Secretary of State for Innovation,
Universities and SkillsMr Tim Melville-Ross Esq
Chairman
Higher Education Funding Council for England
Northavon House
Coldharbour Lane
Bristol
BS16 1QD
18 January 2008
Dear Tim,
Higher Education Funding 2008-09
1. I am writing to you with details of our allocations to the Funding Council for 2008-09, and also with the allocations that we propose to make for 2009-10 and 2010-11. In doing so I am pleased to be able to set out my priorities for the Council over this three-year period, and my expectations for what you will deliver for the unprecedented level of public resources that we are now investing. The success of the Council in meeting these expectations will be a prime determinant of this country's economic success over the next decade and beyond. I have been impressed with higher education's achievements over the last ten years, and the way the Council has supported the sector, and we have strong foundations to build upon for the future. Since this is the first grant letter I have sent to HEFCE, from the Department for Innovation, Universities and Skills, and the first to you as Chair, I welcome this opportunity for us to develop the agenda together.
2. As you know, the Government has chosen to make investment in higher education a high priority, with public spending on institutions and support for students set to grow by an average of 2.5% each year over the three-year period covered by the recent Comprehensive Spending Review. This compares with an increase in overall planned public spending of 2.1% per year to 2010-11, and comes at a time when non-Government resources for higher education are also increasing sharply. Variable tuition fees will bring in an additional £1.3 billion a year by 2008. This growing public and private investment is one indication of the importance of higher education in the twenty-first century, as it makes increasingly telling contributions to all areas of the economy and society.
3. The creation this year of the Department for Innovation, Universities and Skills (DIUS) brings together for the first time in Government three strands of policy that will determine Britain's future economic and social wellbeing. We can only succeed in a rapidly changing world if we develop the skills of everyone to the fullest possible extent, carry out world-class research and scholarship, and apply both knowledge and skills to create an innovative and competitive economy. These three strands of work are crucial for the future of this country; and higher education is crucial to all three strands. So the creation of DIUS has created a tremendous opportunity for Government to develop policies that further unlock the potential of universities and colleges across the whole range of their activity.
4. The funding and priorities set out in this grant letter reflect the breadth of this agenda. I look to the Council to work as an effective part of the wider DIUS family, working with other funding bodies, in particular the Learning and Skills Council and the Research Councils, so that there is a real coherence between innovation and research and strategies to increase skill levels across the economy. You will also want to stay in close touch with the work of the new National Student Forum; I believe that we should all be listening carefully to the views of students about the quality of their courses, and other aspects of the student experience. And I hope you will continue particularly to encourage and reward innovation across higher education: this may be particularly applicable to building new partnerships with employers, widening participation, and making HE more accessible to students.
Priorities
5. A first priority for the Funding Council will be to deliver the increase in the number of higher education students that the CSR outcome has made possible. We have set a long-term target that by 2020 at least 40% of the working age population should have a higher level qualification (level four or above). Growth of this order is comparable with the ambitions and likely performance of our international competitors, and is necessary to build the skilled, adaptable workforce we will need for the future. Equally, I am determined that we should not repeat the mistakes of the early 1990s, when student numbers were allowed to grow unsustainably, and without proper financial support for providers. Our original promise when the new fees regime was introduced was to maintain the unit of planned public funding in real terms to 2007-08. I am pleased to confirm that I am now extending that commitment to 2010-11.
6. The increases in the recurrent grant for teaching over the CSR period are in themselves enough to pay for at least 10,000 additional students in 2008-09, and 40,000 by the end of the CSR period. This would have been a significant expansion, but not one that would have been an adequate response to global challenges. That is why I directed you in September to plan to redeploy, by 2010-11, about £l00m of teaching grant that would have gone to support the costs of teaching students who already hold a qualification at or above their proposed level of study. It is a condition of grant that the Council implements the government's policy on such students who are taking "equivalent or lower qualifications". The policy will allow over 20,000 additional students without an existing qualification to enter HE for the first time or progress to a higher level qualification by 2010-11, taking the total number of additional places to some 60,000. In allocating these numbers between institutions I expect you to have regard to the priorities in this grant letter, focusing in particular on the need to increase participation in HE by underrepresented groups from all parts of the working population, to support flexible and innovative delivery models, and to offer better local access to higher education in places where there is a shortage of supply. Consistent with the approach you have proposed for implementation of ELQ, I hope you will also carefully consider the position of institutions most affected by this change to the funding rules, in allocating the new funded places that are being created.
7. A second priority is to continue to accelerate progress towards a new relationship between employers and higher education. In last year's grant letter Alan Johnson asked you to plan to deliver, by 2008-09, 5,000 new places that were part-funded by employers as well as by teaching grant from the Council. I am pleased that the work you have done with individual providers over the past year has put us in a position to approach this target with confidence. As a result Bill Rammell announced on 4 December our commitment to allocate £15m in 2008-09, rising to £40m in 2009-10 and at least £50m in 2010-11; this should fund 5,000 additional entrants in 2008-09; at least 10,000 in 2009-10; and at least 20,000 in 2010-11.
8. This is an ambitious and ground-breaking plan, but even at the end of this CSR period we shall still have a long way to go. We will look for more substantial growth in this kind of provision from 2011, with increasing volumes of employer co-funding being brought to bear to support skills development. This in part will mean a new approach to funding, on which I know you are working. But the need for innovation and cultural change goes well beyond that. Providers will need a growing appreciation of the requirements of employers, and the general employability skills that are increasingly wanted in the workplace; to provide and adapt courses swiftly in response to demand; to offer provision tailored to individual businesses; and make it accessible in ways that suit employers and students.
9. This three year period is thus one of growth but also one of controlled experimentation. Government, the Funding Council, HE providers, employers, and organisations such as Sector Skills Councils all need to work closely together to understand what works well and what the barriers to success are. I would like the Council to continue to work with individual institutions of all types to help them to gear up for this new approach, to play a role in disseminating good practice, and to work with my Department and others in unlocking latent demand from employers for higher level skills. As part of this, I would like you to continue to grow Foundation degrees, with a target of 100,000 enrolments by 2010. I would also expect you to continue to make progress on Flexible Learning Pathways, including the growth of two-year compressed honours degrees, with a target of at least 1,000 students being on a flexible programme during 2008-09.
10. I shall be taking a close interest in the implementation of all aspects of your employer engagement strategy, and officials will discuss reporting arrangements with you.
11. My third priority for the Funding Council is the need to widen participation, identifying and nurturing talent so that higher education is truly available to all who have the potential to benefit from it. This is not the case at the moment. This is not just a matter of equity, and of institutional self-interest, but of the damaging price we pay as a society when talent is wasted. It is a complex problem, on which I acknowledge some progress has been made in recent years, and certainly many of the solutions do not lie within the HE sector. But unlocking the potential of all citizens is a key concern for my new Department, and I believe it should also be a fundamental part of the mission of all universities. We have set a target to increase participation in higher education towards 50 per cent of those aged 18 to 30.
12. I particularly want to build on the successes of the many links between universities, schools and colleges, which have been inspired by Aimhigher and institutions' own outreach activities. Both I and Ed Balls at DCSF are convinced that there is much more that universities can do to help shape the vision, strategies and ethos underpinning educational excellence in our schools and colleges. In turn that will mean that higher education has a direct hand in securing a larger and better prepared pool of talent able to compete for their places. We want to see many more deep and permanent partnerships forging strong structural links between schools and universities. I want the Funding Council to play a full part in encouraging and supporting institutions to develop in this way, taking a lead from the Academies, Trust Schools and Higher Education Prospectus published by DIUS and DCSF last year. Your plans will also need to take account of recommendations in the spring from the National Council for Educational Excellence about strengthening HE-school links. I have already announced that the Aimhigher programme will continue, and the annual funding of £47.9 million that we are making available reflects our confidence in the changes you have made to this programme to target it more effectively.
13. Part of widening participation is making sure that a good range of higher education is locally available across the country. The Council has an excellent record in recent years in encouraging developments that create, or expand, provision in local centres of higher education, often linked to Further Education Colleges. It has also supported distance learning where this is the most effective solution. I hope you will continue this work, seeking to ensure that demand for higher education, from employers and potential students of all ages, all over the country, can be met Meeting demand from people in the workplace, who missed out on when they were younger, is of course an essential part of widening participation, and will be supported by the focus we are giving to employer co-financed provision.
14. I look to you to work closely with the Learning and Skills Council (LSC) on further development of seamless progression routes to higher level skills, building among other things on the promise of Lifelong Learning Networks. I warmly welcome initiatives that, without compromising standards or the value of HE programmes, make them more accessible to those who could benefit. The decision taken by the Council in 2007 to allow HE providers to receive grant in respect of students who had not met initial learning objectives, but who had achieved an alternative outcome measurable in credits, was a welcome step in the direction of greater flexibility. I would strongly welcome a greater prominence for credits in higher education, in line with the recommendations of the Burgess group, so that it becomes easier for learners to register for meaningful programmes without committing to a full degree and to put together flexible learning packages, perhaps across a range of institutions.
15. I turn fourthly to research and innovation. The creation of DIUS, along with our commitment to maintaining the overall shape of the dual support arrangements for university research, offers us the opportunity to continue to support excellent research and ensure that we maximize the application of research results while encouraging innovation. The scale of the Government's investment is clear. I have already announced funding for the Council rising to £150 million by 2010 for the next round of the Higher Education Innovation Fund (HEIF), and recurrent funding for research rising to over £1.6 billion over the same period. We will be looking for the best possible evidence about the relationship between our investment in HEIF and the outcomes it achieves. In addition, I have also announced that UK-wide funding for the research councils will increase from £2.7 billion to £3.2 billion over the CSR period. Taken in the round, these figures show our clear commitment as an investor in science and research, with my Department's overall funding for research set to grow in real terms by 2.5% over the CSR period. This funding should continue to help universities leverage well over £1 billion from other sources Our funding will create capacity and reward excellence in different forms in different parts of the HE sector, from blue skies research and international collaboration to locally based knowledge transfer activity.
16. A theme in all of these areas of your work should be the importance of science, technology, engineering and mathematics subjects (STEM subjects) and the recommendations of Lord Sainsbury all of which the Government has accepted. There has been good growth in applications from prospective undergraduates in these disciplines recently, and our research performance remains strong. I welcome the financial commitment you have already made, both to the series of pilot projects designed to raise demand for STEM amongst potential students and to the sustaining of capacity in institutions in very high cost STEM subjects. In future, I hope the Council will develop an integrated programme to raise demand for STEM and, where there is evidence of demand, ensure that within available resources there are sufficient student numbers to meet it, encouraging employers to co-fund provision wherever possible. I also encourage the Council to continue to play a full role in the work of the joint DCSF/DIUS STEM high level strategy group.
17. We have already announced your capital budgets for the next three years as part of the research allocations. As you know, we will also be asking the Council to administer, for England, the science budget contribution to the Research Capital Investment fund. I am pleased that the Council will be acting as this single point of distribution of capital for institutions, which should reduce administrative burdens and encourage a more strategic approach to capital investment. The science budget capital money has the objective of financial sustainability in the Research Base, and in allocating this money I expect you to take account of the level of funding that institutions receive from the Research Councils and the National Academies.
18. When I announced your capital budgets, I noted that among other things this would allow you to commit resources to your proposed Green Development Fund. I warmly welcome this initiative, and your plans to work in partnership with Salix to deliver it. I know that institutions will help develop responses to the problems we face, and I am pleased the Council is providing leadership in this area. More generally, while higher education institutions have made some progress in reducing their carbon emissions, more needs to be done if the 2050 commitment to reduce emissions by 60% is to be achieved. I expect HEFCE to work with the sector to ensure these targets are met. Over the spending review, all institutions in receipt of capital funding should have plans to reduce carbon emissions, and performance against these plans should be a factor in future capital allocations. I would be grateful for a report on your plans for taking this forward by September 2008.
19. The Council already has a key performance target to develop measures of performance about the different ways in which quality can be measured in the system, with particular reference to institutions' work with business and the community. As the priorities set out above show, we need the higher education sector to perform strongly across a range of areas - pure research, allowing businesses to innovate, high quality teaching, upskilling of workforces, and widening participation. Finding measures that illustrate performance in each of these areas, allowing for different missions of individual institutions, is an important objective. I would like the Council to work with my Department to develop thinking on this over the next year.
20. In July 2006 the Council published its report The HE workforce in England: a framework for the future. This report looked at labour market trends with the sector, and serve as a resource for institutions considering their long term approaches to recruitment and retention. I support the Council's intention to work with higher education providers and others towards a revised publication in 2009. I would welcome the next version of your analysis looking at the labour market implications of the strong growth that we expect in part-time study for students already in the workplace, designed as well as funded by employers and delivered flexibly and rapidly. It will also be important to focus on how pathways to senior positions in universities can be opened up for staff from underrepresented groups.
21. Last year Alan Johnson wrote to you asking that the Council should make payments to those institutions that chose to participate in the match-funding scheme to encourage voluntary giving. I am grateful to the Council for working with us and other stakeholders to prepare for this scheme. The start date for donations to be eligible for match funding will be August 2008. I shall be making an announcement about the final rules for the scheme soon, having considered the responses to our consultation last year. I will also confirm the timescale over which the funding will be provided, with that funding being additional to that announced in this letter.
22. As part of the DIUS CSR outcome, Higher Education needs to provide close to £500m in efficiency savings in 2010-11 (less in 2008-09 and 2009-10). The Council, alongside others, will need to play its part in securing these. I am therefore asking you to secure efficiency savings in a number of different areas including shared services, procurement, and from rationalising some special funding streams. As far as the last two are concerned, while savings should start to be made in 2008-09 the pace of change should enable those affected by changes to have time to adjust. I will also be requiring the Council to make year on year efficiency savings on its administrative budgets and will write in due course with further details.
23. 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 the same as in the previous two years and I will write to you again when grant is actually made available.
24. In wishing you every success in your first year as chairman of HEFCE, it is right that I should end by paying tribute to the service of your predecessor, David Young, who did great credit to his office. I am confident that, under your leadership, HEFCE will continue its vital and successful work.
John Denham
HEFCE Grant settlement
| Financial Year: all figures (except the unit of teaching funding which is £ real terms) are £million in cash terms | 2008‑09 | 2009‑10 | 2010‑11 |
|---|---|---|---|
| a. Recurrent grant for teaching | 4920 | 5095 | 5325 |
| b. Recurrent resources for Research | 1444 | 1509 | 1634 |
| c. Total Capital grants: | 738 | 738 | 738 |
| o/w teaching and other capital | 472 | 472 | 446 |
| o/w Science and Research | 266 | 266 | 292 |
| d. Non-cash budgets | −29 | −29 | −29 |
| Total HEFCE (a+b+c+d) | 7073 | 7313 | 7668 |
| Growth in core fundable students (FTEs in thousands) 5 | 20 | 35 | 60 |
| Employer co-funded provision (FTE) numbers | 3 | 7 | 15 |
| Planned minimum unit of funding for teaching for 2007 Spending Review period 6 | 4140 | 4140 | 4140 |
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. Figures may not sum due to rounding.
2. Funding must not be moved between the recurrent, capital and non-cash resource lines. The non-cash budgets are cost of capital and depreciation −£7m, release of provision of −£28m per annum and provision take up of £6m per annum.
3. All figures (cash totals and student numbers) for 2009-10 and 2010-11 are indicative. The final figures for those years will be set out in the 2009 and 2010 grant letters.
4. The resources for teaching exclude the Science contribution and the Research Capital Investment Fund. It includes funding for employer co-funding investment and participation, the HEFCE administration and £3.5m in each year for the Erasmus fee waiver.
5. Core fundable students refer to those students who do not have an existing HE qualification at an equivalent or higher level, or where this is not the case are still eligible for teaching grant because of the nature of their course. Some of this growth (around 20,000 additional places) comes from redistributing funding away from students who are studying for equivalent or lower level qualifications. We estimate that there will be 1.14 million fundable fte students in the 2007-08 baseline, which will be adjusted over time to reflect new data. Figures are rounded to the nearest five thousand students.
6. The unit of funding is rounded to the nearest £10 and in 2007-08 prices. The real terms level of funding for teaching costs is the one determined for three years 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. This value has been rolled forward into the 2007 Spending Review. Figures reflect the GDP deflators published by HM Treasury in December 2007.
7. Funding includes £5m for institutions costs in collecting tuition fees
