The World Bank Second ECA Education Conference, Dubrovnik, Croatia Creativity, innovation and role of higher education in economic development – Financing of tertiary education” October 2-4, 2005 Don Thornhill Chairman National Competitiveness Council Ireland

2 Innovation – the key to Economic advantage Greater prosperity   Increased living standards 

3 Innovation Creative process Transforms   Greater value  S&T, social and economic dimensions  Knowledge  Ideas  Technology 

4 Tertiary education system Teaching and learning Research   Knowledge (including technology diffusion)  Key agent Economic development Enhancing comparative advantage  

5 Tertiary education Many interests, pressures and objectives Government (multiple roles, policies and agencies   Society  Confusion, messiness and controversy – unsurprising !

6 If State is a key funder of TE financing system is needed which Addresses multiple objectives Promotes creativity and innovation   Is responsive and flexible  Promotes excellent outcomes 

7 Key drivers Institutional autonomy Accountability   Competition 

8 ARGUMENTS FOR INSTITUTIONAL AUTONOMY ‘ETHICAL’ WELL UNDERSTOOD ‘EFFICIENCY’ INVOKED LESS OFTEN ESSENTIAL ACCOUNTABILITY

9 CENTRALISED CONTROL SYSTEMS TEND TO Inhibit constructive application of energy and innovation Confuse responsibility for outcomes At worst incentivise irresponsible behaviour?   

10 Performance related “core” funding Bedrock funding Direct State funding for HEIs Competitive funding new initiatives Experimental funding Research funding

11 1. Bedrock funding for undergraduate education and learning  capitation based rates and criteria, rational, transparent, straightforward equitable as between institutions reflect cost differences    subject disciplines  student categories 

12 Performance related “core” funding Bedrock funding Direct State funding for HEIs Competitive funding new initiatives Experimental funding Research funding

13 2. Performance related element in core funding  focused on limited number of public policy objectives ideally, benchmarked not destabilising  

14 Performance related “core” funding Bedrock funding Direct State funding for HEIs Competitive funding new initiatives Experimental funding Research funding

15 3. Major new initiatives  competitive funding open and transparent process expert assessment final   non-national membership 

16 Performance related “core” funding Bedrock funding Direct State funding for HEIs Competitive funding new initiatives Experimental funding Research funding

17 4. Experimental and innovative programmes  discretionary funding allow for experimentation review   abandon or mainstream 

18 Performance related “core” funding Bedrock funding Direct State funding for HEIs Competitive funding new initiatives Experimental funding Research funding

19 5.Research funding  non-competitive “foundation funding” competitive performance-based institutional funding competitive funding for research projects and grants (fellowships etc.)  

20 6.Financial sanctions  limited usefulness risk of inappropriate and perverse effects institutional responsibility  

21 7. Vital importance of monitoring, review and performance appraisal but avoid intrusion and disproportionate compliance costs

22 8. Funding mechanisms should support institutional autonomy  diversity of funding sources – a potentially important guarantor of autonomy and the capacity for institutional development mechanisms should encourage and incentivise private funding 

23 Model  Transparent Competitive Non-discriminatory   Promotes re-structuring (internal and between institutions 

24 IMPORTANT CONDITIONS Transparency Culture of review and appraisal  self-evaluation  external appraisal Distinction between governance and management Limited but clearly defined reserve powers for the state e.g. in respect of overall financial management and oversight 

25 FOR ENHANCE REGRESSIVE ‘MARKET SIGNALS’ VFM PUBLIC / PRIVATE GAIN Undergraduate tuition fees? ENHANCE INSTITUTIONAL AUTONOMY REDUCE FISCAL ‘STRAIN’

26 AGAINST GRANTS PARTICIPATION POOR TARGETING HUMAN CAPITAL DEBT  EXTERNALITIES PUBLIC GAIN STUDENT GRADUATE Undergraduate tuition fees?

27 Gains are very considerable but need to address  Social equity and risk aversion issues Optimising social return Effective means-testing systems  

28 Necessary requirements Leadership, skill and courage !