HEFCE Report 00/12

Recurrent grants for 2000-01

Executive summary

1. Purpose

2. This document summarises our provisional allocations of recurrent funding and maximum student numbers (MaSNs) to institutions for the academic year 2000-01.
3. The HEFCE Board agreed the allocations on 24 February 2000. We wrote to all institutions individually on 29 February 2000.

   Key points

   General

4. All years relate to academic years.
5. We are distributing £4,382 million in 2000-01. This represents a 1.5 per cent increase in the overall unit of funding for teaching and research, a cut of 1 per cent in real terms.
6. The total comprises £3,022 million for teaching, £867 million for research, £333 million for special funding, £150 million for earmarked capital funding and £10 million to help phase in changes to institutions' funding and to provide a flexibility margin.

   Teaching

7. The total of £3,022 million for teaching for 2000-01 includes the following:
   1. £47 million for additional funded students, allocated in response to the bids invited in HEFCE 99/56, ‘Additional student places and funds’.
   2. £25 million to support widening participation for disabled students and those from under-represented groups.

   Research

8. A total of £867 million is allocated for research. Of this, £847 million is distributed by reference to quality criteria (QR), and £20 million by reference to generic research activity (GR) carried out in association with users of research.

   Moderation of teaching and research

9. To help maintain stability, we will continue our policy of phasing in changes by moderating the allocations. No institution will receive a reduction in resource (teaching and research grant, plus regulated fee income) of more than 2 per cent in real terms compared with the equivalent figure for 1999-2000.

   Special funding

10. Most of our grants for teaching and research are allocated by formula. In addition, we distribute special funding for specific purposes. In 2000-01, this funding totals £333 million. A further £150 million is to be allocated in earmarked capital grants.

    Student numbers

11. The DfEE requires us to ensure that the actual number of full-time and sandwich undergraduate students does not exceed the Government’s target. To do this we define a maximum student number (MaSN) for each institution. This is a target number of home and EC students (whether fundable by the HEFCE or not) who are on full-time or sandwich undergraduate courses, or on courses of initial teacher training (ITT).
12. We will continue to monitor recruitment to sub-degree courses, to ensure that planned increases are delivered.

    Action required

13. No action is required in response to this document.

    Elements of grant

14. The total distribution to institutions in 2000-01 is £4,382 million, allocated as follows:

    	£M
    Funding for teaching	3,022
    Funding for research	867
    Special funding	333
    Earmarked capital funding	150
    Flexibility margin	10
    Total	4,382

15. Our funding methods for teaching and research, as they applied for 1999-2000, are described in HEFCE 00/07, ‘Funding higher education in England: how the HEFCE allocates its funds’. Our funding methods are designed to operate at the sector level and in broad terms. It is not necessarily appropriate for individual institutions to replicate them when allocating funds internally.
16. The allocations announced in this document are provisional. We will finalise them by July 2000, when we issue each institution’s funding agreement. There may be rounding differences between individual figures and totals.

    Funding for teaching

17. The amount of funding for teaching is higher than the total of £3,013 million announced in Electronic publication 14/99, ‘Funding and student numbers for 2000-01: preliminary decisions’, owing to a further transfer of £9 million from the Department for Education and Employment (DfEE). The allocations for teaching shown in Table 1 total £3,016 million, made up as follows:

    	£M
    Core funding	2,923
    Additional funded places	60
    Adjustments to core funding	8
    Widening access and participation	25
    Total	3,016

18. A full explanation of the data in Table 1 is at Annex A. The balance of the £3,022 million available covers provisions for allocations to be announced later in the year.
19. Funding for additional funded places includes £47 million allocated in response to the bids for 2000-01 invited in HEFCE 99/56. We notified institutions of the additional places offered in February. The balance comprises funding for phased allocations arising from the bids for 1999-2000, additional funding for increases in medical intakes, and funding for diversification out of initial teacher training.
20. Funding for widening access and participation includes £20 million to recognise the additional costs of recruiting and supporting students from disadvantaged groups that are under-represented in higher education; and £5 million to recognise the additional costs of recruiting and supporting disabled students. The latter is a new allocation introduced for 2000-01. We will issue separate guidance on the use and monitoring of the funds for disabled students.

    Funding for research

21. The total funding for research is £867 million. Of this, £847 million is quality-related (QR) funding, the distribution of which reflects ratings in the 1996 Research Assessment Exercise; and £20 million is allocated as generic research funding, which is discussed in paragraph 22.
22. Details of the funding method for research were described in Circular 4/97, ‘Funding method for research from 1997-98’ and HEFCE 00/07. These publications explain how the total amounts for each subject (the subject quanta) have been set, and how these amounts are distributed between institutions, taking account of the quality and volume of their research.
23. GR funding allocations are made in proportion to each institution's GR qualifying income. Qualifying income is the amount received from users of research, for collaborative projects where the institution retains the intellectual property and publication rights. For the sector as a whole, GR qualifying income for 1997-98 and 1998-99 totalled £739 million. Table 4 shows GR qualifying income in total and as a percentage of total external research income for each institution.

    Special funding

24. The total special funding for 2000-01 is £333 million. Electronic publication 14/99 announced an allocation of £475 million, made up of £150 million in earmarked capital funding, and £325 million in special funding. The increase to £333 million is because of additional funding made available by the DfEE to support the Millennium Summer Schools projects (£4 million) and funding for the most talented students at private sector dance and drama schools allocated through the Dance and Drama Awards scheme (£4 million). The allocations that have been agreed total £69 million and are included in Table 1. The balance of £264 million includes both claims-based elements and allocations that are still to be finalised.

    Moderation

25. To help maintain stability, we will continue our policy of phasing in changes by moderating the allocations. No institution will receive a reduction in resource (teaching and research grant, plus regulated fee income) of more than 2 per cent in real terms (using the GDP deflator) compared with the equivalent figure for 1999-2000. This represents a minimum increase in cash terms of 0.5 per cent. Any subsequent changes to teaching or research grants for individual institutions will change the provisional moderation shown here. We review our moderation policy annually.

    Maximum student numbers (MaSNs)

26. On 27 January 2000 we wrote to all institutions, giving their provisional MaSNs for 2000-01. The final MaSNs for all institutions are shown in Table 3. They incorporate changes to accommodate further growth arising from the allocations for additional student numbers for 1999-2000 and 2000-01, and also to allow for migration under our funding method for teaching.
27. The purpose of the MaSN is to ensure that the planned number of students subject to overall control is not exceeded, as required by the Secretary of State. It applies to:
    1. All home and EC full-time and sandwich undergraduate students.
    2. All home and EC students on courses of initial teacher training.
    3. All home and EC full-time students on a postgraduate course for which government support is available at undergraduate rates, such as students undertaking courses leading successively to Parts 1 and 2 of the Royal Institute of British Architects examination.
28. MaSNs relate to all relevant students recruited throughout the academic year, and include those who do not complete their year of study.
29. For institutions that we fund directly, we will continue to monitor their recruitment against the MaSN through the verified December aggregate recruitment surveys and subsequent returns to the Higher Education Statistics Agency (HESA) or the Further Education Funding Council (FEFC).
30. If institutions recruit in excess of a permitted margin above their MaSN, we will hold back grant equivalent to the student fee, to ensure that they will receive no financial benefit. The permitted margin is specified in absolute terms on each institution’s individual grant tables, but in general is set at 2 per cent above the MaSN.
31. Institutions are responsible for managing their recruitment to comply with the MaSN control. They should assume that their MaSN for 2001-02 will be no higher than that announced for 2000-01, and should plan recruitment on that basis.
32. Electronic publication 01/00, ‘Funding decisions for 2000-01’ explained that we proposed to introduce measures which could lead to holdback of grant in 2000-01, if institutions did not deliver the growth expected of them as a result of a successful bid for additional student numbers. We invited bids for additional places for 1999-2000 and for 2000-01 in, respectively, HEFCE 98/56 and HEFCE 99/56. The grant letters to individual institutions specify the full-time equivalent (FTE) student numbers which are expected in 2000-01 if either the growth in 1999-2000 has not yet been delivered, or we have awarded additional places for 2000-01. The grant letters also identify the funding that is contingent upon those FTEs being delivered.
33. We wish to ensure that planned increases in sub-degree provision are delivered. We shall therefore continue to monitor recruitment to sub-degree courses at institutions which have been allocated sub-degree student numbers through the bidding exercises for additional funded places for 1999-2000 or 2000-01. Target recruitment levels for sub-degree courses are specified in institutions’ individual grant letters.

    Conditions of grant

34. Our grants to institutions are conditional on the funds being used for the eligible activities set out in section 65(2) of the Further and Higher Education Act 1992. The conditions of grant which apply to funding are given in the model Financial Memorandum between the HEFCE and institutions (Circular 15/97), published in July 1997. Following consultation, we will publish a revised version of this document later this year, which will specify the conditions of grant which apply for 2000-01.
35. In July 2000 we will send institutions their funding agreement for 2000-01. It will specify the conditions, in terms of levels of teaching activity, which we attach to our allocations of teaching funding. If institutions do not meet these conditions, we will withhold a proportion of that funding. The rules governing the withholding of grant, as they applied in 1999-2000, are described in HEFCE 99/46, ‘Holdback of HEFCE grant 1999-2000’. We will issue details of the holdback arrangements for 2000-01 later this year.
36. Universities and colleges are expected to follow the Government’s policy on public sector pay by taking account of fairness; the need to recruit, motivate and retain staff; and affordability.
37. The Secretary of State has made it clear that he expects institutions not to charge students, who have been assessed as eligible for support, more than a prescribed amount in fees. The prescribed amounts are given in Electronic publication 03/00, ‘Tuition fees for 2000-01’, as:
    • £1,050 for students on full-time undergraduate courses
    • £520 for students on courses, including sandwich courses, where the student spends a significant time during the year away from his or her institution (that is, where periods of full-time study are in aggregate less than 10 weeks)
    • £520 for part-time courses of initial teacher training

    We may therefore apply a condition of grant to institutions, which the Secretary of State may from time to time specify, requiring them not to charge students assessed as eligible for support, more than the prescribed amounts in fees.

38. Our Financial Memorandum with institutions contains sections on providing information. These information requirements are part of the terms and conditions attached to the funding for 2000-01. Details are contained in the letters to institutions, dated 29 February 2000.

    Audit of funding data

39. The allocations of funds for teaching and research are informed by the data we collect from institutions. We will continue to audit these data selectively in this and future funding exercises.
40. We will make a number of audit visits, covering the full range of data provided by institutions to inform the 2000-01 funding allocations. In addition, we will use data which institutions provide to HESA or to the FEFC to verify the data they submit directly to us. If we subsequently find that erroneous data have resulted in institutions receiving higher allocations than would otherwise have been the case, then the funding for those institutions will be reduced accordingly.

    Further information

41. Institutions requiring further information should contact their HEFCE higher education advisers.

Annex A

Descriptions of columns in Tables 1 and 2

Note: Table links are to an Excel Workbook. (179K)

Table 1 Resources for academic year 2000-01 (Provisional)

Teaching funds

1. Core funding is derived from the previous year's core, plus marginal funds. The 2000-01 core funds comprise:

   		£M
   1999-2000 teaching funds:	Core funding	2,795
   	Additional funded places	93
   	Adjustments to core	19
   Adjustments to 1999-2000 baseline because of the consolidation of holdback		-8
   Reduction due to under-recruitment against the 1999-2000 bids		-12
   Uplift for inflation at 2.5 per cent		72
   A real terms reduction of 1 per cent		-30
   Transfer to Department of Health of funding for certain students in the healthcare professions		-7
   Other miscellaneous adjustments and transfers		1
   Total		2,923

2. Additional funded places shows funds for:
   1. Additional funded places awarded following the bidding exercise for 2000-01 announced in HEFCE 99/56, ‘Additional student places and funds: invitation to bid’ (£47 million).
   2. The second, phased allocation of additional funded places awarded following the bidding exercise for 1999-2000 announced in HEFCE 98/56, ‘Additional student places and funds: invitation to bid’ (£8 million).
   3. ITT structural diversification (£3 million).
   4. Increases in quota-controlled undergraduate medical intakes (£3 million).
3. Adjustments to core comprise:
   1. Funds to support institutions’ migration towards the tolerance band (£4 million).
   2. Additional funds to ensure institutions’ positions relative to standard resource are not adversely affected by changed student weightings (£4 million). These include:
      1. The transfer of students studying German or Spanish from price group D to price group C.
      2. Changed assignments of Media Studies students between price groups following review.
      3. The increased weighting applied to certain students at further education colleges studying engineering or related technologies.
      4. The application to further education colleges of the premium for full-time undergraduate mature students.
4. Widening access and participation shows allocations of funding for teaching to recognise the extra costs associated with recruiting and supporting students from disadvantaged backgrounds currently under-represented in higher education (£20 million) or who have a disability (£5 million).

Research funds

5. Research funding for 2000-01 totals £867 million and has been allocated to institutions under two main headings:
   • QR amounts to £847 million (98 per cent of total research funding). Funds made available within each subject area (unit of assessment) are distributed to institutions on the basis of the quality and volume of the research conducted
   • GR amounts to £20 million (2 per cent of total research funding). This is to encourage institutions to collaborate with users of research, where outcomes can be used in a range of applications.

Other funds

6. Moderation of teaching and research is a short-term measure to smooth changes in grant. A minimum allocation threshold of £20,000 has been applied.
7. Special funding covers grant distributed outside the formula allocations for teaching and research. It includes allocations for special initiatives, where they have been agreed, but not claims-based elements of special funding.
8. Regulated fee income 2000-01 is the tuition fee for students who receive, or are in principle eligible to receive, awards from the Student Loans Company (SLC), the Student Awards Agency for Scotland (SAAS) or the Department of Higher and Further Education, Training and Employment (DHFETE) in Northern Ireland. It is calculated on the basis of 1999-2000 student numbers, plus changes in student recruitment levels required for migration in 2000-01, for whose fee income we have made a balancing adjustment to our grant. It excludes fee income for students funded by the TTA.

Table 2 Comparison with 1999-2000 academic year grant

9. Final recurrent and formula grants 1999-2000 shows ‘Total T funding’, plus ‘Total R funding’ plus ‘Moderation of teaching and research’, taken from Table 1 of HEFCE 99/49, ‘Recurrent grants for 1999-2000: final allocations’, or as revised for individual institutions.
10. 1999-2000 holdback shows any holdback of 1999-2000 recurrent funding for teaching, which is to be a consolidated deduction from 2000-01 core funds for teaching.
11. 1999-2000 in-year moderation shows, for comparison purposes, any in-year moderation of 1999-2000 holdback to help institutions adjust to reduced funding levels.
12. Adjustments and transfers into recurrent funds represent other adjustments for comparison purposes for:
    • reductions due to under-recruitment against the 1999-2000 bids
    • allocations of ITT structural diversification, arising from transfers from the TTA
    • other miscellaneous adjustments and transfers, including for the final year transfer to the Department of Health of funding for certain students in the healthcare professions.
13. 1999-2000 Regulated fee income is the tuition fee for students who receive awards from the SLC, SAAS or DHFETE, or who are in principle eligible for means-tested support for such awards. It is calculated on the basis of 1999-2000 student numbers and excludes fee income for students funded by the TTA.