HEFCE Circular 2/96
Funding for 1996-97: HEFCE January Board Meeting
To
Heads of HEFCE-funded Institutions
Heads of DENI-funded Universities
Summary Decisions on recurrent and capital funding for the academic year 1996-97
Reference 2/96
Publication Date January 1996
Response by 14 February 1996 (see paragraph 10)
Enquiries to Regional Officers
1. On 14 December 1995 the HEFCE Board considered its broad approach to funding in 1996-97 and made a number of preliminary decisions to enable further work to be undertaken in preparation for the grant allocations.
2. At its meeting on 25 January 1996 the Board refined some of its earlier decisions conveyed to institutions in Circular 31/95. The details are given in this Circular.
Recurrent Funding
3. The Board reviewed its preliminary decisions on non-formula funding, the flexibility margin, transitional arrangements and the split between teaching and research, and agreed that the total of £3,146M available for recurrent funding should be divided as follows:
----------------------------------------------------------------------
PoundsM PoundsM
----------------------------------------------------------------------
Teaching 2,226 of which approx 2,202 Core
24 Non-consolidated addition
Research 636 of which 600 QR
20 GR
16 DevR
Non-Formula 269 of which 263.5 Committed
Funding 5.5 New Initiatives
Transitional 5
Funding
Flexibility 10
Margin
---------------------------------------------------------------
4. The distribution between teaching and research reflects the Board's preliminary decision on 14 December 1995 that, after taking into account changes in planned student numbers, the baseline unit of resource for teaching and the total for research should each be subject to the same real terms reduction of 2.75 per cent in 1996-97.
Funding for Teaching
Holdback from 1995-96
5. Where an institution has under-recruited in 1995-96 against its Contract Student Numbers (CSNs) adjustments are made to its grant within the current year (holdback) and the institution's baseline student numbers and grant for 1996-97 are reduced accordingly.
6. The calculations of the holdback against CSN and reductions in grant for exceeding Maximum Aggregate Student Numbers (MASNs) from 1995-96 have not been finalised as some data are still being verified with institutions. Nevertheless, the Board considered on 25 January 1996 the likely levels of the resulting downward adjustments to core funding and how these amounts could be redistributed into the core funding for teaching. Such additional allocations would become permanent additions to core funding from 1996-97.
7. The Board agreed that:
- a. Institutions which have recruited fewer students in 1995-96 than the numbers stated in funding agreements will be subject to holdback but with a minimum value of the lower of #50,000 or 10 per cent of their recurrent funding for teaching. Under-recruitment against core proposals and other special initiatives is not subject to a minimum value and holdback will be recovered in full.
- b. For 1995-96 transitional funding was calculated so that no institution received less than a 0.5 per cent increase in recurrent grant compared with the previous year. Holdback against CSN in 1995-96 will be limited to the point where the 1995-96 transitional funding arrangements would have operated. However subject to the modification described in paragraph 10 below, an adjustment for under-recruitment will be made in full to institutions' core funding for teaching for 1996-97.
- c. Funds released in 1995-96 through the application of holdback should be redistributed to institutions pro rata to their core funding.
8. A penalty will be imposed on institutions which recruited beyond the permitted margin above their MASN, calculated as the average mandatory fee paid for all award holders attending that institution, multiplied by the excess numbers. There will be no minimum value for such penalties. Such a penalty has no effect other than in the year in which it is incurred. In particular, it does not affect the baseline core funds of the institution concerned.
9. However, holdback against CSN does affect the core funding of the institution concerned, reducing the baseline contracted student numbers, and the corresponding funding, in subsequent years. Since the total amount of funds available remains the same, holdback creates a pool of additional money available for reallocation to the sector as a whole.
10. The Board agreed that it should give institutions subject to holdback against CSN the opportunity to retain in their core funding for 1996-97 some of the science and engineering numbers and funds held back in 1995-96, and that it would negotiate the extent to which this would be permitted with the institutions concerned. Any institutions in this position should contact their Regional Officers with an initial indication of their intentions by 14 February 1996. Institutions should be aware that any student numbers again under-recruited in 1996-97 by the institutions concerned will be permanently withdrawn.
11. The Board agreed that part of any funds remaining for 1996-97 after the re-allocation described above should be provided for additional science and technology students, to be allocated by reference to previous success in recruiting such students. If any funds remain then these will be added to the core funding of all institutions pro rata to their previous core funds for teaching. These allocations will be considered by the Board at its meeting on 21 February 1996.
Baseline Reduction to the Core
12. The funds available to the Council for distribution in 1996-97 imply a reduction in total core funding of around 2.75 per cent in real terms. The Board considered how this reduction should be effected, and agreed that, as in previous years, it should be applied differentially, based on Average Units of Council Funding (AUCFs). Reductions will be in the range 2-4 per cent in each of the funding cells, with higher AUCFs attracting higher percentage reductions in grant than lower AUCFs.
Funding for Research
13. As stated in paragraph 3, the Board has agreed that of the total #636M funding for research #600M would be for QR, #20M for GR and #16M for DevR.
14. In respect of the allocations of QR the Board agreed that:
a. The previous policy of convergence of units of resource in different subjects would be continued, to within a band width of plus or minus 15 per cent of the average for the family of the subject concerned.
b. The same cap on increases in QR income should be applied in 1996-97 as was applied in 1995-96, with no institution being permitted to secure an increase in QR income of more than 15 per cent over the previous year.
Student Numbers
15. The Council is required by the Government to ensure that the total number of full-time and sandwich undergraduate students does not exceed the Government's planning total, and proposes again to set a Maximum Aggregate Student Number (MASN) for each institution. Provisional MASNs will be notified to institutions on 1 February 1996.
16. In the past the algorithm used to allocate MASNs has reflected the different levels of inbuilt growth in institutions. After three years of consolidation there should be little inbuilt growth remaining. The Board has agreed that MASNs for 1996-97 will be the lower of the 1995-96 allocated MASN or the number of award holders recruited; adjustments will be made to take account of changes to numbers in planned subjects.
17. In 1995-96 institutions were permitted to recruit up to 1.5 per cent above their MASN without incurring a penalty. In 1996-97 institutions will be permitted to recruit up to 2 per cent beyond their MASNs without incurring a penalty.
Capital Funding
18. On 25 January 1996 the Board considered further how it wished to distribute the indicative amounts available for capital funding, taking into account the decisions announced in Circular 31/95.
19. The Board accepted that it would proceed with the previously announced programme of investment in local and metropolitan area networks (LANs and MANs) and that up to #18M would be provided over two years, a maximum of #10M in 1996-97 and a maximum of #8M in 1997-98, subject to the successful institutions making a contribution of 25 per cent of the total costs. Further information on this initiative will be issued by the Secretariat to the Funding Councils' Joint Information Systems Committee.
20. Circular 31/95 indicated that the Council would honour the funding commitments for capital projects which had already started, or which would start by their agreed target date, subject to satisfactory progress. The Board took these commitments and estimates of the funds required for maintenance projects into account in determining the funding that would be available for distribution as formula capital funding.
21. The Board also agreed on 25 January 1996 that #173M would be distributed as formula capital funding for the 1996-97 academic year, a reduction of just under a third on the 1995-96 figure of #248M
Transitional Funding (Safety Net)
22. The Board agreed that the year on year comparator for the purposes of determining transitional funding requirements would be the total of recurrent and capital formula grants adjusted to take account of transfers to the TTA and other changes affecting comparability between years.
23. The Board confirmed that transitional funding should in future be provided only in response to an agreed plan for its use, which might in some cases include a wider look at the nature and extent of an institution's provision.