considerations, particularly for parents of overseas students, is are they going to go to a safe environment, and we know that the perception of international students who study in Wales is that this is a comfortable and safe place to be. That's partly a function of the size of our larger cities—quite a lot smaller than many of the cities in England. So, we've got a UK-quality system, a UK degree, and the strength of that brand is available in Wales, but it's available in a way that is safer and more supportive, I think is the messaging that's coming through. darren millar am: I just wonder to what extent you have been able to plan in your financial forecasts for the next few years ahead for the potential impacts of Brexit. What have you built in, if anything? bethan owen: In terms of our funding, we receive our funding annually, but the sector provides us with financial forecasts, and we use those for monitoring sustainability. We are due to receive a full forecast at the end of this month, and we obviously have updated information from institutions. darren millar am: And they're three-year forecasts that come through to you, aren't they? bethan owen: They are four plus the current year. So, we've got numbers to 2019-20 at the moment, and expect to go to 2020-21. darren millar am: And what are the universities expecting? What do they anticipate? bethan owen: Well, for 2017-18, which is the year we're about to end now, they were expecting £38 million income from European students, and approximately £91 million from the various European programme funding sources, and that's about 8 per cent of the total income—£1.5 billion—of the sector. The forecasts are assuming that that continues, albeit that institutions have various scenarios that they have for all sorts of scenarios that we can all speculate on, and, as I mentioned earlier, the balancing act of maintaining infrastructure and resources and staff in the short term is where we are at the moment, or where the sector is at the moment. And there are also signs that the banks and lending institutions are becoming a bit more risk-averse in providing borrowing to institutions, and of more differentiation between individual institutions being made than has possibly been the case in the past. The sector made an operating deficit, again looking at all Welsh institutions collectively last year, 2016-17, of £17 million. And we're expecting a similar collective level of deficit for this financial year, if not slightly higher. Now, these are managed deficits and we are not currently seeing critical short-term cash availability issues in the sector. However, the increase in funding from Diamond is a key part of enabling the sector to return to longer-term financial sustainability. You can manage in the short-term, but there comes a point when the big cost reductions and infrastructure reductions have to be made. And, again, having mentioned the pressures on pay, pensions and other challenges, it is difficult to gauge whether, if those factors come into play as well, some of these cost reductions may have to be made before funding comes in to replace—either Diamond funding or the European replacement funding. darren millar am: So, would it be fair to say that, in terms of the funding arrangements, and, in terms of the student numbers, one reason why we've got this recruitment problem is this lack of investment in the capital infrastructure that we've seen in recent years because of the financing arrangements from the Welsh Government, and the fee regime that we had previously, and the student finance regime that we had previously, not getting more cash into our Welsh universities perhaps, and that, over the next few years, there's going to have to be much more significant investment in capital if we're to raise the game and be more competitive, yes? bethan owen: Yes, that would be fair to say. darren millar am: So, to what extent are they planning for more capital investment in those financial strategies that they've been preparing and presenting to you? bethan owen: They are all planning for capital investment. This year, 2018-19, is the first time that we've had capital funding in our remit letter—so, we've got £10 million of capital funding, which is very welcome, with a prospect of a further £20 million. That will make a difference, particularly to those institutions who are not finding it as easy to borrow from financial institutions. However, there are internal governance processes that are putting tight restrictions and expectations of what that money will be invested in. But they all have plans to do it and they need the confidence that their forecasts and long-term future funding prospects are secure enough that they can get the confidence of borrowers then, and service the costs of those borrowers. What clarity is there from the Welsh Government at the moment in terms of how much they anticipate the Diamond dividend will be, and what proportion of that is going to be released to HEIs in the future? bethan owen: I was very carefully not describing it as a dividend—a re-establishing of funding that we had in the past for higher cost and innovation and maintaining research funding. The timescales are difficult, because we have an annual remit letter, and we can work with Welsh Government officials, and they can only give us a sense of when they think the funding will be released. But 2018-19 is the start of the system, and because of cohort protection—so, protecting those students who came in on a different deal to the deal from 2018-19—in the early years there is an element of double cost; there's a cost of seeing out the old system and the different cost of implementing the new system. So, at the moment, we're certainly not in a position to tell the sector with any degree of certainty what funding would be beyond what we've allocated for 2018-19, with some sense of what 2019-20 numbers we're working with because we allocate our money over an academic year—so, by definition, we've already made assumptions of four months of the 2019-20 funding, albeit that's not approved yet in the budgetary process. darren millar am: But you're not being given a steer at all as to what you expect the additional resource that you might have to make available to Welsh universities might be as a result of Diamond. dr david blaney: I think it's fair to say that officials have been as helpful as they can be with us, in terms of the planning assumptions we make and indications about whether or not we are being too ambitious or not ambitious enough. So, I think they're being very helpful; as Bethan said, they're constrained by the process—they can't pre-empt a budget process. The other question I think you asked was how much of the money released by the new arrangements will come into higher education. At the moment, we are expecting all of it to come into higher education, as the product of the arrangement between the current Cabinet Secretary and the current First Minister. The extent to which any changes there cause that to come under threat is something I can't judge at the moment. But we have had in our remit letter from the Cabinet Secretary a clear indication that we can expect our resource to grow over the next few years, as the Diamond process unfolds. llyr gruffydd am: Bethan said in an earlier answer that, I think, the financial forecasting from universities forecast something pretty consistent in terms of what they're hoping to be receiving in income, for example. So, does that tally, really, or are they going to be recruiting additional students from the UK market or—? What's the plan? bethan owen: I was reflecting on the last point when we had consistent information across the sector. bethan owen: I'm expecting that the forecast that we get at the end of this month will reflect the reduced applications we've seen, and an element of that will be reflected in reduced improvements as well. So, we don't really know, then, whether—it's unlikely that they are going to expect a consistent fee income, really. dr david blaney: I think it's fair to say we would expect them to respond to what they're seeing in the UCAS process. Even if they didn't, they would all, in any case, have sensitivities for what they would do if things don't come out in the way they hope. And if they didn't have that then we would be on their case, of course, because we want them to be properly sighted. darren millar am: Can I just ask, in terms of the impact of Brexit, have you done any assessment of what you think might happen, or have any of the institutions made available to you any assessments of what they think is likely to happen to their individual institutions, going forward? You've mentioned scenarios earlier on, David, so what scenarios have you set out? dr david blaney: There's a Welsh Government HE Brexit working group, which is chaired by one of the Government directors, and we sit on that. And we have provided that group with early summaries of the risks and the potential impact, in terms of the exposure of the sector to EU-sourced funding. We have, as part of that working group, explored those issues that it would be really very helpful for either the Welsh Government to try to put in place or for the Welsh Government to persuade UK Government to do. And I think, in our submission, we identified a number of areas of what we would consider to be a helpful action, and that has been worked through that working group. We know that it has informed Welsh Government's position, in terms of what it does and also in terms of the conversations that they have with Her Majesty's Government. Beyond that, what we haven't done in that working group is share the work that institutions are doing individually to look at how they would respond to different scenarios. We are not able to do that here either because, inevitably, they would have varying degrees of unpalatability and they would have to be managed very, very carefully. You take cost out, which is essentially the response, you actually take people's jobs out, and all of that has to be managed carefully. So, that's not really a matter for public consideration, but we do know that the institutions are looking at a range of scenarios on what they would do. Bethan mentioned earlier on that the current deficit for the sector is a managed deficit—it's not something that has taken them by surprise. They are responding to what they see as the dip between where Diamond was reporting and where the money starts flowing. Similarly, I think we're comfortable that there is a managed approach to the scenarios that they're testing within institutions. The bigger issue really, in a public policy context, is the potential damage for the sector to be able to deliver for Wales in terms of research and skills development and all the other contributions. darren millar am: So, you're confident that they're taking a robust approach to planning for various scenarios, going forward, are you, as individual HEIs? dr david blaney: Yes, and as the deal becomes more clear politically, then they will obviously have greater clarity in terms of which of these scenarios they need to work up more fully, but they are sighted on it. Can I just ask about fee and access plans, and how Brexit might impact them? To what extent do you think that they could be impacted? dr david blaney: I think there are two dimensions to maybe touch upon there. So, we're just in the process now of finalising our consideration of fee and access plans for the 2019-20 academic year. We, as part of that process, go through similar—we look at their financial sustainability, which is based on their forecasts—data to the stuff we've just been discussing. And also, of course, the fee plans themselves make assumptions about how many students of different types, from different domains, are going to be recruited. So, clearly, if there is a continuing downward pressure on EU student recruitment, then that will reduce the amount of fee income that's going to come in, unless they can find other students, and that will reduce the amount of investment in the various activities that are identified in the fee plans. If institutions are becoming aware that the basis upon which they've submitted a fee plan is fundamentally different from the reality, then they can come into us for a change to their fee plan. If it's not fundamentally different, but there are always differences between what you plan and what happens three years later—. We also monitor after the event and, if there are differences, we would then obviously require institutions to explain those differences. Conversely, if they'd had more students, and potentially more investment, we'd want to know what they'd spent it on, and if they've done different things, we'd want to understand that as well. The only other thing that's perhaps worth saying is that, in the 2019-20 fee and access plans—they're not published yet, so I can't give you the full detail—five universities have made reference to Brexit and the Brexit impact, and things they want to do through their fee and access plan to try and address some of those issues, so they're in there as well. darren millar am: But we've already said, haven't we, that it may be nothing to do with Brexit, this dip in EU recruitment, because there are other factors like the attractiveness of the estates and the environment that young people might be educated in? But they're making assumptions that it's linked to Brexit, are they? dr david blaney: Not really. There are things they want to do to enhance and to protect student mobility, and some of that will be funded through fee plan investment. So, the Brexit conversation between the EU and the UK Government might or might not sustain Erasmus engagement, and if it doesn't, then they need to find other ways of trying to support that sort of thing. What else do you do to assure yourselves that Welsh higher education institutions are effectively planning for Brexit? bethan owen: We've touched on contingency plans, but, in an environment of uncertainty, I think it's difficult for any of us to know what the right scenario is. I think rather than looking at worst-case scenarios, what the sector is also focusing on is the promotion and looking for additional or increased sources of funding. So, we touched on strengthening the Global Wales engagement in order to sell Wales, so more focus on marketing Wales overseas, but also within the UK. The other area where the sector is working at a UK level very hard is making the arguments to UK Government for maintaining access to the successor to Horizon 2020, which is arguably a larger part of the whole funding infrastructure—students is one part, but the whole funding infrastructure for maintaining research capacity. So, working with UK universities to make arguments at UK Government level for maintaining access to those sources of funding is also a part of what the institutions are doing. That group, which is the Welsh Government group, is being advised by members on it, and that's informing Welsh Government officials when they engage with UK Government as well. mark reckless am: Do universities seek your advice on what the risks and, indeed, opportunities of Brexit may be and what you think they should be doing to plan for them, or is your role more one of monitoring what they do as opposed to advising what they should do? bethan owen: They are autonomous institutions and ultimately their governing bodies are responsible for ensuring their sustainability. It's not a relationship where we would advise and direct, but it is a relationship where we would question the scenarios if we consider from our experience that we would have expected other scenarios to have been tested. mark reckless am: I understand you don't direct, of course, but my question was about advising. You're overseeing, or monitoring—or whatever you like to describe the role as—quite a number of institutions, and presumably you therefore have particular expertise within your organisation, and I just wondered whether higher education institutions are doing enough to draw on that. bethan owen: I think we can advise—we can advise based on data and information that we can see. The big thing in this whole Brexit scenario is the uncertainty and the extent to which our speculation is better informed than the governing bodies or the sector collectively is probably the issue. So, there's a relationship with the sector and there's a relationship with individual institutions, and they are different. So, some of these conversations are happening in various ways, where we're all gaining intelligence about what might be a sensible set of planning assumptions. Then, if we see an institution that is manifestly giving signs of not being sighted on some of these risks, either through their forecast or through other assurance activity, we will challenge. We have an annual cycle, with two points in the year where we reassess the overall risks of individual institutions, and that's based on a whole range of hard data but also a range of soft data. We have lots of conversations and we take all of that in the round and form an assessment about the financial sustainability of the institutions but also the extent to which we think their governance and management arrangements are properly sighted and facing properly the challenges that they face. In some ways, we say it's not about the challenges they face; it's about how they face the challenges. Our alarm bells really ring when we get the sense that, actually, either an executive or a governing body hasn't really noticed. There are medium-term real challenges, both because of Brexit and because of other contextual factors, but at the moment the sector is a managed sector, which is good. It's not always like that, but we're in, I think, a good place at the moment. So, our role is definitely to challenge where we don't think they are making sensible assessments, but it's not to say that their assessment is wrong and ours is right; it's just to have a conversation about, 'Why have you done this and what has informed your thinking?' It's slightly more one step back and slightly more subtle, but it is, as you imply, us using the intelligence we gain from all of those conversations when we talk to individual institutions as well. We had evidence last week from some of the higher education institutions, including Cardiff University, and it's very interesting, in relation to Erasmus+ and the mobility funding for students that, I think, only 40 per cent of the mobility funding in Cardiff is paid for by Erasmus+. I note that you've been consulting on national measures for higher education performance and that one possibility is using international mobility as a performance indicator. I was just wondering whether you might go further and expect universities to actually make commitments to funding international mobility from their own fee incomes as part of that. bethan owen: Again, reflecting on the latest fee and access plans, seven of the universities are referring to mobility—either they have targets in them or are explaining what their plans are—so they are including an element of it from their own income and fee and access income. However, Erasmus is such a well-established and long-term plan—if we were looking at a scenario where that infrastructure wasn't available, to implement anything similar to that would be much less efficient and much more costly. Ideally, you'd want something that all Welsh institutions could take part in, and that takes some investment and some co-ordinating. I think it's easy to underestimate the accumulation of time that has gone into establishing Erasmus. llyr gruffydd am: And the point was made clearly last week that the brand is internationally recognised. When you enter into Erasmus+, you know exactly what you're going to get, and all of that. But there have been criticisms as well about degrees of flexibility and this, that and the other, so I'm just wondering whether—and there is presumably going to be some change on that front although I'm hoping we can buy into it, as others have done who aren't in the EU—that emphasis on encouraging institutions to look more proactively at funding their own mobility efforts would be positive. dr david blaney: I think the— llyr gruffydd am: Sorry—especially if it means that they do more of it. I think the Welsh sector is definitely committed to trying to find ways of promoting and resourcing that sort of mobility. There are signs that some of the restrictive elements of the Erasmus programme are going to change anyway, because that's under development and that's positive. There have been positive noises as part of the Brexit negotiations about wanting to carry on being able to access the Erasmus programme. Nothing is agreed until it's all agreed apparently, so we'll have to see on that one. That would be far better, I think, as Bethan indicates, than trying to replace it with a made-in-Wales only, but you could have a made-in-Wales on top. All of these challenges also create opportunities because they stimulate thinking, and so the fact that seven of the eight universities are already now using their fee plans as a vehicle for thinking about this is positive, and I think we can take that on from there. llyr gruffydd am: Because that 40/60 split struck me as being the opposite to what I perceived the situation to be. A key part of your role is to work in partnership with students, so I'd just like to ask what work have you done with students, in terms of maybe protecting their interests as the Brexit scenario evolves? dr david blaney: Well, as you say, we do work with students. We were the first of the funding councils in the UK to have a memorandum of understanding with the National Union of Students in Wales. So, we have close links with NUS Wales and we're very proud of that, and it's very productive. We we're, again, ahead of the rest of the UK in requiring all HE providers to have student charters and there are elements of student protection within the student charter. The UK-wide quality code also has elements in it where arrangements have to be specified about the protection of student interests. That is particularly, in essence, around circumstances where a provider gets into difficulties and they might wish to close a course or something more drastic and then what arrangements are in place to make sure that those students who are in train are protected. So, that is there and we've worked hard with the sector and with NUS Wales to get those measures in place. There's more development work in train at the moment, so we've asked Universities Wales to construct a protection that takes account of the approach to protecting the student interests in higher education. We're also requiring further education institutions who are regulated and deliver higher education to do similar or the same, and that's very important. The students who are HE students in FE are absolutely not second-best, and they should have the same protections. llyr gruffydd am: But is all this a general piece of work? It's not Brexit-specific, although, no doubt, it may—. The other dimension around Brexit is the immigration status of EU students, and that's, kind of, beyond our pay scale—that's a UK Government issue. llyr gruffydd am: Is that something that you have a view on? dr david blaney: It's clearly in the interest of the enrichment of the curriculum and the student experience for students in Welsh institutions to be able to have students from other EU countries in the mix. Now, of course, you have a statutory duty as well to assess the academic quality of the work in our higher education institutions, and I'm just wondering what potential impacts you think that Brexit might have on that particular aspect. dr david blaney: I think there are possibly a couple of things to say, and one, in a sense, echoes what I was just saying in the final part of my previous response, which is that part of the quality of the student experience is the richness that you get from having students in your cohort who have different backgrounds and different perspectives. So, if there is a continuing reduction in the number of EU students coming into Welsh institutions, then that richness deteriorates. That doesn't mean to say that the base or the threshold standard of what's required for a degree will come under pressure, it's just about the richness on top of that, which will be, in a sense, a quality-enhancement issue. That would be something that we would wish to try to protect against, but in the end you can't force EU students to come—you have to try and look attractive, and we've touched on that. The baseline requirement assessment of quality will not be affected by Brexit, except in so far as the machinery we use to discharge our statutory responsibility, which is through the Quality Assurance Agency, which themselves are accredited with European Association for Quality Assurance in Higher Education, the European machinery for higher education quality. And there's a set of standards around that, and we would obviously wish not to be in a position where our ability to use and adhere to those standards is adversely impacted upon. Those standards will still exist, and it will be possible for the British system to adhere to them, even if they're not actually able to play in the same way. Then the only other thing I would say is that one of the factors that can cause the quality of the learning and teaching experience to be likely to become inadequate is when institutions come under financial pressure, just because their capacity to maintain the same sort of student experience can get under pressure. So, clearly, we will be looking for and making sure that institutions manage the financial pressures, if there are any—and there are some at the moment, as we've described—and manage those carefully. And in all of that, we will expect institutions to do their duty to make sure that the commitments they've already made to students are carried through. So, where students have already started on the course, they need to be able to finish that course—you can't just pull the plug out. A lot of what you've told us in the last three quarters of an hour or so will have costs attached, depending on the impacts. Certainly, we're in choppy waters as a sector anyway, and the risk is that things will be even more choppy, if you'll excuse that level of political interpretation, over the years to come. I'm just wondering what advice you might have given the Welsh Government in terms of what level of transition funding, or Brexit transition funding, might be required by the sector, and if you have, what the Welsh Government might have told you. bethan owen: I mentioned earlier that, obviously, we've provided information in terms of the assumptions that the sector are making on income. I think the extent to which that needs to be replaced or supported with transition funding depends absolutely on what the final arrangements for Brexit are, but it's an appropriate point to refer to the report that Professor Graeme Reid has produced, commissioned by Welsh Government. But, again, the Reid recommendations in that report build on the Diamond recommendations, and as soon as Diamond is in place—and Reid is providing recommendations in addition, to establish funding on the basis that the funding needs to be available in Wales to maintain and develop and strengthen the research and innovation infrastructure that we have. llyr gruffydd am: Are you not worried, though, that the clock is ticking and that we really don't know what the situation is at this point? dr david blaney: Do you mean the Brexit situation? llyr gruffydd am: The Brexit clock, yes. dr david blaney: Uncertainty is unhelpful, because as I've said several times, the sector is a managed sector at the moment. We're not seeing maverick stuff, but actually you can only manage, really, what you can see and what you can reasonably predict. So, the longer the uncertainty persists, the more difficult that is for institutional management and, indeed, for the rest of the machinery to support them. darren millar am: Chair, can I just ask a question? john griffiths am: Yes, Darren. darren millar am: In terms of uncertainty, though, we've still got this uncertainty over whether the extra cash that the Government's going to have to spend as a result of Diamond being implemented is coming to the HE sector. They've given a political commitment, but you've got absolutely no other assurance of the sums of money that are coming in. We've got the reform of tertiary education arrangements in Wales, which are also under way, so it's a bit of a perfect storm for you, isn't it, really, with all of these three things happening at the same time? dr david blaney: We're certainly kept busy. darren millar am: But two of those things are in the gift of the Welsh Government to sort out for you, aren't they? dr david blaney: Well, the policy on the reform of the post-compulsory sector absolutely is a Welsh Government policy. The extent to which they can pre-empt a budgetary process and give us clear sight of the amount of money in future years is—. My understanding is that that's difficult for them to do, and I would repeat what I said earlier: officials have been as helpful as I think they can be in respect of that. , you're right, we've only got a political commitment between two people currently in post. darren millar am: that statement about the savings accrued from Diamond being reinvested wholly into the HE sector has not been repeated, frankly, has it, since the coalition deal was struck? dr david blaney: No, but it hasn't been rescinded either, so—. darren millar am: No, but there have been opportunities—repeated opportunities—in the Chamber, where the Cabinet Secretary's been asked to repeat that commitment, and the First Minister's been asked to repeat that commitment and has not given that commitment. That must concern you, and must concern your university sector even more than, perhaps, some of the elements of Brexit that we're discussing. dr david blaney: Bethan has outlined earlier on in this session the fact that institutions are currently running deficit budgets in order not to lose the infrastructure on the assumption that the Diamond money will come in. If anything were to cause significant perturbation, either to the timeline of that or to it coming in at all, then there would be much more of what Medwin Hughes calls 'houskeeping' that would be required, and that would be significant. So, at the moment—I don't like the expression 'valley of death', but there is a valley to cross, and I think the sector is reasonably confident about how wide and how deep that valley is. So, there are several valleys that they're crossing—the metaphor fails, doesn't it, really, but I think you get the drift? So, there are a number of challenges and they can see their way out of some of those challenges, but if any one of these starts to get significantly disrupted, then that would be a real issue for them. Could I go on to ask about other barriers to Welsh universities gaining more funding from UK research councils? What would you say those barriers are? dr david blaney: Well, I think there are a couple of things, really, to say. The first one—and we'll sound like a stuck record if we're not careful—is that there's an issue about investment and the Reid report makes this very clear. So, he has reaffirmed research that had been done previously that identifies that, actually, the quality of the research base in Welsh universities and the productivity of that Welsh research base are both good, there's just not enough of them, and that, in the end, is a product of investment decisions. They have particularly looked at the deficit in science, technology, engineering and mathematics areas, and I always say that research is not just STEM. , STEM is important, and I'm not denying the deficit in that area, but we have to also remember that the research agenda for Wales is not just STEM—it's arts, humanities, it's social sciences. The Welsh impact in its research is better than anywhere else in the UK, so that's good. So, they do very well, and we just really need to invest a little bit further—so continue to do very well, but put it on a broader front. If you want to be able to play into the UK-wide research funding, then the investment has two dimensions to it. One is just having enough researchers to be able to play into those increasingly larger projects rather than small-scale projects. If you haven't got the critical mass, it's very hard to make the case that you can play. And the second thing is that UK-wide research pots nearly always fund at about 80 per cent of the total cost of the research, and the other 20 per cent is meant to be found from the core research funding for the university, and if you're in a situation where your core research funding is not competitive, then you're not going to be competitive at getting that money. I think it's fair to say that the Welsh sector has not been sufficiently focused on getting in on the conversations with the research councils, making sure they're in the various committees and so on. We are intending to do a bit of work to see if we can systematise that a bit better—that engagement—because there's no doubt about it: it's not to say that this system is in any way inappropriate, but the more you're in the conversations, the more likely you are to be better placed to respond to the research challenges that come up. One final question: in terms of the researcher collaborations and networks that exist, do you see potential difficulties after Brexit for the continuation and enhancement of those, and are there any particular lessons to learn from Sêr Cymru II? dr david blaney: I think that there are two things to say here as well. First of all, the Brexit deal might or might not impact adversely on the capacity of Welsh and, indeed, UK research infrastructure to play into broader collaborative activity across Europe, and, in a sense, that's a function of the deal whatever the deal looks like, and we'll have to wait and see. But we've mentioned playing into Horizon Europe, and being able to continue with that would be an important part of that capacity. It's not just the money, it's being in the club and it's the signalling that we're in the game. And then the other part of my response to this would be that, actually, Wales will need to continue to be good at the research it does, so maintaining the quality, maintaining the impact, and hopefully growing the critical mass. The Sêr Cymru initiative has been quite important in doing that, because it's been very focused, capturing key research players, and the attractiveness that that has then to other researchers around them, and to industry collaboration, and they have been areas of real strength that we've invested in. And I think they are already showing dividends in terms of the capacity to win more research funding, and to establish an even stronger presence in the international research market. darren millar am: Just very briefly, one of the pieces of feedback that the committee members received at a stakeholder engagement event, which took place prior to this inquiry starting, to receive oral evidence, was about the research funding that is available from the charitable sector, and how poorly Wales does in attracting some of that research. I think we had some figures from the British Heart Foundation, which said they have £100 million a year available for research grants, or something like that, and we're getting 1 per cent of that coming into Wales, which is obviously pretty low down. I appreciate that research into the type of activity that they want to put their money into, Wales may not be particularly good at, and there may be other opportunities with other charities and partnerships. What work are you doing in order to build the capacity that Wales has to attract more of that charitable sector research funding into Wales? bethan owen: One of the issues is the capacity to engage with that funding, because of the overhead issue that David mentioned. Again, that could be built in to our funding, if we had the capacity to increase our quality-related research funding. darren millar am: But that pressure's the same in other parts of the UK, is it not? So the overhead funding is still an issue in England, and in other places. bethan owen: There is an increased contribution, and I think it's an element that was increased this year to acknowledge that. I'm fairly certain that some of our institutions will be very strong with the cancer charities, possibly not the heart foundation. darren millar am: So, this gearing issue that you mentioned earlier on, for every £1 that somebody else puts on the table, they can draw in another £4 on top, because that £1 will cover the overheads, whereas the rest of the research cash—. You know, we sometimes get into a conversation about the unhypothecated nature of our research funding, but actually that creates a flexibility and the infrastructure investment that allows institutions to be able to respond to these other opportunities. Without that, they can't do it, because if you're not careful, you've got institutions engaging in UK-wide or charity-based research activities where they're actually having to pay for it themselves—they're running at a loss. darren millar am: So that's the main problem; it's not that Welsh universities aren't doing their best to get this cash in. Or is it a bit of both? dr david blaney: I think, in the main, universities and researchers will get their cash from wherever they can, so I don't think it's a lack of appetite. Well, thank you, both, for coming in to give evidence to the committee this morning. You will be sent a draft of the transcript, to check for accuracy. Okay then, the next item is item 3, papers to note, the first of which is a letter from the Cabinet Secretary for Education on the school organisation code. The second is a letter from the Minister for Children, Older People and Social Care on the Childcare Funding (Wales) Bill. Paper to note 3 is a letter from the Chair of the Finance Committee regarding scrutiny of the Welsh Government's draft budget for the forthcoming financial year, which we will be discussing under item 6 on the agenda. Paper to note 4 is a letter from the Minister for Children, Older People and Social Care on parental attitudes towards managing young children's behaviour. And the final paper to note, paper to note 5, is a letter from the Minister for Children, Older People and Social Care on the children and family delivery grant, which we will discuss later on in private session, if Members are content. Item 4, then, is a motion under Standing Order 17.42 to exclude the public from the remainder of this meeting, and also for items 1 and 2 of the 20 September meeting