March 2005/13
Core funding/operations
Allocation of funds

This report is for information

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Recurrent grants for 2005-06

This document summarises our provisional allocations of recurrent funding to institutions for the academic year 2005-06. Final allocations will be announced in July 2005.

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To:	Heads of HEFCE-funded higher education institutions Heads of HEFCE-funded further education colleges Heads of universities in Northern Ireland
Of interest to those responsible for:	Finance, Planning
Reference:	2005/13
Publication date:	March 2005
Enquiries to:	HEFCE higher education advisers

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Executive summary (read on-line)

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Executive summary

Purpose

1.    This document summarises our provisional allocations of recurrent funding to institutions for the academic year 2005-06.

Key points

2.    We are distributing £6,332 million in 2005-06. This represents an overall cash increase of 5.6 per cent compared with 2004-05. The total includes recurrent funding of £4,004 million for teaching, (of which £282 million is for widening participation) and £1,251 million for research. In addition, we are providing a further £649 million for earmarked capital grants and £428 million for special funding.

3.    A major concern expressed by institutions over the last year has been the need for stability as the sector prepares for the introduction of a new variable fee regime in 2006-07. Our recurrent grant allocations for 2005-06 achieve this, while providing a significant real-terms increase in funding for the sector as a whole. This will offer greater financial security and enable institutions to plan more effectively for the dynamic environment created by the 2004 Higher Education Act.

4.    There are substantial increases in funding for research, in keeping with the Government's commitment to enhancing the research base through both sides of the dual-support system.

5.    Many institutions have gained significant additional funded student numbers, while overall there is also an above-inflation increase in the unit of resource per student for teaching.

6.    We are continuing to reduce the accountability burden on institutions by distributing a greater proportion of funds through our formula recurrent allocations, and less as special funding.

7.    Funding for earmarked capital has increased by 11 per cent compared with last year. The distribution of this funding between institutions has been announced separately and is not included in this document (paragraph 54 provides further information).

Teaching

8.    Our total recurrent funding for teaching has increased by 5.4 per cent over the equivalent figures for 2004-05. This has allowed us to provide approximately 26,000 additional full-time equivalent (FTE) student places for 2005-06, while providing an above-inflation uplift in the unit of resource per student. This increase for teaching includes an additional £64 million for rewarding and developing staff in higher education, compared with the allocations for 2004-05. The overall publicly-funded unit of resource per FTE student for teaching (including regulated fee income for full-time undergraduates) has increased by 2.9 per cent compared with 2004-05, which represents an increase of 0.4 per cent above the rate of inflation.

9.    Funding for widening participation has been maintained in real terms. Some changes to the allocation methods have been implemented for 2005-06, largely to reflect changes in the underlying data available.

10.    The total of £4,004 million for teaching includes the following:

1. £282 million to support widening participation for students from under-represented groups or who are at greatest risk of not completing their studies. We have adapted the allocation method to reflect changes in the data available that inform the method.

2. £64 million in additional funding for rewarding and developing staff.

3. £67 million for additional funded places awarded in recent years through our general bidding exercises.

4. £19 million for increases in medical and dental student numbers.

Research

11.    A total of £1,251 million is allocated for research. After allowing for transfers from teaching and special funding, this is an increase of 10.8 per cent compared with the equivalent funding for 2004-05. Within this overall increase we have:

1. Established a significantly enhanced supervision fund for research degree programmes.

2. Increased the average unit of funding for departments rated 5 and 5* by 4.6 per cent (taking account of both mainstream quality-related research - QR - and the additional funding for the 'best 5-star' departments).

3. Maintained the average unit of funding for departments rated 4 in real terms.

Moderation of teaching and research

12.    We have continued our policy of phasing in changes by moderating the allocations. Institutions will not receive a reduction in resource (teaching and research grant, plus regulated fee income) in real terms, compared with the equivalent unmoderated figure for 2004-05.

Special funding and earmarked capital

13.    Funding for earmarked capital has increased by 11 per cent compared with last year. We have also reduced the amount of grant we distribute as special funding by 12 per cent, enabling us to distribute a greater proportion of our total budget through our formula recurrent grant allocations.

Action required

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