Student fee subsidy defended by ex-minister Andrews

Welsh ministers are expected to respond to the WAO report later on Thursday

The former education minister has defended a controversial student fee subsidy policy which auditors say will cost £150m more than first estimated.

The Wales Audit Office claims the full Welsh cabinet was not properly warned of the potential costs in 2010.

But ex-minister Leighton Andrews says the total cost will be £200m less than the worst case outcome they considered.

The report also says the cost of subsidising Welsh students in other UK nations will reach £68m next year.

Under the policy, Welsh students have up to £5,500 of their tuition fees subsidised, wherever they study in the UK.

But auditors say ministers failed to properly consider all the options when bringing in the flagship policy.

It says the final go-ahead was based on estimates in November 2010 of a £7,000 fee level - compared to well over £8,000 now.

This means the overall cost of the policy has risen by 24% from £653m to £809m for the five-year period from 2012-13 to 2016-17, the WAO states.

But former minister Mr Andrews described the WAO's conclusion on cost estimates as a "glaring error", insisting the government was aware of the potential extra costs of fees being charged at the maximum £9,000, rather than an estimated £7,000.

On that basis, he says the policy is likely to cost around £200m less than that worst case scenario, which predicted a cost of more than £1bn.

Mr Andrews told BBC Radio Wales: "The reality is we were very conscious that fees could go to £9,000 at the time we took this decision, that of course would have been the worst case outcome. I think this has been a triumph of forecasting by Welsh government officials and Welsh government statisticians.

"I think all members of the cabinet were aware the fees could go up to £9,000," he added.

"What's not stated in the audit office report is that if fees go up to £9,000 the income coming in from the students from England who are paying that full £9,000 would be more than it had been had they only been paying £7,000, so there's a balance of factors that people had to take into account.

"I don't think anybody in the cabinet was in any doubt of the likely out-turn of these proposals.

"At the end of the day, this is a policy that's delivered for Welsh students and delivered for Welsh universities."

On Monday the current Education Minister Huw Lewis announced a review of the policy, but said it was fully costed, affordable and sustainable until at least 2016.

Higher education bodies have argued that this diverts tens of millions of pounds away from Welsh universities.

The WAO inquiry into higher education (HE) funding found that while the financial health of Welsh universities is generally sound, some institutions face significant challenges in an increasingly competitive environment.

Last year, Welsh students studying outside Wales took £34m in subsidies with them.

Auditors projects that this year it will rise to £50m and £68m next year, as the full three-year cohort are covered by the policy.

The WAO says that when the decision to implement the policy was taken, the Welsh government was too optimistic about what the average fee level would be across the UK, and not all cabinet members were made aware of the costs involved if it turned out to be higher.

'Robustness'

The report, published on Thursday, says: "The Welsh government based its policy decision on what has proven to be an optimistic assumption of an average fee of £7,000 in 2012/13 across Wales, England and Northern Ireland but with an assumed fee for Scottish institutions of £2,190.

"Although officials had also produced a model based on a maximum £9,000 fee across Wales, England and Northern Ireland, this model was not presented to the full cabinet to support its decision making.

"However, the £9,000 model had been shared with and discussed by the then minister for education, children and lifelong learning [Leighton Andrews] and certain other cabinet members."

The report says that the analysis carried out at the time on variables such as student numbers and cross border flows was insufficient.

Public Accounts Committee chair Darren Millar said: "This report raises important questions about the robustness of the Welsh government's original policy-making in 2010 and about other issues relating to student finance and the regulation of higher education, in particular, the adequacy of arrangements for processing student finance applications to protect against the risk of fraud."

Mr Millar added: "It is clear that further work is needed to monitor and review the policy's impact in more detail, and to address conclusively the question of parity in the tuition fee arrangements for part-time students."

Auditor General for Wales Huw Vaughan Thomas said: "It is good to see that the finances of higher education institutions in Wales are generally sound, although it is clear that institutions face significant challenges and uncertainties.

"In particular, the full impact of the introduction of higher tuition fees and the tuition fee grant will not become clear for two to three years time, as more students who entered higher education before the 2012/13 academic year leave the system".

A Welsh government spokesperson said the conclusion that higher education was in generally in sound health and that the policy of raising tuition fees had been implemented effectively was "positive, welcome news".

The spokesperson added: "The content of the report from the WAO confirms that Welsh government officials and ministers considered the affordability of the preferred policy and its effect on the income of higher education institutions in Wales.

"It was clear that the policy was affordable with higher fees and that has been borne out in the conclusions of the report and with confirmation that the funding system is both costed and sustainable for the lifetime of this government and beyond.

"It's disappointing that some have decided to be highly selective in their reading of the report and are looking to undermine what is a sustainable and popular policy which has been welcomed by parents and students alike.

"The minister is due to issue a statement to assembly members on the findings of the report and we will respond to the WAO in due course."