Welsh higher education is facing a funding and recruitment crisis that could set it on "a spiral of decline", vice-chancellors and funding chiefs warned the Welsh Assembly this week.
Universities and colleges in Wales will begin to lose their best staff and students unless the assembly addresses past and present underfunding compared with institutions in England and Scotland, the assembly's Dearing-style higher education review was told.
In its submission, the Higher Education Funding Council for Wales said that without more money from the assembly and greater collaboration among institutions, Welsh higher education will become uncompetitive, departments may have to close, and the sector will fail to meet the needs of the Welsh economy.
A spokeswoman for the assembly said Welsh higher education had already received a generous settlement for next year, increasing funding levels by 8 per cent compared with this year.
She acknowledged that a funding gap was opening up between England and Wales. "It is for the assembly to decide its own priorities for Wales which will not necessarily match those for England and other parts of the UK," she said.
The Heads of Higher Education Wales warned that student demand had levelled off, leaving institutions vulnerable to competition, especially from English universities, which were being encouraged to expand.
"Underfunded institutions will inevitably look and feel inferior to potential students compared to well-funded ones," the HHEW said. "If Welsh institutions seem less attractive than English institutions, academics will vote with their feet."
Figures agreed between the HHEW and the WFC show that next year institutions in Wales will receive £18 per student less than in England, and £1,355 less than in Scotland - which many Welsh vice-chancellors see as a better comparison.
The WFC said without a cash injection from the assembly, the gap will widen further in the following two years. An extra £30 million is needed just to keep Welsh year-on-year percentage increases in line with England.
The WFC's submission said that the assembly's vision of an advanced knowledge-based economy would need a well-resourced and internationally competitive HE sector. "Otherwise, institutions in Wales will increasingly fail to recruit and retain excellent staff and students, and will enter a spiral of decline," it said.
Many Welsh institutions are vulnerable to competition because of their rural location, which means they cannot tap in to large populations of local students.
Richard Hirst, the WFC's finance director, told The THES that Welsh institutions were facing a "significant challenge", with eight out of 13 institutions facing or forecasting financial problems, and the sector as a whole in deficit.
Keith Robbins, vice-chancellor of the University of Wales, Lampeter, which reportedly suffered a 30 per cent drop in recruitment this year, said competition from English institutions was contributing to the university's difficulties.