I thank the committee for this opportunity to address it. We have included our opening statement in the documentation provided to the committee and I will go through it briefly. We also included a copy of our pre-budget submission and an impact report, to which I will refer later.
Universities are key catalysts of economic growth. Ireland's economic success is increasingly linked to our capacity to compete globally in a competitive knowledge economy. As a small open economy within the EU, we have succeeded in attracting a disproportionate level of inward investment from the global leaders in technology, pharmaceuticals, medical devices and other sectors. Our success in foreign direct investment, FDI, combined with the development of a thriving indigenous SME sector, has enabled us to recover from recession and emerge as one of the fastest growing economies in the EU, all within a single decade. It is well recognised by all that our pool of high-quality talent and our capacity for innovation at a globally competitive level in a range of industries is central to this achievement. We contend that universities and other third level institutions are the engine rooms for the production of this talent and for cutting-edge research and innovation.
The Minister of State with responsibility for higher education has described our emerging talent as Ireland's oil reserve and how right she is. However, the value of those oil reserves of talent cannot be tapped unless we invest in harnessing and developing that talent, which will, in turn, fuel our future economic success. This is why investing in our universities must be a national priority.
In April, Indecon published a major study on the impact of universities, the first of its kind in Ireland. It provides a detailed measurement of the contribution of the seven universities represented by the IUA to the economy and the country generally. We have included a summary copy of the report in the documentation. The universities collectively contribute approximately €9 billion annually to the economy, support 22,000 jobs, and more than 120,000 students are enrolled. The universities generate close to €400 million a year in export earnings from international students. By comparison, this is almost double sheep meat exports from the country. The research and innovation activities of the universities generate €1.5 billion annually to the economy. Critically, Indecon has shown an estimated net gain to the Exchequer of €1.6 billion per year arising from the increased earnings and tax take from higher-earning university graduates. Given that the total annual State investment in universities is of the order of €1 billion, there is a clear cash return to the State. In summary, universities not only deliver on the public good of producing top talent and driving innovation, they also deliver a cash return for the State. This is why investment in universities is an investment in our economic success.
Over the past decade, State funding per student in the third-level sector has been dramatically cut. The core grant from the Higher Education Authority to third-level institutions throughout the sector has dropped from almost €9,000 per student a decade ago to just over €5,000 per student now. This €4,000 gap has been made up in two ways: half by an increase in the student registration fee and half by cost-cutting at universities and generating new sources of income.
In spite of welcome but modest funding increases over the last two budgets, State funding per student - the critical measure - has hardly moved as the increases are largely mopped up by a growth in student numbers. This bulge in student numbers is set to grow over the next decade, with an estimated 40,000 extra students to be catered for by 2030, as compared with the 2015 baseline. The funding problem will get considerably worse unless there is a significant step-up in investment to support our growing student base. There is almost unanimous support among employer leaders, unions and students for a comprehensive programme of investment, with IBEC, chambers of commerce leaders, USI and ICTU all in support of such a programme.
The Irish Universities Association is calling for a three-part response from Government to the urgent investment needs of the third level sector. First, an additional €117 million for core operational funding is required, inclusive of €40 million in new money to improve quality and enhance services and the remainder to cater for a known increase in student numbers and known increases in staff pay awards arising from the financial emergency measures in the public interest, FEMPI, reversals, which are out of the control of the universities. Second, we are seeking a step-up in investment in research, including an additional €50 million for frontier research by our top scientists, many of whom currently receive no national funding. This was amplified in the last week in regard to the prestigious European Research Council, ERC, grant awards - a pot of €600 million - in respect of which Ireland succeeded in securing only one of 408 grants overall. This was a direct result of applicants not having seed funding from national government.
On capital funding, we propose a two-strand injection with €100 million for new build to cater for growing student numbers in the first instance. We acknowledge the recent announcement by Government on grant funding for capital projects in four of our universities. Second, €110 million for year one of a seven-year capital investment recovery programme to upgrade many of our decades-old facilities, in particular the refurbishment and upgrade projects that have remained neglected over the last decade or longer and are now urgent.
We have set out our proposals in detail in our budget 2020 submission, Investing in Ireland’s Future Talent and Innovation. We would welcome the support of the Committee on Budgetary Oversight for these proposals.
I am happy to take comments or questions from members.