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Dear Vice-Chancellor or Principal

1.   I am writing to set out the decisions HEFCE has made in response to the letter from the Secretary of State of 24 June 2010See note1.

2.   We welcome the Government's recognition of the important role played by higher education in rebuilding the economy and note the Government's desire to continue investing. But we also recognise that universities and colleges cannot be exempt from the wider need to reduce public spending.

3.   On 24 May 2010, the Chancellor announced £6.2 billion of in-year savings in 2010 11 across Government, with a contribution from the Department for Business, Innovation and Skills of £836 million.

4.   Higher education is required to contribute £200 million to this overall saving. This consists of:

  • a £118 million reduction in the University Modernisation Fund (UMF), to £152 million from the £270 million announced in the March 2010 Budget
  • a reduction of £82 million in the baseline announced in the grant letter of 22 December 2009.

5.   This means that there has been a net increase in the total financial settlement for 2010-11 compared to the 22 December 2009 grant letter: an additional £132 million is being provided to fund 10,000 additional new student entrants plus £20 million for funding shared service and procurement activities in 2010-11. There is also a requirement to make further efficiency savings of £82 million in the baseline in fiscal year 2010-11.

£82 million baseline reduction

6.   In delivering the £82 million baseline reduction, our aim is to give institutions as much flexibility as possible in accordance with the principle of the block grant.

7.   We will implement this saving by a split of £52 million in the teaching grant and £30 million in teaching capital. Because the reduction is from April 2010, this will also impact on the recurrent funding for 2009-10 with a further £20.8 million reduction to be applied proportionately across all elements of recurrent teaching grant in this academic year. Annex A shows the reductions to 2009-10 recurrent teaching grant for each institution that we will implement in our July 2010 grant payment. We are not recalculating 2009-10 moderation funding as a result of this late change to teaching grant. The recurrent reduction of £52 million to 2010-11 teaching grant will be confirmed in institutions' funding agreements in July.

8.   We do not feel it is appropriate to revisit the significant savings targets already set in respect of special funding or to reconsider our approach to targeted allocations at this late stage. We will therefore minimise the possibility of disproportionate effects by implementing across-the-board reductions. There is also a limit to the extent to which we can reduce capital funding at this point in the financial cycle, given the existing commitments of universities and colleges; and of course the Government wishes to continue protection for quality-related research funding, the Higher Education Innovation Fund and research capital in 2010-11.

University Modernisation Fund

9.   Of the £152 million in the UMF that remains in place, we will use £132 million to meet the teaching costs of 10,000 new student entrants in 2010-11, securing savings in future years to support this cohort for the duration of their programmes without additional HEFCE funding. Approximately 8,000 of the new entrants will be full-time and 2,000 part-time.

10.   On 6 April, institutions were invited to apply for this funding ('Allocation of funding for additional new entrants and efficiency activities in 2010-11 through the University Modernisation Fund', HEFCE Circular letter 08/2010). We received proposals from a total of 95 institutions, requesting significantly more than 10,000 new entrants in total.

11.   The final allocation was based on those ranking highest by assessment score, up to the Government’s revised limit of 10,000 full-time equivalents (FTEs). These allocations have been approved through a robust process of internal and external assessment, which looked both at subject priorities and at value for money.

12.   We have written to institutions to inform them whether their applications were successful or unsuccessful. Further feedback may be requested from HEFCE institutional teamsSee note2. We are publishing separately a list of successful bids on our web-site.

13.   We will now allocate the remaining £20 million of the UMF in 2010-11 for shared services and procurement efficiencies, as set out in 'Allocation of funding for shared service activities in 2010-11 through the University Modernisation Fund' (HEFCE Circular letter 07/2010). We will write to institutions in the next few days to invite them to propose how they will introduce or further develop the use of e-procurement systems. Shared services activities will be taken forward within existing programmes. As Circular letter 07/2010 stated, we see this scheme as an opportunity to invest in key areas that will deliver significant efficiencies, benefiting institutions and releasing additional resources for teaching and research.

Shifting the balance of provision

14.   The latest UCAS data on applications for 2010-11 suggested an increasing demand for vulnerable science, technology, engineering and mathematics (STEM) subjects among prospective students. However, this demand occurs in the face of a cap on the number of students starting full-time undergraduate study and a small real-terms reduction in the funding provided for each student.

15.   Therefore, the HEFCE Board agreed earlier this year that we should address concerns that institutions would be unable to respond to the upturn in demand by increasing the number of places in these strategically important and vulnerable subjects (SIVS).

16.   We subsequently invited applications from institutions to shift the balance of their teaching provision towards vulnerable STEM and modern foreign language subjects starting in 2010-11 ('Support for moving full-time undergraduate numbers into strategically important and vulnerable subjects (SIVS) in 2010-11', HEFCE Circular letter 06/2010).

17.   This competitive bidding process was open to higher education institutions (HEIs) and HEFCE-funded further education colleges (FECs) with over 100 directly funded FTE students. All applications were reviewed by a central HEFCE team, reviewed by an external panel and approved by the HEFCE Chief Executive.

18.   The total funding requested by eligible bidders was £3.94 million. Of the 33 successful bids, 32 were from HEIs and one from an FEC. As a result, 1,712 FTEs will be moved towards SIVS in 2010-11.

19.   Institutions that have been awarded funding were individually notified last month. We are also publishing separately the list of institutions awarded this funding on the HEFCE web-site.

2010-11 funding agreements

20.   All these changes and the baseline grant reduction will be reflected in the funding agreements due to be published in July.

21.   Following the HEFCE Board meeting on 15 July we will send institutions their funding agreements on 20 July by post and will make the funding agreements and institutional grant tables available to institutions via the HEFCE extranet on the same day. We also plan to make available information on funding and student numbers, with accompanying tables, on the HEFCE web-site on 22 July. This information will be embargoed until 0001 hours on 22 July.

22.   Separate arrangements are also in place to implement 2010-11 grant adjustments to take account of over-recruitment in 2009-10. On 9 June we issued 'Student number control for 2010-11: issues for institutions that over-recruited in 2009-10' (HEFCE Circular letter 11/2010) which explains our approach towards institutions that over-recruited in 2009-10.

Yours sincerely

Sir Alan Langlands
Chief Executive


  1. The letter from the Secretary of State can be read in full.
  2. Contact details for HEFCE institutional teams, searchable by institution, are available.

Date: 24 June 2010

Ref: Circular letter 14/2010

To: Heads of HEFCE-funded further education colleges, Heads of HEFCE-funded higher education institutions, Heads of universities in Northern Ireland

Enquiries should be directed to:

relevant HEFCE institutional team