Dear Vice-Chancellor or Principal
1. This letter reports the efficiencies achieved by the English higher education sector and HEFCE against the annual target set by the Government to be delivered by 2007-08. No action is required in response.
2. In March 2006, HEFCE Circular Letter 04/2006 '2004 spending review: releasing resources to the front line' informed higher education institutions (HEIs) about the Government's efficiency review, what it was seeking to achieve, and the contribution that higher education would be expected to make to the achievement of the target savings of £21,480 million set out in the review.
3. The contribution by the (then) Department for Education and Skills to this target was £4,350 million a year by 2007-08. Within this, English HEIs and HEFCE were expected to deliver £108.2 million, to which a contingency target of £90.45 million was added, giving a combined efficiency target of £198.65 million a year by 2007-08.
4. In 2007-08, HEIs in England and HEFCE delivered efficiencies totalling £202.39 million against the combined efficiency target of £198.65 million. The efficiencies were mainly achieved in the areas of procurement; use of capital assets; and the benefits of information and communication technologies (ICT) in higher education, as described below.
Procurement
5. English HEIs delivered efficiencies totalling £103.53 million as a result of improvements in procurement. Most of this was as a result of increased institutional procurement efficiency, through institutions' own contracts and increased use of e-procurement, as advised by HEIs through Efficiency Measurement Model (EMM) returns to HEFCE. (For 2007-08, 60 institutions used the EMM return to record their efficiencies.) There was also increased use by institutions of the national and regional contracts negotiated by the four English higher education regional purchasing consortia. Collaborative procurement efficiencies were also achieved by the Research Equipment Affinity Group which managed the Science Research Investment Fund (SRIF) 2006-08 collaborative procurement exercises on behalf of the sector.
Use of capital assets
6. English HEIs delivered efficiencies totalling £65.5 million in the use of capital assets. These were largely though the better use of space. This led to reduced research and teaching occupancy costs along with lower capital costs as relatively less space was required, despite increased levels of activity. In addition a further £41.7 million of such efficiencies are being reported against the targets for the former Department for Trade and Industry.
The benefits of ICT in higher education
7. Efficiencies totalling £10.02 million were delivered by the Joint Information Systems Committee (JISC) through electronic content deals for English HEIs, including dynamic datasets and Heritage Collections. Other savings have been achieved by the National Electronic Site Licensing Initiative (NeSLi2) negotiating agreements for current electronic journals for the sector.
Other efficiencies
8. Other efficiencies, totalling £23.34 million, were delivered through changes to the Higher Education Innovation Fund administration and institutional arrangments; by holding down drop out rates in higher education; through reductions in the cost of institutions' borrowing; and through reductions in HEFCE's own running costs.
Future efficiencies
9. Institutions are to be congratulated on their achievement in delivering in full the efficiency target in 2007-08.
10. We are now faced with the need to deliver further efficiencies during the three years from 2008 to 2011, over and above those delivered up to the end of 2007-08. The January 2009 grant letter to HEFCE from the Secretary of State includes a requirement for higher education to provide close to £500 million in annual efficiency savings by 2010-11. These are cash releasing savings that will be reinvested within higher education. (The grant letter can be viewed on the HEFCE web-site.)
11. This is a challenging target, but the sector is well-placed to demonstrate that it can continue to deliver efficiencies which do not impact negatively on teaching and research.
Yours sincerely
Professor David Eastwood
Chief Executive
