Well I think both are really easy to use because there are few button buttons ,

and uh well t p the menu are clear , well-organised , so


and uh well t p the menu are clear , well-organised , so

Well with little knowing of the technology you can you can easily use the product


and uh well t p the menu are clear , well-organised , so

Well with little knowing of the technology you can you can easily use the product

so I will give a six for the easy to use.


Well with little knowing of the technology you can you can easily use the product

so I will give a six for the easy to use.


Well with little knowing of the technology you can you can easily use the product

so I will give a six for the easy to use.

No it's just if I I see the the f the rate I think it's better to do it without L_C_D_.


so I will give a six for the easy to use.

No it's just if I I see the the f the rate I think it's better to do it without L_C_D_.


No it's just if I I see the the f the rate I think it's better to do it without L_C_D_.

Because that's with L_C_D_ just will increase the price ,


Because that's with L_C_D_ just will increase the price ,

and I thi i they have the same rate so without L_C_D_ it will be


and I thi i they have the same rate so without L_C_D_ it will be

Or we can just go back to the previous slide uh where we ha we have a few updates. So I mean in the product design you could just amend it to make some few changes


Or we can just go back to the previous slide uh where we ha we have a few updates. So I mean in the product design you could just amend it to make some few changes

according to fruit and vegetable or a spongy touch


according to fruit and vegetable or a spongy touch

without L_C_D_ and without speech recognition. Even then our product is going to be very good.


without L_C_D_ and without speech recognition. Even then our product is going to be very good.


And uh if the the  well if we have less technology we have more liberty to uh for the shape and uh things like that so


And uh if the the  well if we have less technology we have more liberty to uh for the shape and uh things like that so

Yeah. I have another thing to say about the easy to use aspect. I think the easy to use uh aspect is different for different people.


Yeah. I have another thing to say about the easy to use aspect. I think the easy to use uh aspect is different for different people.

For the young generation easy to use may be very complicated


For the young generation easy to use may be very complicated

because uh they w they wants lot of controls with lots of buttons. For kids they want simply the  s similarit for the old people they want simplicity ,


because uh they w they wants lot of controls with lots of buttons. For kids they want simply the  s similarit for the old people they want simplicity ,

so that's why  we have the parental module. Uh we can ha have  build a more complex design if if they want it , but but uh what I'm trying to say here is that the um  we have different sets of buttons for different kinds of people. So in terms of easy to use I think it's very user customisable. User customisation is very important yeah. Yeah


so that's why  we have the parental module. Uh we can ha have  build a more complex design if if they want it , but but uh what I'm trying to say here is that the um  we have different sets of buttons for different kinds of people. So in terms of easy to use I think it's very user customisable. User customisation is very important yeah. Yeah


S s oh I think it's better to have this without L_C_D_.


S s oh I think it's better to have this without L_C_D_.

As our Programme Manager s Pro Project Manager says that without L_C_D_ it is going to reduce the cost also ,


As our Programme Manager s Pro Project Manager says that without L_C_D_ it is going to reduce the cost also ,


and it's going to be much simpler to use.


and it's going to be much simpler to use.

Yes and to give us more liberty to have a fancy look so


Yes and to give us more liberty to have a fancy look so


What a what what about the sys speech recognition ?


What a what what about the sys speech recognition ?

what about the integration of speech recognition ?


What a what what about the sys speech recognition ?

what about the integration of speech recognition ?

Huh ? The speech recogniser is a add-on module. Right ?


what about the integration of speech recognition ?

Huh ? The speech recogniser is a add-on module. Right ?


Huh ? The speech recogniser is a add-on module. Right ?


If somebody wants to buy it they can have it , otherwise no.


If somebody wants to buy it they can have it , otherwise no.

It's optional yeah , since well according to this study uh people more  likes more to have a spongy uh  remote control than


It's optional yeah , since well according to this study uh people more  likes more to have a spongy uh  remote control than


It's optional yeah , since well according to this study uh people more  likes more to have a spongy uh  remote control than

I think it will be better if we have all these modules in the same remote control , because maybe parents will lose these uh


I think it will be better if we have all these modules in the same remote control , because maybe parents will lose these uh

Yeah , but I mean if you have an add-ons , the kids may just uh hide the parental module


I think it will be better if we have all these modules in the same remote control , because maybe parents will lose these uh

Yeah , but I mean if you have an add-ons , the kids may just uh hide the parental module

and so that their parents can't use it .


Yeah , but I mean if you have an add-ons , the kids may just uh hide the parental module

and so that their parents can't use it .

Or maybe parents they can for forget where they put it or ,


and so that their parents can't use it .

Or maybe parents they can for forget where they put it or ,

so mayb better if you have all this in the same


Or maybe parents they can for forget where they put it or ,

so mayb better if you have all this in the same

and and individual buttons to make them work.


so mayb better if you have all this in the same

and and individual buttons to make them work.


and and individual buttons to make them work.

The problem is if i we are bla if a customer wants a certain component , and doesn't want the parental control because it's a couple who do not have children   when you sell the product in the market you could meet any kind of people , and not all people will need all the functionalities we propose to them. So we might lose the customer because of this. I don't know ,


and and individual buttons to make them work.

The problem is if i we are bla if a customer wants a certain component , and doesn't want the parental control because it's a couple who do not have children   when you sell the product in the market you could meet any kind of people , and not all people will need all the functionalities we propose to them. So we might lose the customer because of this. I don't know ,

So you mean that even if these modules will be will be functional  uh will be optional.


The problem is if i we are bla if a customer wants a certain component , and doesn't want the parental control because it's a couple who do not have children   when you sell the product in the market you could meet any kind of people , and not all people will need all the functionalities we propose to them. So we might lose the customer because of this. I don't know ,

So you mean that even if these modules will be will be functional  uh will be optional.

what do you think uh ? Yes exa what do you think , I don't know. You are Marketing Manag .


So you mean that even if these modules will be will be functional  uh will be optional.

what do you think uh ? Yes exa what do you think , I don't know. You are Marketing Manag .

I mean how to how to how to make a marketing survey that uh how many married couple  or how many couples have a T_V_


what do you think uh ? Yes exa what do you think , I don't know. You are Marketing Manag .

I mean how to how to how to make a marketing survey that uh how many married couple  or how many couples have a T_V_


I mean how to how to how to make a marketing survey that uh how many married couple  or how many couples have a T_V_

or to the number or singles who have a television.


or to the number or singles who have a television.


or to the number or singles who have a television.

Yeah.  But the the question is n does those modularity increase the production cost or decrease the production cost ?


Yeah.  But the the question is n does those modularity increase the production cost or decrease the production cost ?


Yeah.  But the the question is n does those modularity increase the production cost or decrease the production cost ?

Well you can   if you had uh something li


Well you can   if you had uh something li


Well you can   if you had uh something li

because if you if you add uh something  well yeah maybe because it's three different pieces uh to to to build but


because if you if you add uh something  well yeah maybe because it's three different pieces uh to to to build but


because if you if you add uh something  well yeah maybe because it's three different pieces uh to to to build but

But you can make it on a single P_C_ with three different options.


But you can make it on a single P_C_ with three different options.

it's I think it's cheaper if you if you already built the all the  functionalities um on the same module , but uh


it's I think it's cheaper if you if you already built the all the  functionalities um on the same module , but uh


it's I think it's cheaper if you if you already built the all the  functionalities um on the same module , but uh

Well well the other aspect is that if  in the  when they have the ar existing product you you gonna maintain the the  you're gonna keep the same customer ,


Well well the other aspect is that if  in the  when they have the ar existing product you you gonna maintain the the  you're gonna keep the same customer ,


Well well the other aspect is that if  in the  when they have the ar existing product you you gonna maintain the the  you're gonna keep the same customer ,

because the same customer will come back to buy other add-ons.


because the same customer will come back to buy other add-ons.


because the same customer will come back to buy other add-ons.

I mean you could just provide with an optional .


I mean you could just provide with an optional .

Yeah i i so if don't don't buy now they can buy i in the future. So in in that way you're actually keeping the cus the same customer , attracting them to come back in again and again.


I mean you could just provide with an optional .

Yeah i i so if don't don't buy now they can buy i in the future. So in in that way you're actually keeping the cus the same customer , attracting them to come back in again and again.

So it's something like a Microsoft product  update.


I mean you could just provide with an optional .

Yeah i i so if don't don't buy now they can buy i in the future. So in in that way you're actually keeping the cus the same customer , attracting them to come back in again and again.

So it's something like a Microsoft product  update.

And and we we we we we we don't want that.


Yeah i i so if don't don't buy now they can buy i in the future. So in in that way you're actually keeping the cus the same customer , attracting them to come back in again and again.

So it's something like a Microsoft product  update.

And and we we we we we we don't want that.

We're not trying to follow the Microsoft and we don't want to the m


So it's something like a Microsoft product  update.

And and we we we we we we don't want that.

We're not trying to follow the Microsoft and we don't want to the m

Updates and we sell it. We make updates and sell it .


And and we we we we we we don't want that.

We're not trying to follow the Microsoft and we don't want to the m

Updates and we sell it. We make updates and sell it .

Yeah well if the buyers can be up the th would be  can be upgraded , it would be a good thing right ?


We're not trying to follow the Microsoft and we don't want to the m

Updates and we sell it. We make updates and sell it .

Yeah well if the buyers can be up the th would be  can be upgraded , it would be a good thing right ?


Updates and we sell it. We make updates and sell it .

Yeah well if the buyers can be up the th would be  can be upgraded , it would be a good thing right ?


Yeah well if the buyers can be up the th would be  can be upgraded , it would be a good thing right ?

And uh what's the idea about uh the shape of the remote controls ?


And uh what's the idea about uh the shape of the remote controls ?


And uh what's the idea about uh the shape of the remote controls ?

Uh can they be made into a fruit and vegetable types ?


Uh can they be made into a fruit and vegetable types ?

Do you require different types of P_C_B_s and


Uh can they be made into a fruit and vegetable types ?

Do you require different types of P_C_B_s and

I think we are   yeah but we are also the um well the components will have to change because uh we have to deal with the shape and um  but I don't think it will uh increase the cost too much so


Do you require different types of P_C_B_s and

I think we are   yeah but we are also the um well the components will have to change because uh we have to deal with the shape and um  but I don't think it will uh increase the cost too much so


Do you require different types of P_C_B_s and

I think we are   yeah but we are also the um well the components will have to change because uh we have to deal with the shape and um  but I don't think it will uh increase the cost too much so

Or uh it could be like this  the P_C_B_ would be the same for all , but only the exterior uh shape is different o for all.


I think we are   yeah but we are also the um well the components will have to change because uh we have to deal with the shape and um  but I don't think it will uh increase the cost too much so

Or uh it could be like this  the P_C_B_ would be the same for all , but only the exterior uh shape is different o for all.


Or uh it could be like this  the P_C_B_ would be the same for all , but only the exterior uh shape is different o for all.

Uh well but it's a bit complicated to  if if if you need machines to  different machines to um ah well


Or uh it could be like this  the P_C_B_ would be the same for all , but only the exterior uh shape is different o for all.

Uh well but it's a bit complicated to  if if if you need machines to  different machines to um ah well

Yeah. What we can change is to propose the  customers with skins. For example the i the mobile phones nowaday , they sell different kinds of skin


Uh well but it's a bit complicated to  if if if you need machines to  different machines to um ah well

Yeah. What we can change is to propose the  customers with skins. For example the i the mobile phones nowaday , they sell different kinds of skin


Uh well but it's a bit complicated to  if if if you need machines to  different machines to um ah well

Yeah. What we can change is to propose the  customers with skins. For example the i the mobile phones nowaday , they sell different kinds of skin

and then people just feel that oh I have a new skin and looks better.


Yeah. What we can change is to propose the  customers with skins. For example the i the mobile phones nowaday , they sell different kinds of skin

and then people just feel that oh I have a new skin and looks better.

Yeah yeah we can have the same global shape


and then people just feel that oh I have a new skin and looks better.

Yeah yeah we can have the same global shape


and then people just feel that oh I have a new skin and looks better.

Yeah yeah we can have the same global shape

and then uh add on skins and with with this uh tex spongy texture uh things like that.


Yeah yeah we can have the same global shape

and then uh add on skins and with with this uh tex spongy texture uh things like that.


and then uh add on skins and with with this uh tex spongy texture uh things like that.


and then uh add on skins and with with this uh tex spongy texture uh things like that.

Yeah.  Yeah you can pl in what material would that be in uh ?


Yeah.  Yeah you can pl in what material would that be in uh ?


Yeah.  Yeah you can pl in what material would that be in uh ?

I think you need to look into the material.


Yeah.  Yeah you can pl in what material would that be in uh ?

I think you need to look into the material.

Yeah or furry like a pet dog kind of thing .


I think you need to look into the material.

Yeah or furry like a pet dog kind of thing .


Yeah or furry like a pet dog kind of thing .


So we finished the prototype uh presentation if you have uh something else to say.


So we finished the prototype uh presentation if you have uh something else to say.

I think the Project Manager would be interested to look about the financial issues in making these models.


So we finished the prototype uh presentation if you have uh something else to say.

I think the Project Manager would be interested to look about the financial issues in making these models.

Project evaluation project satisfaction , for example. I don't know , we have to ask these question. We have to give answers so


So we finished the prototype uh presentation if you have uh something else to say.

I think the Project Manager would be interested to look about the financial issues in making these models.

Project evaluation project satisfaction , for example. I don't know , we have to ask these question. We have to give answers so

I suppose that you  this criteria , is it ?


I think the Project Manager would be interested to look about the financial issues in making these models.

Project evaluation project satisfaction , for example. I don't know , we have to ask these question. We have to give answers so

I suppose that you  this criteria , is it ?


Project evaluation project satisfaction , for example. I don't know , we have to ask these question. We have to give answers so

I suppose that you  this criteria , is it ?

Room for creativity. This room is a bit small , but


I suppose that you  this criteria , is it ?

Room for creativity. This room is a bit small , but

but I think it's okay for us to work with.


Room for creativity. This room is a bit small , but

but I think it's okay for us to work with.

I feel it's fine , we know we don't need uh  I think it's okay.


but I think it's okay for us to work with.

I feel it's fine , we know we don't need uh  I think it's okay.


I feel it's fine , we know we don't need uh  I think it's okay.

This is fine for making a presentat for project presentations.


This is fine for making a presentat for project presentations.

Mm. Yeah anyway we have the laboratory nearby to build our modules so it's okay.


Mm. Yeah anyway we have the laboratory nearby to build our modules so it's okay.


He gave you the liberty to talk as you wants .


He gave you the liberty to talk as you wants .

Uh the teamwork was very very good. I was really  I am very satisfying to work with with you.


Uh the teamwork was very very good. I was really  I am very satisfying to work with with you.


And new ideas found. Any new ideas to make these presentations more interactive and more interesting ?


I mean uh what type of product would you think  could we make this more interesting ?


I mean uh what type of product would you think  could we make this more interesting ?

Mm we  I I know something , we need more cakes , more biscuits on the table while we have meetings.


I mean uh what type of product would you think  could we make this more interesting ?

Mm we  I I know something , we need more cakes , more biscuits on the table while we have meetings.

Yeah and also more well uh  more seriously I think it's it's a good idea to have uh clear clear points whenever we do a meeting


Mm we  I I know something , we need more cakes , more biscuits on the table while we have meetings.

Yeah and also more well uh  more seriously I think it's it's a good idea to have uh clear clear points whenever we do a meeting

uh prior to the meeting to have uh well a list with the points who will be discussed or things like that , but I think it's alright. We achieved uh project goal I think.


Yeah and also more well uh  more seriously I think it's it's a good idea to have uh clear clear points whenever we do a meeting

uh prior to the meeting to have uh well a list with the points who will be discussed or things like that , but I think it's alright. We achieved uh project goal I think.


uh prior to the meeting to have uh well a list with the points who will be discussed or things like that , but I think it's alright. We achieved uh project goal I think.


Without without L_C_D_ , without speech recognition , it will be simple.


Good morning, everyone. Welcome to the Children, Young People and Education Committee. We've received apologies for absence from Suzy Davies, and I'm very pleased to welcome Angela Burns, who is substituting for Suzy this morning. We've also received apologies from Dawn Bowden. Can I also welcome Siân Gwenllian to the meeting? Siân is joining us from her constituency office via video-conference. Can I ask Members if they've got any declarations of interest, please? Hefin.

Apologies. I'm currently registered as an associate lecturer at Cardiff Metropolitan University, although I haven't done any work for them for some time.

Okay. Thank you very much. We'll move on, then, to item 2 this morning, which is our evidence session on the higher education new academic year allocations. I'm very pleased to welcome David Blaney, who is chief executive of the Higher Education Funding Council for Wales, and Bethan Owen, who is deputy chief executive of HEFCW. Thank you, both, for attending this morning. We're looking forward to hearing what you've got to say. If you're happy, we'll go straight into questions from Members, and the first questions are from Angela Burns.


Apologies. I'm currently registered as an associate lecturer at Cardiff Metropolitan University, although I haven't done any work for them for some time.

Okay. Thank you very much. We'll move on, then, to item 2 this morning, which is our evidence session on the higher education new academic year allocations. I'm very pleased to welcome David Blaney, who is chief executive of the Higher Education Funding Council for Wales, and Bethan Owen, who is deputy chief executive of HEFCW. Thank you, both, for attending this morning. We're looking forward to hearing what you've got to say. If you're happy, we'll go straight into questions from Members, and the first questions are from Angela Burns.

Good morning. Thank you very much, indeed. I just wanted to talk about, really, the financial sustainability of the higher education sector because, as we know, there's been all sorts of things going on in the press. So, can I just start with, actually, quite a technical question and ask you what the financial indicators look like for the universities here in Wales, and are there particular indicators that are really flashing warning signals to you?


Apologies. I'm currently registered as an associate lecturer at Cardiff Metropolitan University, although I haven't done any work for them for some time.

Okay. Thank you very much. We'll move on, then, to item 2 this morning, which is our evidence session on the higher education new academic year allocations. I'm very pleased to welcome David Blaney, who is chief executive of the Higher Education Funding Council for Wales, and Bethan Owen, who is deputy chief executive of HEFCW. Thank you, both, for attending this morning. We're looking forward to hearing what you've got to say. If you're happy, we'll go straight into questions from Members, and the first questions are from Angela Burns.

Good morning. Thank you very much, indeed. I just wanted to talk about, really, the financial sustainability of the higher education sector because, as we know, there's been all sorts of things going on in the press. So, can I just start with, actually, quite a technical question and ask you what the financial indicators look like for the universities here in Wales, and are there particular indicators that are really flashing warning signals to you?

Well, shall I just start with a couple of contextualising comments and Bethan can come in then with some detail? It's undeniably the case there are financial challenges facing our universities. They result from three main causes: one is the impact of the demographic dip of 18-year-olds, which is deeper and longer in Wales than it is elsewhere in the UK. There are increased pension costs and, actually, increased costs generally. And, of course, we also have current uncertainty as a result of the Augar review in England, and whether that might play into Wales, and also Brexit. These challenges are not unique to Wales; the majority of the UK universities are actually taking out cost one way or another. So, this is not a Welsh issue. Before the Diamond review of fees and funding in Wales, there was a pre-existing funding gap in resource between England and Wales, and even now, that's still the case. So, Welsh higher education institutions are approximately £40 million worse off than they would be in the English system. That's a challenge, and that is a result from a political decision to invest in students, and that's fine. The money's gone into the system but it hasn't gone into universities, necessarily. So, these are serious challenges for institutions to manage, but I think it is a managed situation. We're not seeing a crisis; we are seeing some real challenges, and there is a distinction, I think, between—. We have to understand, though, that taking out cost to balance the books has a detrimental effect on the capacity. Obviously it impacts on the people who lose their jobs immediately, but there's a medium to longer term impact on the capacity of the system to deliver for Wales. They are taking out capacity; they're not cutting at fat now, they're cutting out core capacity. And so, the range of the curriculum, the range of research and innovation, the range of the contribution that universities can make will be diminished by that. And against that backdrop, the introduction of the Diamond reforms is hugely important—delivery of that is going to be really important—and we are really pleased to see the Minister able to meet her commitments in respect of that. The Diamond money is coming in. This forthcoming year will be the first year we see an increase in the resource, through us, to higher education. And the projections in future years are better still, and that will be extremely important. The performance of the sector is very good; we had the national student survey results out yesterday. Wales is still the best in the UK, which is excellent. We have the best impact from research in Wales across the UK. So, all of that is very positive, but that is also being done at some cost. There are some very tired staff in universities, and we've seen some stuff in the press recently about some of the impact of stress there as well.


Okay. Thank you very much. We'll move on, then, to item 2 this morning, which is our evidence session on the higher education new academic year allocations. I'm very pleased to welcome David Blaney, who is chief executive of the Higher Education Funding Council for Wales, and Bethan Owen, who is deputy chief executive of HEFCW. Thank you, both, for attending this morning. We're looking forward to hearing what you've got to say. If you're happy, we'll go straight into questions from Members, and the first questions are from Angela Burns.

Good morning. Thank you very much, indeed. I just wanted to talk about, really, the financial sustainability of the higher education sector because, as we know, there's been all sorts of things going on in the press. So, can I just start with, actually, quite a technical question and ask you what the financial indicators look like for the universities here in Wales, and are there particular indicators that are really flashing warning signals to you?

Well, shall I just start with a couple of contextualising comments and Bethan can come in then with some detail? It's undeniably the case there are financial challenges facing our universities. They result from three main causes: one is the impact of the demographic dip of 18-year-olds, which is deeper and longer in Wales than it is elsewhere in the UK. There are increased pension costs and, actually, increased costs generally. And, of course, we also have current uncertainty as a result of the Augar review in England, and whether that might play into Wales, and also Brexit. These challenges are not unique to Wales; the majority of the UK universities are actually taking out cost one way or another. So, this is not a Welsh issue. Before the Diamond review of fees and funding in Wales, there was a pre-existing funding gap in resource between England and Wales, and even now, that's still the case. So, Welsh higher education institutions are approximately £40 million worse off than they would be in the English system. That's a challenge, and that is a result from a political decision to invest in students, and that's fine. The money's gone into the system but it hasn't gone into universities, necessarily. So, these are serious challenges for institutions to manage, but I think it is a managed situation. We're not seeing a crisis; we are seeing some real challenges, and there is a distinction, I think, between—. We have to understand, though, that taking out cost to balance the books has a detrimental effect on the capacity. Obviously it impacts on the people who lose their jobs immediately, but there's a medium to longer term impact on the capacity of the system to deliver for Wales. They are taking out capacity; they're not cutting at fat now, they're cutting out core capacity. And so, the range of the curriculum, the range of research and innovation, the range of the contribution that universities can make will be diminished by that. And against that backdrop, the introduction of the Diamond reforms is hugely important—delivery of that is going to be really important—and we are really pleased to see the Minister able to meet her commitments in respect of that. The Diamond money is coming in. This forthcoming year will be the first year we see an increase in the resource, through us, to higher education. And the projections in future years are better still, and that will be extremely important. The performance of the sector is very good; we had the national student survey results out yesterday. Wales is still the best in the UK, which is excellent. We have the best impact from research in Wales across the UK. So, all of that is very positive, but that is also being done at some cost. There are some very tired staff in universities, and we've seen some stuff in the press recently about some of the impact of stress there as well.

Can I bring you back to the financial element of that? Can I just ask a question: what are the university reserves looking like at present?


Good morning. Thank you very much, indeed. I just wanted to talk about, really, the financial sustainability of the higher education sector because, as we know, there's been all sorts of things going on in the press. So, can I just start with, actually, quite a technical question and ask you what the financial indicators look like for the universities here in Wales, and are there particular indicators that are really flashing warning signals to you?

Well, shall I just start with a couple of contextualising comments and Bethan can come in then with some detail? It's undeniably the case there are financial challenges facing our universities. They result from three main causes: one is the impact of the demographic dip of 18-year-olds, which is deeper and longer in Wales than it is elsewhere in the UK. There are increased pension costs and, actually, increased costs generally. And, of course, we also have current uncertainty as a result of the Augar review in England, and whether that might play into Wales, and also Brexit. These challenges are not unique to Wales; the majority of the UK universities are actually taking out cost one way or another. So, this is not a Welsh issue. Before the Diamond review of fees and funding in Wales, there was a pre-existing funding gap in resource between England and Wales, and even now, that's still the case. So, Welsh higher education institutions are approximately £40 million worse off than they would be in the English system. That's a challenge, and that is a result from a political decision to invest in students, and that's fine. The money's gone into the system but it hasn't gone into universities, necessarily. So, these are serious challenges for institutions to manage, but I think it is a managed situation. We're not seeing a crisis; we are seeing some real challenges, and there is a distinction, I think, between—. We have to understand, though, that taking out cost to balance the books has a detrimental effect on the capacity. Obviously it impacts on the people who lose their jobs immediately, but there's a medium to longer term impact on the capacity of the system to deliver for Wales. They are taking out capacity; they're not cutting at fat now, they're cutting out core capacity. And so, the range of the curriculum, the range of research and innovation, the range of the contribution that universities can make will be diminished by that. And against that backdrop, the introduction of the Diamond reforms is hugely important—delivery of that is going to be really important—and we are really pleased to see the Minister able to meet her commitments in respect of that. The Diamond money is coming in. This forthcoming year will be the first year we see an increase in the resource, through us, to higher education. And the projections in future years are better still, and that will be extremely important. The performance of the sector is very good; we had the national student survey results out yesterday. Wales is still the best in the UK, which is excellent. We have the best impact from research in Wales across the UK. So, all of that is very positive, but that is also being done at some cost. There are some very tired staff in universities, and we've seen some stuff in the press recently about some of the impact of stress there as well.

Can I bring you back to the financial element of that? Can I just ask a question: what are the university reserves looking like at present?


Well, shall I just start with a couple of contextualising comments and Bethan can come in then with some detail? It's undeniably the case there are financial challenges facing our universities. They result from three main causes: one is the impact of the demographic dip of 18-year-olds, which is deeper and longer in Wales than it is elsewhere in the UK. There are increased pension costs and, actually, increased costs generally. And, of course, we also have current uncertainty as a result of the Augar review in England, and whether that might play into Wales, and also Brexit. These challenges are not unique to Wales; the majority of the UK universities are actually taking out cost one way or another. So, this is not a Welsh issue. Before the Diamond review of fees and funding in Wales, there was a pre-existing funding gap in resource between England and Wales, and even now, that's still the case. So, Welsh higher education institutions are approximately £40 million worse off than they would be in the English system. That's a challenge, and that is a result from a political decision to invest in students, and that's fine. The money's gone into the system but it hasn't gone into universities, necessarily. So, these are serious challenges for institutions to manage, but I think it is a managed situation. We're not seeing a crisis; we are seeing some real challenges, and there is a distinction, I think, between—. We have to understand, though, that taking out cost to balance the books has a detrimental effect on the capacity. Obviously it impacts on the people who lose their jobs immediately, but there's a medium to longer term impact on the capacity of the system to deliver for Wales. They are taking out capacity; they're not cutting at fat now, they're cutting out core capacity. And so, the range of the curriculum, the range of research and innovation, the range of the contribution that universities can make will be diminished by that. And against that backdrop, the introduction of the Diamond reforms is hugely important—delivery of that is going to be really important—and we are really pleased to see the Minister able to meet her commitments in respect of that. The Diamond money is coming in. This forthcoming year will be the first year we see an increase in the resource, through us, to higher education. And the projections in future years are better still, and that will be extremely important. The performance of the sector is very good; we had the national student survey results out yesterday. Wales is still the best in the UK, which is excellent. We have the best impact from research in Wales across the UK. So, all of that is very positive, but that is also being done at some cost. There are some very tired staff in universities, and we've seen some stuff in the press recently about some of the impact of stress there as well.

Can I bring you back to the financial element of that? Can I just ask a question: what are the university reserves looking like at present?

The reserves are a measure. There's a difference between the distributable reserves—I don't have those numbers before me, but looking at reserves, what is more important are those reserves that are available as cash or liquid cash. So, universities have reserves, but a large amount of that is tied up in their estates, so they're not immediately realisable. So, one of the key measures that we're looking at, which is even more important than surpluses and deficit, is the operating cash that our universities are generating at the moment. When we look at operating cash in 2017-18, they were generating, as a percentage of income, about 7.6 per cent, which contrasts with nearly 10 per cent for the same year for English institutions. And that represents their capacity to generate surplus cash to meet their costs, which now, increasingly, include the costs of servicing their borrowings. So, again, because capital funding has not been as available to universities as it was, they've invested in their estates and that's largely been funded by borrowings. The costs of those borrowings have to be met on an annual basis, so that's becoming an increasing proportion of the operating cash that universities have.


Can I bring you back to the financial element of that? Can I just ask a question: what are the university reserves looking like at present?

The reserves are a measure. There's a difference between the distributable reserves—I don't have those numbers before me, but looking at reserves, what is more important are those reserves that are available as cash or liquid cash. So, universities have reserves, but a large amount of that is tied up in their estates, so they're not immediately realisable. So, one of the key measures that we're looking at, which is even more important than surpluses and deficit, is the operating cash that our universities are generating at the moment. When we look at operating cash in 2017-18, they were generating, as a percentage of income, about 7.6 per cent, which contrasts with nearly 10 per cent for the same year for English institutions. And that represents their capacity to generate surplus cash to meet their costs, which now, increasingly, include the costs of servicing their borrowings. So, again, because capital funding has not been as available to universities as it was, they've invested in their estates and that's largely been funded by borrowings. The costs of those borrowings have to be met on an annual basis, so that's becoming an increasing proportion of the operating cash that universities have.

I just asked that question because I know that about four years ago, the universities were sitting on substantial reserves and were less than keen to deploy them back into actually using them for the students—it was more about building up the war chest, if you like, of the universities. And I just really wanted to have an understanding of how that picture might have changed over the last four years and are they actually skinnier cats now, rather than before.


The reserves are a measure. There's a difference between the distributable reserves—I don't have those numbers before me, but looking at reserves, what is more important are those reserves that are available as cash or liquid cash. So, universities have reserves, but a large amount of that is tied up in their estates, so they're not immediately realisable. So, one of the key measures that we're looking at, which is even more important than surpluses and deficit, is the operating cash that our universities are generating at the moment. When we look at operating cash in 2017-18, they were generating, as a percentage of income, about 7.6 per cent, which contrasts with nearly 10 per cent for the same year for English institutions. And that represents their capacity to generate surplus cash to meet their costs, which now, increasingly, include the costs of servicing their borrowings. So, again, because capital funding has not been as available to universities as it was, they've invested in their estates and that's largely been funded by borrowings. The costs of those borrowings have to be met on an annual basis, so that's becoming an increasing proportion of the operating cash that universities have.

I just asked that question because I know that about four years ago, the universities were sitting on substantial reserves and were less than keen to deploy them back into actually using them for the students—it was more about building up the war chest, if you like, of the universities. And I just really wanted to have an understanding of how that picture might have changed over the last four years and are they actually skinnier cats now, rather than before.

We can get you that analysis, but even four years ago, I think the definition of exactly what's meant by reserves, it's really important to look at what are distributable reserves as opposed to the assets that universities have.


I just asked that question because I know that about four years ago, the universities were sitting on substantial reserves and were less than keen to deploy them back into actually using them for the students—it was more about building up the war chest, if you like, of the universities. And I just really wanted to have an understanding of how that picture might have changed over the last four years and are they actually skinnier cats now, rather than before.

We can get you that analysis, but even four years ago, I think the definition of exactly what's meant by reserves, it's really important to look at what are distributable reserves as opposed to the assets that universities have.

And, there are also differences in the way that universities have secured funding for investing in their estates. So, for example, Cardiff University have had a bond rather than borrowing, which you draw down as you're spending. So, in the short term, the reserves of Cardiff will appear as though they have significant cash balances, but all of those are restricted for investment in the estate and, over the next two or three years, will be utilised for that.


We can get you that analysis, but even four years ago, I think the definition of exactly what's meant by reserves, it's really important to look at what are distributable reserves as opposed to the assets that universities have.

And, there are also differences in the way that universities have secured funding for investing in their estates. So, for example, Cardiff University have had a bond rather than borrowing, which you draw down as you're spending. So, in the short term, the reserves of Cardiff will appear as though they have significant cash balances, but all of those are restricted for investment in the estate and, over the next two or three years, will be utilised for that.

So, overall, you're painting a picture of a sector that's under a significant degree of financial stress, and this is obviously using your key financial indicators. Do you monitor each and every university, or do you wait for them to come back and tell you what their situation is?


And, there are also differences in the way that universities have secured funding for investing in their estates. So, for example, Cardiff University have had a bond rather than borrowing, which you draw down as you're spending. So, in the short term, the reserves of Cardiff will appear as though they have significant cash balances, but all of those are restricted for investment in the estate and, over the next two or three years, will be utilised for that.

So, overall, you're painting a picture of a sector that's under a significant degree of financial stress, and this is obviously using your key financial indicators. Do you monitor each and every university, or do you wait for them to come back and tell you what their situation is?

We monitor, we receive forecasts, five-year forecasts, and we meet frequently with all our universities now. It varies, depending on the risks of the universities, as to how frequently we meet, but we're actually meeting with every university because even the forecast that we received last July, the changes, even in the 12-month period, are significant enough for us to need a better understanding of what the latest position is. The forecasts, if I just run through—. We had a sector that, in 2017-18, had a deficit. Although it had a turnover and income of £1.5 billion, which had increased, nonetheless it had a small deficit of 0.4 per cent of income in 2017-18, which was an improvement on the deficit the year before of 1.7 per cent, but notably, again, the sector in England were looking at surpluses of 3 per cent to 4 per cent in the same period. The forecasts that we had this time last year were indicating that, for 2018-19, we should have a sector that's roughly in a break-even position, but that has to be caveated with waiting for new forecasts in July, where there will have to be a reflection of the pension costs, and there have been significant changes in pension costs, both for the teachers' pension scheme and the universities' superannuation scheme as well, and those will be significant costs that universities have to build into their forecasts at a time when their income, certainly their fee income, is not increasing, and that is the challenge.


And, there are also differences in the way that universities have secured funding for investing in their estates. So, for example, Cardiff University have had a bond rather than borrowing, which you draw down as you're spending. So, in the short term, the reserves of Cardiff will appear as though they have significant cash balances, but all of those are restricted for investment in the estate and, over the next two or three years, will be utilised for that.

So, overall, you're painting a picture of a sector that's under a significant degree of financial stress, and this is obviously using your key financial indicators. Do you monitor each and every university, or do you wait for them to come back and tell you what their situation is?

We monitor, we receive forecasts, five-year forecasts, and we meet frequently with all our universities now. It varies, depending on the risks of the universities, as to how frequently we meet, but we're actually meeting with every university because even the forecast that we received last July, the changes, even in the 12-month period, are significant enough for us to need a better understanding of what the latest position is. The forecasts, if I just run through—. We had a sector that, in 2017-18, had a deficit. Although it had a turnover and income of £1.5 billion, which had increased, nonetheless it had a small deficit of 0.4 per cent of income in 2017-18, which was an improvement on the deficit the year before of 1.7 per cent, but notably, again, the sector in England were looking at surpluses of 3 per cent to 4 per cent in the same period. The forecasts that we had this time last year were indicating that, for 2018-19, we should have a sector that's roughly in a break-even position, but that has to be caveated with waiting for new forecasts in July, where there will have to be a reflection of the pension costs, and there have been significant changes in pension costs, both for the teachers' pension scheme and the universities' superannuation scheme as well, and those will be significant costs that universities have to build into their forecasts at a time when their income, certainly their fee income, is not increasing, and that is the challenge.

Are we going to lose any universities in the next couple of years?


So, overall, you're painting a picture of a sector that's under a significant degree of financial stress, and this is obviously using your key financial indicators. Do you monitor each and every university, or do you wait for them to come back and tell you what their situation is?

We monitor, we receive forecasts, five-year forecasts, and we meet frequently with all our universities now. It varies, depending on the risks of the universities, as to how frequently we meet, but we're actually meeting with every university because even the forecast that we received last July, the changes, even in the 12-month period, are significant enough for us to need a better understanding of what the latest position is. The forecasts, if I just run through—. We had a sector that, in 2017-18, had a deficit. Although it had a turnover and income of £1.5 billion, which had increased, nonetheless it had a small deficit of 0.4 per cent of income in 2017-18, which was an improvement on the deficit the year before of 1.7 per cent, but notably, again, the sector in England were looking at surpluses of 3 per cent to 4 per cent in the same period. The forecasts that we had this time last year were indicating that, for 2018-19, we should have a sector that's roughly in a break-even position, but that has to be caveated with waiting for new forecasts in July, where there will have to be a reflection of the pension costs, and there have been significant changes in pension costs, both for the teachers' pension scheme and the universities' superannuation scheme as well, and those will be significant costs that universities have to build into their forecasts at a time when their income, certainly their fee income, is not increasing, and that is the challenge.

Are we going to lose any universities in the next couple of years?

I don't think so. As I said earlier on, we're not seeing a crisis, we're seeing really challenging circumstances for institutions to manage. At the moment, our sense is they are managing them, so one of the things we try to do is to make sure that, insofar as we can see it, we are making sure that the institutions are alert to the challenges they're facing, and are actually engaging those challenges properly, and we are seeing that at the moment. So I think what we will see if the pressure continues unabated is more costs being taken out, so more jobs being lost, more capacity being lost, but that's not the same as falling over. I don't see people falling over. There is always the possibility of structural change within the sector, and that might be one of the solutions that institutions think about, but it's not a policy position, and it's not always a good short-term response to crisis anyway, actually. But I think, as I say, we're in a managed situation, but the challenges are quite acute. But I don't see an institution falling over in the foreseeable future.


We monitor, we receive forecasts, five-year forecasts, and we meet frequently with all our universities now. It varies, depending on the risks of the universities, as to how frequently we meet, but we're actually meeting with every university because even the forecast that we received last July, the changes, even in the 12-month period, are significant enough for us to need a better understanding of what the latest position is. The forecasts, if I just run through—. We had a sector that, in 2017-18, had a deficit. Although it had a turnover and income of £1.5 billion, which had increased, nonetheless it had a small deficit of 0.4 per cent of income in 2017-18, which was an improvement on the deficit the year before of 1.7 per cent, but notably, again, the sector in England were looking at surpluses of 3 per cent to 4 per cent in the same period. The forecasts that we had this time last year were indicating that, for 2018-19, we should have a sector that's roughly in a break-even position, but that has to be caveated with waiting for new forecasts in July, where there will have to be a reflection of the pension costs, and there have been significant changes in pension costs, both for the teachers' pension scheme and the universities' superannuation scheme as well, and those will be significant costs that universities have to build into their forecasts at a time when their income, certainly their fee income, is not increasing, and that is the challenge.

Are we going to lose any universities in the next couple of years?

I don't think so. As I said earlier on, we're not seeing a crisis, we're seeing really challenging circumstances for institutions to manage. At the moment, our sense is they are managing them, so one of the things we try to do is to make sure that, insofar as we can see it, we are making sure that the institutions are alert to the challenges they're facing, and are actually engaging those challenges properly, and we are seeing that at the moment. So I think what we will see if the pressure continues unabated is more costs being taken out, so more jobs being lost, more capacity being lost, but that's not the same as falling over. I don't see people falling over. There is always the possibility of structural change within the sector, and that might be one of the solutions that institutions think about, but it's not a policy position, and it's not always a good short-term response to crisis anyway, actually. But I think, as I say, we're in a managed situation, but the challenges are quite acute. But I don't see an institution falling over in the foreseeable future.

When you talk about structural change, are you referring to the fact that certain offshoots or divisions might close? I bring this up because I'm the Assembly Member for Carmarthen West and South Pembrokeshire, and I have had multiple representations from students, and their parents, who are about to go to Lampeter and who've been told that courses are being restructured, there's a massive staff loss, and they have concerns about whether the three-year commitment they're about to make to a course is going to be able to be sustained. So I am trying to drill down a little bit, because I think it's only fair for the students to know what they're up against, and also it's a bit like in the great depression—you can start a run on something, can't you? Because if enough people believe it, then suddenly enough people will stop going to what is an excellent little university, really top-quality in medieval literature, in archaeology. And I'm just talking about one, but I know there are problems in other universities around Wales, so I just wondered if you could comment on that and also what processes you as HEFCW might have in place to protect any student who does find themselves in a situation where their course appears to be disappearing before their eyes.


Are we going to lose any universities in the next couple of years?

I don't think so. As I said earlier on, we're not seeing a crisis, we're seeing really challenging circumstances for institutions to manage. At the moment, our sense is they are managing them, so one of the things we try to do is to make sure that, insofar as we can see it, we are making sure that the institutions are alert to the challenges they're facing, and are actually engaging those challenges properly, and we are seeing that at the moment. So I think what we will see if the pressure continues unabated is more costs being taken out, so more jobs being lost, more capacity being lost, but that's not the same as falling over. I don't see people falling over. There is always the possibility of structural change within the sector, and that might be one of the solutions that institutions think about, but it's not a policy position, and it's not always a good short-term response to crisis anyway, actually. But I think, as I say, we're in a managed situation, but the challenges are quite acute. But I don't see an institution falling over in the foreseeable future.

When you talk about structural change, are you referring to the fact that certain offshoots or divisions might close? I bring this up because I'm the Assembly Member for Carmarthen West and South Pembrokeshire, and I have had multiple representations from students, and their parents, who are about to go to Lampeter and who've been told that courses are being restructured, there's a massive staff loss, and they have concerns about whether the three-year commitment they're about to make to a course is going to be able to be sustained. So I am trying to drill down a little bit, because I think it's only fair for the students to know what they're up against, and also it's a bit like in the great depression—you can start a run on something, can't you? Because if enough people believe it, then suddenly enough people will stop going to what is an excellent little university, really top-quality in medieval literature, in archaeology. And I'm just talking about one, but I know there are problems in other universities around Wales, so I just wondered if you could comment on that and also what processes you as HEFCW might have in place to protect any student who does find themselves in a situation where their course appears to be disappearing before their eyes.

So, there's quite a lot in that question, actually. Let me try not to forget any of the elements. First of all, your comment about causing a run is a serious consideration. So, if we look at the debate that happened in the Senedd last week, from my reading of the transcript, it was actually quite a balanced debate where pretty much every contributor made reference to the contribution that higher education is making. There was reference to the national student survey scores, and in many ways Wales is the best place in the UK to come and be a student, because you are looked after properly in Wales. But there was also a perfectly legitimate exploration of whether or not there's a crisis, and if you look at the way in which that was represented in the media, the crisis bit stuck and the rest of it didn't. At the point where the sector is trying very hard to recruit students, it's really quite unhelpful that you get that sort of representation. So we do need to make sure, I think, all of us, that we try to avoid a situation where there can be media amplification of a problem that's not actually as acute as the media are portraying it, and that is very harsh. I'm not being critical of the political process here, but it has ripples and we do need to be careful that we don't start a run on this. In terms of the specifics at Lampeter, we understand that there are no plans to close any of the departments, and there certainly will not be plans to pull the rug out from under continuing students. That is just not what institutions do. So there's an absolute obligation on them to meet their commitments, and that's a contractual obligation anyway, so it's a legal obligation. But we also have a quality machinery that we operate where we would expect institutions to be able to demonstrate that they've put in place appropriate arrangements to ensure that students can finish their programmes of study. So they're not going to be recruiting students to programmes that they're not planning to continue—they just are not going to do that. And if you think about it in a market context, it would be suicidal for a university to treat their students like that.


I don't think so. As I said earlier on, we're not seeing a crisis, we're seeing really challenging circumstances for institutions to manage. At the moment, our sense is they are managing them, so one of the things we try to do is to make sure that, insofar as we can see it, we are making sure that the institutions are alert to the challenges they're facing, and are actually engaging those challenges properly, and we are seeing that at the moment. So I think what we will see if the pressure continues unabated is more costs being taken out, so more jobs being lost, more capacity being lost, but that's not the same as falling over. I don't see people falling over. There is always the possibility of structural change within the sector, and that might be one of the solutions that institutions think about, but it's not a policy position, and it's not always a good short-term response to crisis anyway, actually. But I think, as I say, we're in a managed situation, but the challenges are quite acute. But I don't see an institution falling over in the foreseeable future.

When you talk about structural change, are you referring to the fact that certain offshoots or divisions might close? I bring this up because I'm the Assembly Member for Carmarthen West and South Pembrokeshire, and I have had multiple representations from students, and their parents, who are about to go to Lampeter and who've been told that courses are being restructured, there's a massive staff loss, and they have concerns about whether the three-year commitment they're about to make to a course is going to be able to be sustained. So I am trying to drill down a little bit, because I think it's only fair for the students to know what they're up against, and also it's a bit like in the great depression—you can start a run on something, can't you? Because if enough people believe it, then suddenly enough people will stop going to what is an excellent little university, really top-quality in medieval literature, in archaeology. And I'm just talking about one, but I know there are problems in other universities around Wales, so I just wondered if you could comment on that and also what processes you as HEFCW might have in place to protect any student who does find themselves in a situation where their course appears to be disappearing before their eyes.

So, there's quite a lot in that question, actually. Let me try not to forget any of the elements. First of all, your comment about causing a run is a serious consideration. So, if we look at the debate that happened in the Senedd last week, from my reading of the transcript, it was actually quite a balanced debate where pretty much every contributor made reference to the contribution that higher education is making. There was reference to the national student survey scores, and in many ways Wales is the best place in the UK to come and be a student, because you are looked after properly in Wales. But there was also a perfectly legitimate exploration of whether or not there's a crisis, and if you look at the way in which that was represented in the media, the crisis bit stuck and the rest of it didn't. At the point where the sector is trying very hard to recruit students, it's really quite unhelpful that you get that sort of representation. So we do need to make sure, I think, all of us, that we try to avoid a situation where there can be media amplification of a problem that's not actually as acute as the media are portraying it, and that is very harsh. I'm not being critical of the political process here, but it has ripples and we do need to be careful that we don't start a run on this. In terms of the specifics at Lampeter, we understand that there are no plans to close any of the departments, and there certainly will not be plans to pull the rug out from under continuing students. That is just not what institutions do. So there's an absolute obligation on them to meet their commitments, and that's a contractual obligation anyway, so it's a legal obligation. But we also have a quality machinery that we operate where we would expect institutions to be able to demonstrate that they've put in place appropriate arrangements to ensure that students can finish their programmes of study. So they're not going to be recruiting students to programmes that they're not planning to continue—they just are not going to do that. And if you think about it in a market context, it would be suicidal for a university to treat their students like that.

But I have to ask these questions because the auditor was very clear that there was a material uncertainty in Trinity Saint David's financial plans.


When you talk about structural change, are you referring to the fact that certain offshoots or divisions might close? I bring this up because I'm the Assembly Member for Carmarthen West and South Pembrokeshire, and I have had multiple representations from students, and their parents, who are about to go to Lampeter and who've been told that courses are being restructured, there's a massive staff loss, and they have concerns about whether the three-year commitment they're about to make to a course is going to be able to be sustained. So I am trying to drill down a little bit, because I think it's only fair for the students to know what they're up against, and also it's a bit like in the great depression—you can start a run on something, can't you? Because if enough people believe it, then suddenly enough people will stop going to what is an excellent little university, really top-quality in medieval literature, in archaeology. And I'm just talking about one, but I know there are problems in other universities around Wales, so I just wondered if you could comment on that and also what processes you as HEFCW might have in place to protect any student who does find themselves in a situation where their course appears to be disappearing before their eyes.

So, there's quite a lot in that question, actually. Let me try not to forget any of the elements. First of all, your comment about causing a run is a serious consideration. So, if we look at the debate that happened in the Senedd last week, from my reading of the transcript, it was actually quite a balanced debate where pretty much every contributor made reference to the contribution that higher education is making. There was reference to the national student survey scores, and in many ways Wales is the best place in the UK to come and be a student, because you are looked after properly in Wales. But there was also a perfectly legitimate exploration of whether or not there's a crisis, and if you look at the way in which that was represented in the media, the crisis bit stuck and the rest of it didn't. At the point where the sector is trying very hard to recruit students, it's really quite unhelpful that you get that sort of representation. So we do need to make sure, I think, all of us, that we try to avoid a situation where there can be media amplification of a problem that's not actually as acute as the media are portraying it, and that is very harsh. I'm not being critical of the political process here, but it has ripples and we do need to be careful that we don't start a run on this. In terms of the specifics at Lampeter, we understand that there are no plans to close any of the departments, and there certainly will not be plans to pull the rug out from under continuing students. That is just not what institutions do. So there's an absolute obligation on them to meet their commitments, and that's a contractual obligation anyway, so it's a legal obligation. But we also have a quality machinery that we operate where we would expect institutions to be able to demonstrate that they've put in place appropriate arrangements to ensure that students can finish their programmes of study. So they're not going to be recruiting students to programmes that they're not planning to continue—they just are not going to do that. And if you think about it in a market context, it would be suicidal for a university to treat their students like that.

But I have to ask these questions because the auditor was very clear that there was a material uncertainty in Trinity Saint David's financial plans.

Yes, I understand that, so let’s come back to the material uncertainty. [Interruption.] No, I understand, and that's fine. What I'm hoping to try and express is that we have absolute confidence that the institutions will not do the dirty on their students. They will look after their students and if they're recruiting to programmes, they are recruiting to programmes that they are planning to run, and run through to completion. And the expectations that we place on them in terms of our quality assurance machinery is precisely that—when they are engaged in portfolio change, they have to look after the interest of the students that they currently have. In terms of our oversight and monitoring, our primary consideration, again, is the interest of the students. They are the people who have, in many ways, least influence over what happens in terms of the way an institution is managed. Although, they do have a voice and, actually, the arrangements for the student voice in Wales are, again, better than elsewhere in the UK. But, nonetheless, we do not wish to see students becoming innocent victims of difficulties of management and financing. And so that is our primary consideration when we're looking at these institutions. Our institutional risk review process is fundamentally designed to make sure that institutions are grappling with their problems before they become a crisis. So, we have machinery, which has 70/80 different factors and hundreds of questions that we ask twice a year, to interrogate the performance of the institutions and to make sure that we are seeing them managing the issues that they're facing. So, it's not the challenges you face, it's the way you face your challenges—it's a cliché—and, at the moment, they are managing them, but if we were in any way concerned that they weren't, the people who are most at risk in that context are the students and we will be intervening to make sure that they were cited, and we do intervene when we have to.


So, there's quite a lot in that question, actually. Let me try not to forget any of the elements. First of all, your comment about causing a run is a serious consideration. So, if we look at the debate that happened in the Senedd last week, from my reading of the transcript, it was actually quite a balanced debate where pretty much every contributor made reference to the contribution that higher education is making. There was reference to the national student survey scores, and in many ways Wales is the best place in the UK to come and be a student, because you are looked after properly in Wales. But there was also a perfectly legitimate exploration of whether or not there's a crisis, and if you look at the way in which that was represented in the media, the crisis bit stuck and the rest of it didn't. At the point where the sector is trying very hard to recruit students, it's really quite unhelpful that you get that sort of representation. So we do need to make sure, I think, all of us, that we try to avoid a situation where there can be media amplification of a problem that's not actually as acute as the media are portraying it, and that is very harsh. I'm not being critical of the political process here, but it has ripples and we do need to be careful that we don't start a run on this. In terms of the specifics at Lampeter, we understand that there are no plans to close any of the departments, and there certainly will not be plans to pull the rug out from under continuing students. That is just not what institutions do. So there's an absolute obligation on them to meet their commitments, and that's a contractual obligation anyway, so it's a legal obligation. But we also have a quality machinery that we operate where we would expect institutions to be able to demonstrate that they've put in place appropriate arrangements to ensure that students can finish their programmes of study. So they're not going to be recruiting students to programmes that they're not planning to continue—they just are not going to do that. And if you think about it in a market context, it would be suicidal for a university to treat their students like that.

But I have to ask these questions because the auditor was very clear that there was a material uncertainty in Trinity Saint David's financial plans.

Yes, I understand that, so let’s come back to the material uncertainty. [Interruption.] No, I understand, and that's fine. What I'm hoping to try and express is that we have absolute confidence that the institutions will not do the dirty on their students. They will look after their students and if they're recruiting to programmes, they are recruiting to programmes that they are planning to run, and run through to completion. And the expectations that we place on them in terms of our quality assurance machinery is precisely that—when they are engaged in portfolio change, they have to look after the interest of the students that they currently have. In terms of our oversight and monitoring, our primary consideration, again, is the interest of the students. They are the people who have, in many ways, least influence over what happens in terms of the way an institution is managed. Although, they do have a voice and, actually, the arrangements for the student voice in Wales are, again, better than elsewhere in the UK. But, nonetheless, we do not wish to see students becoming innocent victims of difficulties of management and financing. And so that is our primary consideration when we're looking at these institutions. Our institutional risk review process is fundamentally designed to make sure that institutions are grappling with their problems before they become a crisis. So, we have machinery, which has 70/80 different factors and hundreds of questions that we ask twice a year, to interrogate the performance of the institutions and to make sure that we are seeing them managing the issues that they're facing. So, it's not the challenges you face, it's the way you face your challenges—it's a cliché—and, at the moment, they are managing them, but if we were in any way concerned that they weren't, the people who are most at risk in that context are the students and we will be intervening to make sure that they were cited, and we do intervene when we have to.

Well, following on from what you said, I've just got two really specific technical questions, then, to ask, because you said that you look across the whole scope to make sure that they are meeting all of their correct liquidity ratios and so on. So, considering how much is invested in their estates, are you happy that each university's estates strategy and its financing is prudent and has appropriate governing-body oversight in place?


But I have to ask these questions because the auditor was very clear that there was a material uncertainty in Trinity Saint David's financial plans.

Yes, I understand that, so let’s come back to the material uncertainty. [Interruption.] No, I understand, and that's fine. What I'm hoping to try and express is that we have absolute confidence that the institutions will not do the dirty on their students. They will look after their students and if they're recruiting to programmes, they are recruiting to programmes that they are planning to run, and run through to completion. And the expectations that we place on them in terms of our quality assurance machinery is precisely that—when they are engaged in portfolio change, they have to look after the interest of the students that they currently have. In terms of our oversight and monitoring, our primary consideration, again, is the interest of the students. They are the people who have, in many ways, least influence over what happens in terms of the way an institution is managed. Although, they do have a voice and, actually, the arrangements for the student voice in Wales are, again, better than elsewhere in the UK. But, nonetheless, we do not wish to see students becoming innocent victims of difficulties of management and financing. And so that is our primary consideration when we're looking at these institutions. Our institutional risk review process is fundamentally designed to make sure that institutions are grappling with their problems before they become a crisis. So, we have machinery, which has 70/80 different factors and hundreds of questions that we ask twice a year, to interrogate the performance of the institutions and to make sure that we are seeing them managing the issues that they're facing. So, it's not the challenges you face, it's the way you face your challenges—it's a cliché—and, at the moment, they are managing them, but if we were in any way concerned that they weren't, the people who are most at risk in that context are the students and we will be intervening to make sure that they were cited, and we do intervene when we have to.

Well, following on from what you said, I've just got two really specific technical questions, then, to ask, because you said that you look across the whole scope to make sure that they are meeting all of their correct liquidity ratios and so on. So, considering how much is invested in their estates, are you happy that each university's estates strategy and its financing is prudent and has appropriate governing-body oversight in place?

Yes, so the estates strategies that institutions operate are overseen by either the full governing body or relevant sub-committees in respect of every institution, so there is proper governance oversight. And in all of those instances, there is staff and student engagement as well in the strategic approach on estates. So, the machinery is in place—


Yes, I understand that, so let’s come back to the material uncertainty. [Interruption.] No, I understand, and that's fine. What I'm hoping to try and express is that we have absolute confidence that the institutions will not do the dirty on their students. They will look after their students and if they're recruiting to programmes, they are recruiting to programmes that they are planning to run, and run through to completion. And the expectations that we place on them in terms of our quality assurance machinery is precisely that—when they are engaged in portfolio change, they have to look after the interest of the students that they currently have. In terms of our oversight and monitoring, our primary consideration, again, is the interest of the students. They are the people who have, in many ways, least influence over what happens in terms of the way an institution is managed. Although, they do have a voice and, actually, the arrangements for the student voice in Wales are, again, better than elsewhere in the UK. But, nonetheless, we do not wish to see students becoming innocent victims of difficulties of management and financing. And so that is our primary consideration when we're looking at these institutions. Our institutional risk review process is fundamentally designed to make sure that institutions are grappling with their problems before they become a crisis. So, we have machinery, which has 70/80 different factors and hundreds of questions that we ask twice a year, to interrogate the performance of the institutions and to make sure that we are seeing them managing the issues that they're facing. So, it's not the challenges you face, it's the way you face your challenges—it's a cliché—and, at the moment, they are managing them, but if we were in any way concerned that they weren't, the people who are most at risk in that context are the students and we will be intervening to make sure that they were cited, and we do intervene when we have to.

Well, following on from what you said, I've just got two really specific technical questions, then, to ask, because you said that you look across the whole scope to make sure that they are meeting all of their correct liquidity ratios and so on. So, considering how much is invested in their estates, are you happy that each university's estates strategy and its financing is prudent and has appropriate governing-body oversight in place?

Yes, so the estates strategies that institutions operate are overseen by either the full governing body or relevant sub-committees in respect of every institution, so there is proper governance oversight. And in all of those instances, there is staff and student engagement as well in the strategic approach on estates. So, the machinery is in place—

Because it's the big thing that drives most of university borrowing, isn't it?


Well, following on from what you said, I've just got two really specific technical questions, then, to ask, because you said that you look across the whole scope to make sure that they are meeting all of their correct liquidity ratios and so on. So, considering how much is invested in their estates, are you happy that each university's estates strategy and its financing is prudent and has appropriate governing-body oversight in place?

Yes, so the estates strategies that institutions operate are overseen by either the full governing body or relevant sub-committees in respect of every institution, so there is proper governance oversight. And in all of those instances, there is staff and student engagement as well in the strategic approach on estates. So, the machinery is in place—

Because it's the big thing that drives most of university borrowing, isn't it?


Yes, so the estates strategies that institutions operate are overseen by either the full governing body or relevant sub-committees in respect of every institution, so there is proper governance oversight. And in all of those instances, there is staff and student engagement as well in the strategic approach on estates. So, the machinery is in place—

Because it's the big thing that drives most of university borrowing, isn't it?

So, if our universities are on a sticky wicket, we just need to know that the borrowing that they're undertaking is absolutely prudently assessed and is appropriate. So, as long as you're content, if I can hear you say that—[Laughter.]


Because it's the big thing that drives most of university borrowing, isn't it?

So, if our universities are on a sticky wicket, we just need to know that the borrowing that they're undertaking is absolutely prudently assessed and is appropriate. So, as long as you're content, if I can hear you say that—[Laughter.]

Okay. We're content on two fronts: one is that the governance machinery within the institutions is structured appropriately to look at that, but also that if the institutions are wanting to engage in anything other than relatively trivial borrowing, they have to get our consent as well. And what we don't do is second-guess everything, but what we do do is make sure that the governing body, or its relevant committees, have been asking the right questions. So, there are two bits to this.


So, if our universities are on a sticky wicket, we just need to know that the borrowing that they're undertaking is absolutely prudently assessed and is appropriate. So, as long as you're content, if I can hear you say that—[Laughter.]

Okay. We're content on two fronts: one is that the governance machinery within the institutions is structured appropriately to look at that, but also that if the institutions are wanting to engage in anything other than relatively trivial borrowing, they have to get our consent as well. And what we don't do is second-guess everything, but what we do do is make sure that the governing body, or its relevant committees, have been asking the right questions. So, there are two bits to this.


Okay. We're content on two fronts: one is that the governance machinery within the institutions is structured appropriately to look at that, but also that if the institutions are wanting to engage in anything other than relatively trivial borrowing, they have to get our consent as well. And what we don't do is second-guess everything, but what we do do is make sure that the governing body, or its relevant committees, have been asking the right questions. So, there are two bits to this.


In asking for the forecasts, we have reinforced this year the importance of universities looking at different scenarios. So, to be looking at the demographic and maybe in the past, where there's potentially been growth in the system and universities have built that into their forecast, we have explicitly asked this year that we are provided—not just the governing body—with the scenario where there is no growth in the income. That's not the core forecast, but a scenario, so that it's quite clear how reliant the forecasts are on that growth, and if that growth doesn't come through, what the contingency plans are for ensuring that all the cost commitments can be met. And we should probably just differentiate between—we have a role before borrowings are entered into, but all the best forecasts in the world can never quite predict, certainly what's happened in the last two years, probably, in universities. So, there are significant borrowings that are now committed to and the key measures we are looking at are universities' capacity to meet their covenants and their repayments under those borrowings, because that's essential for maintaining their liquidity.


In asking for the forecasts, we have reinforced this year the importance of universities looking at different scenarios. So, to be looking at the demographic and maybe in the past, where there's potentially been growth in the system and universities have built that into their forecast, we have explicitly asked this year that we are provided—not just the governing body—with the scenario where there is no growth in the income. That's not the core forecast, but a scenario, so that it's quite clear how reliant the forecasts are on that growth, and if that growth doesn't come through, what the contingency plans are for ensuring that all the cost commitments can be met. And we should probably just differentiate between—we have a role before borrowings are entered into, but all the best forecasts in the world can never quite predict, certainly what's happened in the last two years, probably, in universities. So, there are significant borrowings that are now committed to and the key measures we are looking at are universities' capacity to meet their covenants and their repayments under those borrowings, because that's essential for maintaining their liquidity.

Which actually, neatly, thank you, brings me to my last question, which is: have any universities broken those loan covenants or been close to breaking them, unable to pay their borrowings as and when they fall due?


In asking for the forecasts, we have reinforced this year the importance of universities looking at different scenarios. So, to be looking at the demographic and maybe in the past, where there's potentially been growth in the system and universities have built that into their forecast, we have explicitly asked this year that we are provided—not just the governing body—with the scenario where there is no growth in the income. That's not the core forecast, but a scenario, so that it's quite clear how reliant the forecasts are on that growth, and if that growth doesn't come through, what the contingency plans are for ensuring that all the cost commitments can be met. And we should probably just differentiate between—we have a role before borrowings are entered into, but all the best forecasts in the world can never quite predict, certainly what's happened in the last two years, probably, in universities. So, there are significant borrowings that are now committed to and the key measures we are looking at are universities' capacity to meet their covenants and their repayments under those borrowings, because that's essential for maintaining their liquidity.

Which actually, neatly, thank you, brings me to my last question, which is: have any universities broken those loan covenants or been close to breaking them, unable to pay their borrowings as and when they fall due?

There was a significant change in accounting standards in 2015, financial reporting standard 102, so most universities had to renegotiate their covenants, but it was because the accounts were looking very different. The accounting standards brought about changes in how income was recognised and how some service concession arrangements, largely student accommodation arrangements, and pension costs, significantly, were recognised in the accounts. So, most universities have had to renegotiate covenants, but we're not aware of any who've had to renegotiate due to covenant breaches, other than one which the University of Wales Trinity Saint David disclosed in their financial statements—that they did need to renegotiate their financing arrangements, which they have done earlier this year, and they have now negotiated new covenants. It's a core part of financial management in universities now that you manage your relationship with your lender as well as with us. Breaching covenants in themselves is different to doing that with your lender being unaware and the factors being within your control. So, again, from that perspective, we have the covenants built into our forecasts, we require the forecasts to show how the university are planning to be within their covenants. The nature of those covenants vary, but most of them require a measure of cash flow, a ratio between the cash generated and the cost of debt, so there is close monitoring that is required because of the borrowing in the system, as well as our ongoing monitoring as well.


Which actually, neatly, thank you, brings me to my last question, which is: have any universities broken those loan covenants or been close to breaking them, unable to pay their borrowings as and when they fall due?

There was a significant change in accounting standards in 2015, financial reporting standard 102, so most universities had to renegotiate their covenants, but it was because the accounts were looking very different. The accounting standards brought about changes in how income was recognised and how some service concession arrangements, largely student accommodation arrangements, and pension costs, significantly, were recognised in the accounts. So, most universities have had to renegotiate covenants, but we're not aware of any who've had to renegotiate due to covenant breaches, other than one which the University of Wales Trinity Saint David disclosed in their financial statements—that they did need to renegotiate their financing arrangements, which they have done earlier this year, and they have now negotiated new covenants. It's a core part of financial management in universities now that you manage your relationship with your lender as well as with us. Breaching covenants in themselves is different to doing that with your lender being unaware and the factors being within your control. So, again, from that perspective, we have the covenants built into our forecasts, we require the forecasts to show how the university are planning to be within their covenants. The nature of those covenants vary, but most of them require a measure of cash flow, a ratio between the cash generated and the cost of debt, so there is close monitoring that is required because of the borrowing in the system, as well as our ongoing monitoring as well.

Thank you. Just before we move on to Hefin David, can I just ask you what your view, then, is on the statement included by auditors in the accounts of Trinity Saint David that there is material uncertainty?


There was a significant change in accounting standards in 2015, financial reporting standard 102, so most universities had to renegotiate their covenants, but it was because the accounts were looking very different. The accounting standards brought about changes in how income was recognised and how some service concession arrangements, largely student accommodation arrangements, and pension costs, significantly, were recognised in the accounts. So, most universities have had to renegotiate covenants, but we're not aware of any who've had to renegotiate due to covenant breaches, other than one which the University of Wales Trinity Saint David disclosed in their financial statements—that they did need to renegotiate their financing arrangements, which they have done earlier this year, and they have now negotiated new covenants. It's a core part of financial management in universities now that you manage your relationship with your lender as well as with us. Breaching covenants in themselves is different to doing that with your lender being unaware and the factors being within your control. So, again, from that perspective, we have the covenants built into our forecasts, we require the forecasts to show how the university are planning to be within their covenants. The nature of those covenants vary, but most of them require a measure of cash flow, a ratio between the cash generated and the cost of debt, so there is close monitoring that is required because of the borrowing in the system, as well as our ongoing monitoring as well.

Thank you. Just before we move on to Hefin David, can I just ask you what your view, then, is on the statement included by auditors in the accounts of Trinity Saint David that there is material uncertainty?

Yes, I'll pick up on that. The material uncertainty largely relates—there is a note in the accounts that explains the factors that are being taken into account, but it largely relates to some significant cash receipts that have been subject to timing delays and the fact that the timing of these is essentially outside the control of the institution. The main delay relates to the receipt of funding for the Egin project, which was due to be received from the Swansea city deal. That funding has been delayed, but the sums due to the university are still due to the university—it's the issue of the timing of those receipts that is causing a cash pressure. Receipt of that funding would certainly reduce the cash flow pressure at the university at the moment. Just in terms of cash flows, all universities have to ensure that they are maintaining enough cash in their system to meet their payments as they fall due. Most of their costs are incurred on a monthly basis, staff costs in particular, but the income flows into universities are now less regular. In days gone by, that funding would largely flow from us and that would also come on a monthly basis. The funding from the Student Loans Company now, for example, comes in chunks. A quarter of that money comes in in October, a quarter in February, and the majority of it, half of it, doesn't come into the university in cash until May. So, that's quite a different cash management scenario for universities to manage; it requires holding cash balances to do it.


Thank you. Just before we move on to Hefin David, can I just ask you what your view, then, is on the statement included by auditors in the accounts of Trinity Saint David that there is material uncertainty?

Yes, I'll pick up on that. The material uncertainty largely relates—there is a note in the accounts that explains the factors that are being taken into account, but it largely relates to some significant cash receipts that have been subject to timing delays and the fact that the timing of these is essentially outside the control of the institution. The main delay relates to the receipt of funding for the Egin project, which was due to be received from the Swansea city deal. That funding has been delayed, but the sums due to the university are still due to the university—it's the issue of the timing of those receipts that is causing a cash pressure. Receipt of that funding would certainly reduce the cash flow pressure at the university at the moment. Just in terms of cash flows, all universities have to ensure that they are maintaining enough cash in their system to meet their payments as they fall due. Most of their costs are incurred on a monthly basis, staff costs in particular, but the income flows into universities are now less regular. In days gone by, that funding would largely flow from us and that would also come on a monthly basis. The funding from the Student Loans Company now, for example, comes in chunks. A quarter of that money comes in in October, a quarter in February, and the majority of it, half of it, doesn't come into the university in cash until May. So, that's quite a different cash management scenario for universities to manage; it requires holding cash balances to do it.

Okay, thank you. Just before I bring Hefin in, we're going to need to have a bit of agility, as Dai Lloyd would call it, in our questioning and our answers if we're going to cover the ground that we need to cover. So, Hefin.