Update on the teaching funding method and plans for review

To:

Heads of HEFCE-funded further education colleges, Heads of HEFCE-funded higher education institutions
Heads of sector representative organisations

Dear Vice-Chancellor or Principal

1.   This letter outlines our plans to review over the next two years the way we fund learning and teaching, with a view to implementing possible changes to our funding policy and method from 2012-13 at the earliest.

2.   It also reports our decisions to make no changes for 2010-11 to the subject price group weightings nor to the fee assumption in the teaching funding method. We made these decisions following the 2009 review of the subject price groups using Transparent Approach to Costing for Teaching (TRAC(T)) data and a survey of unregulated tuition fees charged by institutions in 2007-08, which we undertook earlier this year. Our decisions were influenced by a desire not to make too many changes at this time. Further information about the price group review and fee survey.

Review of the teaching funding method

3.   Our basic approach to, and method for, funding learning and teaching have remained largely stable since 1997-98. However, we are conscious that incremental developments to the funding method since then, as it seeks to accommodate new factors and thus becomes more complex, are leading to difficulty for institutions in understanding the link between inputs to the method and funding outcomes; and that there are questions that need to be addressed about the method remaining fit for purpose in the longer term.

4.   In view of these considerations, and other factors bearing on the future funding of higher education more generally (see paragraph 5), we plan a fundamental review of our teaching funding policy and method over the next two years. Its outcomes will be a funding policy and method that take due account of the wider context of higher education funding and policy, and that have been developed through thorough consultation with relevant stakeholders. We will explore all options, ranging from fundamental changes to the teaching method to minimal or no changes. The earliest academic year in which we would implement any possible changes as a result of this review would be 2012-13.

5.   Other factors that will or may have a bearing in the longer term on the funding of higher education include any policy priorities that are implemented as a result of the Government’s higher education framework and the Government-led review of higher education fees and funding. Therefore, we aim to make our plans for a fundamental review of HEFCE teaching funding sufficiently flexible to take account of developments in the wider context.

6.   We plan to involve the following key stages in the review, but this timetable is indicative only, given the current wider uncertainties:

• winter 2009: consultation and debate with sector representatives and other stakeholders, primarily through a series of round-table discussions, to articulate the principles that should underpin our teaching funding policy and method in future
• spring 2010: a written, sector consultation on these principles
• summer/autumn/winter 2010: analysis of consultation responses and development of proposals or options for the funding of learning and teaching
• spring 2011: a written, sector consultation on proposals or options
• autumn 2011: announcement of decisions.

7.   These stages have been planned to take account of the likely timing and possible implications of the fees and funding review starting this year, and a general election in 2010; and to avoid the potential burden to the sector of engaging simultaneously with other HEFCE policy consultations (for example on the Research Excellence Framework and the Quality Assurance Framework).

8.   We recently consulted on proposals to achieve efficiency savings required of higher education by Government from 2010-11, by withdrawing three targeted allocations from recurrent teaching funding ('Review of teaching funding: consultation on targeted allocations', HEFCE 2009/25). Those consultation proposals are separate from this fundamental review. We will announce the outcome of the consultation on those proposals later this year. We cannot rule out the need for other interim changes before the long-term review comes to fruition, for example in response to further directions in our 2010-11 grant letter from the Secretary of State.

Review of subject price groups

9.   To inform this year’s review of subject price groups we combined the 2006-07 TRAC(T) data used in last year's review (reported in HEFCE Circular letter 23/2008), with the 2007-08 TRAC(T) data submitted by institutions this year. Of the 122 higher education institutions that provided 2007-08 TRAC(T) data, 83 per cent agreed that it was fit for the purpose of informing a review of this aspect of our funding method.

10. Combining two years’ data ensured that the review drew on as much information as possible, and gave us confidence that neither year’s return was atypical. An analysis of the data used to inform the review is available.

11.   We reviewed the assignment of subjects to price groups and the weightings of the price groups in light of: the TRAC(T) data; the changes coming into effect because of the need to make efficiency savings; and our plans for a fundamental review of our teaching funding policy and method. We concluded that the TRAC(T) data may support some changes in the longer term to the price group weightings and subject assignments. We decided, however, to make no such changes in the immediate future, because we did not wish to create unnecessary turbulence or to pre-empt the outcomes of the long-term review. We will continue to collect and review TRAC(T) data to contribute to the development of the teaching funding method.

Fee survey

12.   Throughout May 2009 we ran a survey of unregulated part-time and postgraduate taught tuition fees charged by institutions in 2007-08. We had previously said (following a 2005 consultation on changes to the teaching funding method) that we would keep the assumption we make about fees in our teaching funding method fixed, in real terms, until the end of 2009-10, to maintain stability while institutions adapted to the variable fees regime. Analysis of this year’s fee survey data informed our review of the fee assumption. A summary of the survey results is available.

13.   In view of the Government's review of fees and funding and our own long-term review of the funding method outlined in this letter, we have decided to similarly leave the fee assumption unchanged for 2010-11.

14.   If you have any questions about this letter please contact Anna Sherratt, tel 0117 931 7236, or Samantha Dunbar, tel 0117 931 7178, or e-mail teaching-funding@hefce.ac.uk.

Yours sincerely

Sir Alan Langlands
Chief Executive

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