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But appraisal of policy options was limited and estimated costs have increased, says Auditor General.

The finances of Welsh higher education institutions are generally in sound health and, overall, both the Welsh Government and Higher Education Funding Council for Wales (HEFCW) have implemented policy around raising tuition fees effectively. That's the conclusion of a new report by the Auditor General for Wales. But, it also found that the Welsh Government could have done more to appraise policy options around tuition fees in late 2010, before putting the current arrangements in place from the start of the 2012/13 academic year, and that estimated costs have increased since the time the policy was announced.

The report, published today, recognised that the Welsh Government considered that it needed to respond quickly to the UK Government's decision to introduce higher tuition fees in England. But it found limitations in the way the Welsh Government appraised its policy options, such as the extent to which it considered potential changes in its assumptions, including the tuition fee rates that institutions were likely to charge and the overall number and cross border flow of students.

The cost of the Tuition Fee Grant for 2012-13 to 2016-17 is now expected to be substantially higher than forecast in November 2010 - increasing by 24 per cent, from £653 million to £809 million. There have been various changes in the assumptions underpinning the Welsh Government's forecasts and, most significantly, institutions are charging higher fees than the Welsh Government had expected in November 2010.

The estimated total cost of issuing tuition fee loans over the same period is largely unchanged at just over £1.6 billion, with an increase in the estimated cost of maintenance loans being offset by a reduction in the estimated cost of issuing tuition fee loans. However, the estimated cost of writing off student loans has also fallen by 13 per cent, from £549 million to £476 million, although the Welsh Government expects that planned changes in the way this cost is estimated will reverse some of this reduction.

The report found that, overall, the Welsh Government and HEFCW have implemented the new tuition fees policy effectively, although further action is needed on part-time tuition fees, to address weaknesses in processing student finance applications, and to strengthen the regulation of higher education. In addition, HEFCW may need to make further changes to the way it distributes funding to higher education institutions to ensure that these arrangements support institutions and the delivery of Welsh Government policy objectives in the most effective way.

Despite changes to their funding, the financial health and financial planning and management arrangements of higher education institutions in Wales are generally sound. While the total income of the sector is forecast to grow, the report emphasises that this depends heavily on institutions' ability to attract students in an increasingly competitive operating environment.

Today's report makes eight recommendations, including reference to issues for the Welsh Government to consider in reviewing the impact of the current tuition fees policy. On 18 November 2013, the Welsh Government announced plans for a wide-ranging review that will include an evaluation of the impact of the current tuition fees policy. The review will start in 2014 but the Welsh Government has indicated that it will not be concluded before the 2016 elections

Auditor General for Wales, Huw Vaughan Thomas said today:
"It is good to see that the finances of higher education institutions in Wales are generally sound, although it is clear that institutions face significant challenges and uncertainties. In particular, the full impact of the introduction of higher tuition fees and the Tuition Fee Grant will not become clear for two to three years time, as more students who entered higher education before the 2012/13 academic year leave the system".

Notes to Editors:

This report examines whether higher education finances are in good health, particularly in light of recent changes in the Welsh Government's policy on funding higher education. On 30 November 2010, the Welsh Government announced that, from the start of the 2012/13 academic year, higher education institutions in Wales would be able to charge tuition fees of up to £9,000 per annum for new full-time undergraduate students. To offset the cost of increased tuition fees, the Welsh Governemnt offered access to a Tuition Fee Grant, worth up to £5,535 in 2012/13, for Welsh-domiciled students regardless of where in the UK they chose to study (accessible also to EU-domiciled students studying in Wales). The cost of the Tuition Fee Grant is met from funding that HEFCW had previously distributed direct to higher education institutions.

We examined whether the analysis underpinning the Welsh Government's policy on tuition fees was robust; whether the Welsh Government and HEFCW implemented the tuition fees policy effectively (including consideration of a range of related issues in respect of the student finance system and higher education funding and regulation); and whether higher education institutions in Wales are in good financial health and have appropriate financial planning and management arrangements.

 The findings and conclusions in this report are based on our review of a range of
documentation supplied by the Welsh Government, HEFCW, higher education institutions and other stakeholders, as well as interviews with those parties. Pricewaterhouse Coopers LLP were also engaged to assist in this review.

The Auditor General and the auditors he appoints in local government are the independent statutory external auditors of most of the Welsh public sector. They are responsible for the annual audit of the majority of public money spent in Wales, including the £15 billion of funds that are voted on annually by the National Assembly. Elements of this funding are passed by the Welsh Government to the NHS in Wales (over £5 billion) and to local government (over £4 billion).

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