Sanctuary BuildingsGreat Smith Street
Westminster
London SW1P 3BT
tel: 0870 0012345
dfes.ministers@dfes.gsi.gov.uk
Rt Hon Alan Johnson MP
Chairman
Higher Education Funding Council for England
Northavon House
Coldharbour Lane
Bristol
BS16 1QD
11 January 2007
Higher Education Funding 2007-08
Introduction
1. I am writing to you to set out the details of the funding which we will be making available for HEFCE for 2007-08.
2. This year has seen a major change in the way higher education is funded, bringing significant new resources into the sector. I would like to start by congratulating the Council and the sector on the way these changes are being handled. It is clear that underlying student demand for higher education remains strong, which has much to do with the continuing success and competitiveness of the system against a background of continuing reform and challenges at home and worldwide. While there is still important work to do to bed in the new arrangements fully, it is now time to look to the future.
Strategic Priorities
3. Last year, Ruth Kelly identified two major strategic priorities for the Council. The first was to lead radical changes in the provision of higher education in this country by incentivising provision co-funded by employers; the second was to support widening participation in higher education for people from non-traditional backgrounds. These remain my priorities, but there have been some important developments on them this year.
4. On Employer Engagement, Sandy Leitch's recent report has set out the importance of developing a high-skills workforce, with an ambition that by 2020 over 40 per cent of the population aged 19 to State Pension age should be qualified to Level 4 or above. That is a rise from around 29% at present. As Leitch says, sustaining current trends in HE, with increasing numbers of young people entering higher education, will take us some of the way there, but not far enough. We need to develop radical approaches that can lead to much higher levels of access to higher education by older people already in the workplace. This means models of HE that make available relevant, flexible and responsive provision that meets the high skill needs of employers and their staff. It will be important that the Higher Level pathfinders through Train to Gain operating in three regions are successful and lessons can be learned in good time so as to inform the expansion of Train to Gain. I will look to you and the Learning and Skills Council to work closely together to provide assurance that the ambition set out by Sandy Leitch for the expansion of Train to Gain and Higher Education can be delivered by building upon the skills brokerage model already successfully implemented for the lower level skills.
5. The Council, and higher education providers, are already well engaged in such work, exploring different approaches.
- Foundation degrees are a core part of our strategy, and I hope you will continue to take action to increase the number of Foundation Degree enrolments to 100,000 by 2010, building on the current total of 61,000.
- You are working with some institutions which are interested in delivering honours degrees over two years, using distance and blended learning. You are also working on other flexible approaches to delivery. I hope you will continue and broaden that work beyond the original pilots, looking to generate around 1,000 students in flexibly delivered programmes (including two year Fast Track honours degrees) from the academic year 2008/09.
- You have supported closer engagement between the HE sector and employers through the Higher Education Innovation Fund and, more recently, using the Strategic Development Fund to enable institutions to pilot new forms of engagement.
6. In addition, I would like you, in consultation with the Department and higher education providers, to develop a new model for funding higher education that is co-financed with employers, achieves sustained growth in employer based student places, and introduces the principle of employer demand-led funding. Building on the start that has been made this year, I expect you to aim to be delivering at least 5,000 additional student places in such provision in the 2008-09 financial year, There should be a growth strategy in place which aims to deliver year on year growth of at least 5,000 entrants in the following two CSR 07 years; we shall need to consider in the light of experience what growth trajectory to adopt subsequently. It is possible that growth will initially be concentrated in a relatively small number of institutions which show themselves to be willing to embrace this agenda. This would be consistent with the diversity of mission for institutions that the Government has emphasised consistently since the 2003 higher education White Paper. You may also want to invest in building capacity to respond to the challenges identified by the Leitch report.
7. On Widening Participation, I welcome the Council's Review which was discussed at the symposium Bill Rammell held in November. I am grateful to the Council for taking the lead on work to improve the targeting of Aimhigher and other outreach activities. I hope you will complete dissemination of guidance during May and June. We must improve our understanding of the impact of Aimhigher and other outreach activity, and I look to the Council to help Aimhigher partnerships, higher education providers and others to do more to monitor effectiveness and gather robust evidence about the impact of their interventions. And I hope you will consider whether you can further support the sector in its plans to establish a national credit framework by 2008/09, as set out in the recent Burgess report.
8. Also relevant to widening participation are the policies set out in the FE White Paper. I would like you to work even more closely with the Learning and Skills Council in enabling students to progress seamlessly between further and higher education. I would like you to consider, with the LSC, whether there are any areas where lack of provision may be depressing demand for higher level learning. You may, for example, wish to consider using funding, including capital, to fill such gaps in provision and reward excellence. I made a similar request in my grant letter to the LSC and I would like both Councils to submit joint progress reports to my officials by December 2007.
Funding totals
9. The table attached at the end of this letter sets out the details of the funding available to HEFCE for this year. Total recurrent grant for teaching will rise by some £200 million. In allocating this funding to institutions, the Council will be able to maintain in real terms the overall level of grant per planned student that my predecessor announced in 2004 and finance the expansion of employer co-funded students. Recurrent funding for research will increase by £90 million and capital funding will increase by £27 million. These two funds may be used in appropriate cases to support institutions in receipt of grant for initial teacher training from the Training and Development Agency.
10. As usual, I expect the Council carefully to monitor progress towards strategic objectives and in particular the priorities I have identified in this letter, national trends in student growth and capital expenditure for next year. I would also like you to report to me in good time if there are signs that the trends and expected progress in these areas are out of step with our published plans.
Other areas of work
11. As well as the work I would like you to do on my top strategic priorities outlined above, there are some other areas that I should mention.
12. First, I would like the Council to consider how it can help the HE sector to prepare for our reforms to the system of 14-19 education. Most of the reforms will be of direct interest to Higher Education Institutions. Potentially, large numbers of students could be applying to higher education with the new Diploma qualification and it is important that higher education is engaged in its development and that institutions are aware of the impact Diplomas will have on their own curricula.
13. Second, I wrote to you on 6 December about the work that I would like HEFCE to take forward to develop new and more efficient arrangements for the assessment and funding of research. I would be grateful to receive a full report from you on the progress of this work no later than 1 October 2007.
14. Third, I would like the Council to continue the good work it is doing with representative bodies such as Universities UK to support the second phase of the Prime Minister's Initiative for international education. As I believe that Higher Education should involve two-way traffic, I expect the Council to continue to meet the tuition fees of students at institutions who study abroad for part of their courses under the Erasmus scheme.
15. Fourth, I would like the Council to help us prepare for the Olympics in 2012 by undertaking an assessment of the capacity of the Higher Education sector to make a contribution, working in partnership with all the relevant regional and national bodies. I would like to receive a report on this by November 2007.
Efficiency gains
16. I am grateful for your close co-operation with the Department in reaching agreement on the efficiency savings to be made by 2008, as part of our overall commitment to reduce administrative costs in Non-Departmental Public Bodies (NDPBs) by at least 10% by 2007-08. I expect the Council's administrative costs to reduce to £16.74 million in 2007-08. After that, administration budgets will be further reduced over the 2007 CSR planning period. Officials have already written to your Chief Executive to signal that we will use the Treasury benchmark of a 5% real terms annual reduction as the starting point for discussion.
17. I also expect HEFCE to continue to work closely with my Department and individual institutions to deliver efficiency savings across the sector, thereby releasing resources for the delivery of front-line services. This effort is likely to be even more important during the period covered by the 2007 Comprehensive Spending Review. In particular, I would like you to continue to quantify the cost savings expected as a result of the ''single conversation'' approach to accountability and to continue your work with the NAO and other funders and regulators toward effective, but lighter-touch accountability. I was pleased that HEFCE has become a signatory to HERRG's Concordat and I expect you to work with us and other signatories to deliver the Concordat's principles and ensure that HE providers benefit from reduced bureaucracy.
Condition of grant - tuition fees
18. As before, when I make the grant to the Council in April I will, as required by Parliament, impose a condition relating to regulated tuition fees under the Higher Education Act 2004. The effect of this condition will be that the Council will in turn be required to impose a condition of funding that institutions do not set regulated fees which exceed the higher amount (if they have an access agreement in place) or the basic amount (if they do not). It will also be a condition of grant that the Council must impose a condition that institutions comply with the provisions of any access agreement in force and impose specified financial penalties if an institution has breached the terms of its access agreement or the relevant fee cap. Pursuant to these conditions, I will write to you again when grant is actually made available.
19. I would like to end where I began and acknowledge the hard work of the Council and the whole of the Higher Education sector in managing the radical changes we are introducing to ensure that our Higher Education system continues to be recognised as world class.
Alan Johnson
HEFCE Grant settlement
| Financial Year: all figures (except the unit of teaching funding which is £ real terms) are £ million in cash terms | 2006‑07 | 2007‑08 | Year‑on‑year % change |
|---|---|---|---|
| a. Recurrent grant for teaching | 4567 | 4766 | 4.4 |
| b. Recurrent resources for Research | 1299 | 1389 | 6.9 |
| c. Total Capital grants: | 704 | 735 | 4.4 |
| o/w teacher and other capital | 468 | 472 | |
| o/w Research | 236 | 266 | |
| d. Cost of capital and depreciation | -7 | -7 | |
| Total HEFCE (a+b+c+d) | 6564 | 6884 | 4.9 |
| Student numbers (FTEs in thousands) | 1125 | 1150 | |
| Planned unit of funding for teaching for 2004 Spending Review period7 | 3900 | 3900 |
Notes:
1. The amounts set out above are the Council's resource budgets. They represent the maximum amount of resource that the Council may consume in pursuance of the priorities agreed with the Department for the Spending Review period. The 2007-08 budget includes £ 9.5 million Departmental end-year flexibility planned to be carried forward from 2005-06 and 2006-07. Figures are net of a £69/70 million transfer of AHRB resources. Figures may not sum due to rounding.
2. The resources for each year include funding of £18m from the Department of Health for clinical academicians' pay and £5m funding transferred to HEFCE for the Dance and Drama scheme.
3. The resources exclude funding from DTI and OST for the Science Research Innovation Fund and HE Innovations Fund.
5. Capital costs and depreciation are part of the Council's resource budgets and the maximum amount of resources it may consume. The amounts shown are subject to review and will be discussed further with the Council.
6. Student numbers are net of students to be funded through the TDA but include Welsh students studying at the Open University.
7. Figures are rounded to the nearest £10 and in 2005-06 prices. The planned real terms level of funding for teaching costs is derived from calculations made in 2004 prior to the introduction of the new student support arrangements and based on total level of recurrent resources to support teaching and full-time equivalent numbers of planned publicly funded students over the period covered by the 2004 Spending Review. The value of the real terms figures reflect the GDP deflators published by HM Treasury on 6 December 2006.
8. Funding includes £5m for institutions costs in collecting tuition fees - a reduction from the current £20m costs, as institutions will need to collect fees from fewer individual students, with the introduction of tuition fee loans
9. Funding includes £0.5 million to support the Office of Fair Access.
Download
A copy of the grant letter is available to download in Adobe PDF format [77K].