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Tim Melville-Ross, Chair of HEFCE, said:

'I welcome this grant letter, which is very positive in tone as it recognises the achievements of higher education and the role of the Council in supporting the sector. As the Secretary of State says, we have strong foundations on which to build.

'This is the first grant letter to be issued to us by DIUS and brings together the new department's broad strategic interests. We look forward to working with universities and colleges, and all our partners, in addressing the challenging agenda outlined in the letter across the full range of activities.

'I very much appreciate the Government's commitment to increase funding over the three-year period until 2010-11. This will provide for growth in student numbers, enabling the Government's priorities to be substantially addressed. The continuing commitment to maintaining the unit of funding throughout this period is particularly important as it will enable the sector to maintain standards and plan with confidence.

'I am pleased that the Government has recognised the progress that has been made in developing a new relationship between employers and higher education in supporting skills development and also in addressing the widening participation agenda. Both these areas will continue to be very high priorities for the Council as we seek to unlock the potential of higher education for students from a wider range of backgrounds, including students in the workplace.

'We also recognise the Government's commitment to research with funding set to grow in real terms by 2.5 per cent over the three-year period. We will continue to sustain and develop a dynamic and internationally competitive sector by supporting high quality research and allowing businesses to flourish by encouraging innovation and maximising the application of research results.'

Read the grant letter