Review of the year and the challenges for higher education

Sir Alan Langlands, Chief Executive, HEFCE

Higher education faces new financial challenges as public finances tighten, HEFCE Chief Executive, Sir Alan Langlands told delegates. But, even with tighter funding, there are real opportunities for the sector in responding to the 'Higher Ambitions' and skills frameworks, and the student finance review.

The sector has much to celebrate with 18 of the world's top 100 universities and an economic contribution valued at £59 billion a year. Its response to the recession with support from the Economic Challenge Investment Fund has helped 50,000 people and 11,700 businesses.

But ten years of funding growth since 1999 are coming to an end. For 2010-11, research and STEM funding are set to rise, but the teaching budget remains almost static, and capital spending is uncertain after funds were brought forward for the stimulus.

Sir Alan said research should focus both on curiosity-driven inquiry and 'national priorities' including big issues in climate change, food security and global health. 'If universities in this country can't take a lead on these things, I'm not sure who else is going to do so.' In the new Research Excellence Framework consultation it was proposed that funding would be based 60 per cent on outputs, 25 per cent on economic, social and cultural impacts, and 15 per cent on the sustainability of the research environment.

But universities are about more than science. They are vital educators of the professions. Half a million undergraduates – nearly a quarter of the total – are studying for professions like teaching, nursing and architecture. Universities are also a vital part of our national cultural life.

Funding over the last decade may be seen by history as a 'golden age' as the sector now faces a combination of international competition – Germany has just announced an 18 billion Euro investment in its research infrastructure and research has been a big beneficiary of President Obama's stimulus in the US – and reduced government spending in response to the budget deficit.

While the student finance review could offer a 'rebalancing' that shifted taxpayer, student, graduate, and employer contributions, the next spending review period from 2011 could be a difficult transition until the finance review is implemented. The short-term case will need to be made for maintaining investment, and the longer-term arguments for prioritising higher education and research as the basis for economic and social progress also have to be made. HEFCE's own teaching allocations would be reviewed not only to reduce targeted allocations – including separate funding for historic buildings and foundation degrees – but also to develop greater links to public priorities, student demand and quality of provision. As higher education faces these challenges, HEFCE will continue to try to build on the successful use of funds for research and innovation, and widening participation.