6 April 2010
Secretary of State for Business, Innovation & Skills Mr Tim Melville-Ross CBE
Chairman
Higher Education Funding Council for England
Northavon House
Coldharbour Lane
Bristol
BS16 1QD
6 April 2010
Dear Mr Melville-Ross,
Budget 2010
The Budget set out action that the Government is taking to invest in strong, sustainable growth and build a stronger Britain. I am writing about its implications for higher education, and for HEFCE, which build on recent directions of travel.
Higher Ambitions set out our long-term strategic directions for higher education. New Industry, New Jobs made the case for investing in universities and colleges, to improve the flow of higher level skills that is essential if we are to meet the economy’s needs. The first national Skills Audit, prepared by the UK Commission for Employment and Skills has confirmed the increasing need for higher level skills in many parts of the economy. And in recent months we have also seen a rising trend in applications to enter higher education this Autumn. At the same time, as we made clear in the Pre-Budget Report in December 2009, universities and colleges have to play their proper part in making the efficiencies and savings that are necessary to achieve our wider economic and fiscal goals.
We are therefore creating a new £270 million Modernisation Fund that responds to these twin imperatives – enabling more young people to enter higher education to gain skills that the economy needs, while also supporting universities to take the robust action needed to increase efficiency and reduce cost over the medium term.
We are making available, via HEFCE, £250m additional funding for Higher Education institutions in England, to be spent in 2010-11. That funding will be allocated to universities and colleges in response to bids for additional student places for entry this autumn. Our planning assumption is that this funding will support 20,000 additional places in total, as a one-off entry in 2010-11. Of these some 10,000 will be full time, three-year undergraduate places; 5,000 will be part-time undergraduate places; and 5,000 will be full-time foundation degree places. I would like HEFCE to give preference to bids from universities and colleges that propose to offer additional places in areas of economic priority – for example, Science Technology, Engineering and Maths (STEM), the priorities identifies in New Industry, New Jobs, and the higher skill priorities identified in the Skills Audit. HEFCE should also assess the quality of institutions’ plans to use the funding to invest in driving modernisation and efficiency. I would like FE colleges providing higher education to have the chance to bid for these places and funding, as is normal with HEFCE allocations of additional student numbers.
Successful university and college bidders will be able to use some of the funds allocated in 2010-11 to meet the first year costs of the additional student places. In order to secure the goal of driving efficiency, they will be required to provide clear plans for how they will invest the remainder of the funds in 2010-11 in projects that will reduce their future cost base – for example, through restructuring, or investment in new IT systems or facilities that will produce running cost efficiencies. Priority should be given to supporting innovative proposals for significant savings that have the potential for widespread adoption across the sector. Institutions will use the savings thereby produced to fund the costs of providing the additional student places in subsequent years. Successful bidders should also work with HEFCE to capture, report and disseminate across the whole HE sector the learning from their projects, demonstrating how efficiencies in teaching and other operating costs can be achieved in different ways without reducing the quality of the student experience. This work will need to help all universities and colleges make sector-wide efficiency savings.
The Government will provide additional funding to meet in full the student support costs associated with the additional places.
The wider financial context requires a much stronger drive for efficiency across higher and further education. To provide further support for universities and colleges to increase their efficiency and reduce their ongoing costs, we are also allocating £20 million for HEFCE, and £15 million to the Skills Funding Agency, to lead programmes across the higher and further education sectors. We expect that the focus will be on more vigorous use of consortia for shared services across the range of academic support functions, including core IT systems, support services and procurement, drawing on the wide range of available benchmarking data to inform proposals for costs savings. I would like you to work with the Skills Funding Agency to identify synergies between the sectors, and encourage bids from joint consortia where appropriate. Results from this work need to shared across the sectors.
As part of this work, I would like you to consider how best to bring together into one place the rich amount of existing benchmarking data, and produce relevant analyses, so that it is readily accessible and comprehensible to institutions. The results should be communicated actively, so that all universities and colleges can use them, with clear funding incentives to improve their efficiency. All data that would be useful to institutions should be co-ordinated together, clearly signposted, and easily accessible through the web by June 2010.
For budget management purposes, I would be grateful if you could inform the department by September 2010 of the planned split of the funding provided between capital and resource.
Peter Mandelson