Sanctuary Buildings
Great Smith Street
Westminster
London SW1P 3BT
tel: 0870 0012345
dfes.ministers@dfes.gsi.gov.uk
Rt Hon Charles Clarke MP
Mr David Young
Chairman
Higher Education Funding Council for England
Northavon House
Coldharbour Lane
Bristol
BS16 1QD
8 January 2004
Dear David
HIGHER EDUCATION FUNDING AND DELIVERY 2004-05
Introduction
1. The White Paper 'The future of higher education', confirmed the Government's commitment to increasing and widening participation within higher education. It set out a challenging agenda for change for the HE sector, the Government and the Higher Education Funding Council for England (HEFCE). Some of the changes proposed in the White Paper will only be brought into effect through the enactment of the Bill that is being introduced in Parliament and will come into force from 2006. In the meantime, it is important that stability in the sector is maintained through the implementation of only necessary changes to funding arrangements, while keeping up the momentum on the policies that will bring further progress towards a higher education sector as described in the White Paper. This letter therefore confirms the Council's budget for 2004-05 and builds on the one sent to the Council in January of last year by highlighting areas where there have been changes or developments. In general, however, the messages made in the previous grant letter remain in force.
2. I am very grateful to the Council for the commitment it has made to implement the White Paper strategy, for example in working with my Department in the joint DfES/HEFCE HE programme. This has led to more effective delivery, focusing on policy outcomes, avoiding unnecessary duplication of effort, and reducing the potential bureaucratic burden on HEIs.
3. As you know, reducing bureaucracy and reinforcing local autonomy and accountability are core objectives for this Government. I know and strongly welcome the work that the Council and partners have done during the last year in seeking to simplify funding streams and reduce the administrative burden on HEIs. I hope that this work will continue and intensify, and that the Council will be active in bringing to my attention any areas where it sees scope to go further, and faster, than we are currently planning. I also hope the Council will let me know of any areas where our policies may inadvertently be increasing, and not reducing, bureaucracy. During the year, I will want to discuss future strategies in this area with the Council, including any recommendations coming from the Lambert Review or the Better Regulation Review Group. In the meantime, I would like the Council and partners to publish assessments of the regulatory burden accompanying significant new regulation where a public assessment has not been previously undertaken.
4. As more and more institutions deliver both higher and further education, it becomes increasingly important that bureaucratic burdens on these institutions are removed. I expect the LSC and HEFCE to continue to work together to take forward ways of reducing the difficulties mixed economy institutions currently face as a result of operating within two funding organisations. This will include reviewing the administrative and legislative barriers that exist to improve greater integration of systems and smoother progression for students.
5. I also know that the Council is actively contributing to discussions on a gatekeeper mechanism for higher education which I think will be an important advance in ensuring that the burden of new initiatives is always carefully considered. I look forward to a firm proposal being presented, and its adoption of by all those agencies involved in higher education.
Research and knowledge transfer
6. This year has seen important developments in research and knowledge transfer: the Council have made considerable progress towards implementing the aims of the White Paper; there have been consultations on Sir Gareth Roberts' review of research assessment, the review of the Council's funding method, and on 'the sustainability of university research'. The 'Lambert Review' has recently reported. Decisions on these key areas will be taken shortly and will lead to a period of consolidation in 2004-05. In taking forward these areas, I would ask the Council to reflect on the views of the new HE Research Forum.
7. The Council should keep funding for the Arts and Humanities Research Board (AHRB) at the levels previously announced as progress is made towards transforming it into a Research Council by 2005.
Quality and Standards
8. The Council should continue to build upon the substantial progress made in taking forward a range of programmes, including the Centres of Teaching Excellence, designed to raise the status of teaching in Higher Education, to reward excellent teaching and to disseminate best practice.
9. The Government is committed to ensuring that HE applicants have accurate and up-to-date information about quality and standards in institutions, so that their choices are well-informed. I congratulate the Council on the work undertaken so far towards the publication of 'Teaching Quality Information' (TQI) and the development of the first National Student Survey (NSS). I look to the Council to ensure the comprehensive availability of TQI by the end of 2004, and implementation of the first sector wide NSS at the beginning of 2005.
Foundation degrees
10. In October we published 'Foundation Degrees - meeting the need for higher level skills', setting out our objectives for FDs and giving details of the next steps for growing Foundation Degree provision. The Council has also initiated a bidding round for 10,000 additional foundation degree numbers spread over 2004/05 and 2005/06. We expect this to bring the number of Foundation Degrees to around 50,000 full-time equivalent places by 2005/06, taking account of courses converted from HNDs. Given this expansion, we expect to see growth in the number of places at the intermediate level - in both absolute and proportionate terms -with Foundation Degree places outnumbering HNDs in due course. We expect the Council to monitor the volume of intermediate level provision and look to the sector to ensure that Foundation Degrees are meeting the criteria set out in the QAA benchmark for Foundation Degrees.
Aimhigher
11. The Council, together with the LSC and the Department, is working swiftly to establish the new, unified Aimhigher programme from April 2004 through the merger of the existing Aimhigher programme and Partnerships for Progression. In the initial period, it is essential that guarantees to existing Aimhigher and Partnerships for Progression partnerships are met. However, I look to the Council, through the National Partnership Board, to ensure that work continues to be concentrated in the most disadvantaged areas and available resources are appropriately deployed, and to see that locally-based activity is at the forefront of efforts to raise aspirations and attainment levels. Additional funding for the new Aimhigher programme will be confirmed with the Council in due course.
Workforce Development
12. From Autumn 2004, the Council should provide the Department with an annual report on workforce trends, covering sector staffing capacity, institutional HR capability and progress on embedding HR strategies, and progress on pay modernisation. The report should draw on HEFCE's existing institutional monitoring arrangements and should impose no extra reporting requirements on institutions. On staffing capacity, I ask in particular that the Council closely monitor the risk of staffing shortages within specific discipline areas, and the actions being taken within the sector to address these; and to determine whether further action is necessary.
Other areas
13. Office for Fair Access. I am grateful for the Council's assistance in developing policy on the Office for Fair Access (OFFA) which, subject to the Higher Education Bill, will be a separate non-Departmental public body. The Department will write separately to the Council about the funding for OFFA.
14. Student Retention. While I acknowledge that the national average student retention rates are amongst the best in the OECD, some institutions continue to record unacceptably high rates of non-completion. I want the Council to keep under review methods of funding institutions to help support those students most at risk, while ensuring that funding methodologies do not reward institutions that perform poorly in supporting and retaining students.
15. Flexible pathways. I ask that the Council make progress to develop a strategy for incentivising flexible pathways for students for implementation from 2004-05 onwards. This strategy should encompass 2+ models, pilots of compressed 2 year honours degrees, and credit based systems. The work on credit systems should take account of developments in the learning and skills sector, and the wider usage of European credit systems under the terms of the Bologna agreement. I also look forward to the report from the sector group which is exploring credit issues alongside those relating to recording achievement, value-added measures and degree classifications.
16. Sustainable Development. The Sustainable Development Action Plan for Education and Skills, published in September 2003 included action to be taken forward by the Council. I would be grateful if you could keep officials in touch with progress on those action points, in particular on the production of the sustainable development strategy for higher education.
17. Student numbers. The student numbers in the Annex to this letter take account of the expansion of the EU due to take place in 2004, and the Additional Student Numbers (ASN) exercise that HEFCE are currently running for foundation degrees - see paragraph 10 above.
18. The Government has noted a trend in the last couple of years for institutions to recruit above the planned numbers. Those planned numbers are consistent with the Government's target of increasing participation between now and the end of the decade; and supported by the planned grant to the Funding Council as well as planned expenditure on student support. We would be concerned if faster growth than implied by the planned numbers led to overspending of the student support budget. We therefore look to HEFCE carefully to monitor student recruitment and growth for next year and to report to the Secretary of State in good time if there are signs that student numbers will exceed current plans.
Tuition fees
19. As last year, and in advance of institutions being free to set their own tuition fees (subject to Parliamentary approval), I do not expect institutions to charge additional tuition fees above the regulated level. Under the Teaching and Higher Education Act 1998, the Secretary of State has the power to impose a condition on the Council's grant, requiring it in turn to place a condition on the funding it allocates to institutions that they should not charge additional fees. That condition will be imposed on the Council's grant for 2004-05.
Running costs
20. The HEFCE administration costs are included in the recurrent provision shown in the Annex to this letter. Provision for running costs is £16.785 million in 2003-04. David Normington wrote to Howard Newby on 29 October to ask you to work with us to identify ways that we could release resources to the front line through increased efficiency and more effective ways of working. I have asked Rachel Green here to work closely with the Council and report back to me by the end of January on your firm proposals for savings for 2004-05 and beyond. The Department will also write separately about the end-year flexibility arrangements that will apply this year.
Charles Clarke
ANNEX
| Financial Year | 2003-04 | 2004-05 |
| SR2002 outcome grants to HEFCE and TTA [note 1] | 5,176 | 5,422 |
| Public contributions to fees [note 2] | 411 | 415 |
| Student contributions to fees [note 3] | 415 | 445 |
| OST funding for HEIF | 40 | 61 |
| Total | 6,042 | 6,344 |
| Capital grants for: | ||
| IT and other capital | 206 | 376 |
| Research | 158 | 208 |
| Cost of capital and depreciation | -7 | -7 |
| Access and Hardship funding [note 4] | 97 | 75 |
| Total | 6,496 | 6,996 |
| Student numbers (FTEs in thousands) [note 5] | 1,115 | 1,137 |
The estimates of tuition fee contributions have been revised since the last grant letter to take account of more robust assumptions. The income for institutions will, however, remain unchanged as a result of this amendment. A comparison of the previous estimates with the new ones is shown below.
FEE INCOME FOR ENGLISH INSTITUTIONS
| 1998-99 | 1999-00 | 2000-01 | 2001-02 | 2002-03 | 2003-04 | 2004-05 |
| Estimated Outturn /£m | Forecasts for this Grant Letter /£m | |||||
| 723 | 731 | 748 | 762 | 796 | 826 | 860 |
FORECASTS AT TIME OF 2002 GRANT LETTER
| 1998-99 | 1999-00 | 2000-01 | 2001-02 | 2002-03 | 2003-04 | 2004-05 |
| - | - | - | 810 | 853 | 887 | 924 |
Notes
1 Includes funding for Dance and Drama and Aimhigher and excellence challenge initiatives previously shown in 'access and hardship' line
2 The forecast income from public contributions to fees includes that for undergraduates and postgraduates.
3 The forecast income that universities and colleges will receive from student contributions to tuition fees, after means testing. The figures are net of an estimated 5% cost for collection and any default.
4 Takes account of transfer of funding for Aimhigher and other Excellence Challenge initiatives into the main grant line.
5 These figures take into account additional foundation degree places to be allocated through the Additional Student Number exercise initiated in September 2003.
A copy of the signed grant letter is available to download in PDF format [ 371K ].