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Contents

  • Note on interpreting the funding figures in this document
  • Introduction
  • Key points
  • Overview: how we share out the money
    • What are we trying to achieve?
    • How do we do it?
    • How is teaching funding calculated?
    • How is research funding calculated?
  • Full guide to HEFCE's funding methods
    • Background: HEFCE's funding powers and responsibilities
    • The annual funding cycle
    • Accountability for funding
    • Recurrent grant
    • Funds for teaching
    • Funds for research
    • Higher Education Innovation Fund
    • Moderation
    • Data monitoring
    • Non-recurrent funding (special funding and earmarked capital grants)
  • Glossary of terms
  • Further reading

Note on interpreting the funding figures in this document

After our initial announcement of recurrent funding for 2010-11 in March 2010, we had to issue revised allocations in July 2010 which incorporated a £52 million pro rata reduction from recurrent teaching grant, following a change in the funding provided by Government. In order to implement this in as simple and equitable a way as possible, this saving was applied as a pro rata reduction to all elements of teaching grant, reducing it by approximately 1.09 per cent. This approach avoided the need to recalculate the teaching allocations from first principles and revise parameters used in our funding and monitoring, such as rates of funding per student.

For this guide to funding, we have adjusted overall budget figures for all elements of recurrent teaching grant to incorporate the pro rata reduction that we have implemented (generally by reducing totals by 1.09 per cent). However, because we have avoided recalculating the underlying parameters in our method, these have not been adjusted for the efficiency saving. This affects, in particular, rates of teaching funding that we specify in the document, such as in our calculations of standard resource. This approach is consistent with the presentation to institutions of our grant allocations and monitoring arrangements for the year.

This document reflects the 2010-11 academic year funding allocations that were announced in July 2010. At the time of writing, we have not had confirmation from the Government of the funding available for the 2011-12 financial year or beyond. The Government has said that the 2010 spending review will be announced on 20 October 2010 and will set out its spending plans for the whole of this Parliament. It may be some time after that before the detailed outcomes for higher education are known. In the meantime, in order to announce funding for the 2010-11 academic year (which has a four-month overlap with the 2011-12 financial year), we have assumed that funding will be maintained in cash terms for 2011-12. If we receive information that suggests this assumption is no longer appropriate, we reserve the right to review all of our allocations for the 2010-11 academic year. This would be with a view to managing any change in funding for institutions that might be necessary by 2011-12.

Introduction

1.   HEFCE distributes government funding for higher education. This guide explains how we calculate how much each university or college gets, the principles that underpin those calculations, and the components of an institution's grant.

2.   It is intended for those working in higher education and for others who wish to understand our funding methods.

3.   It is our policy and our practice to be open about our allocation methods and policies, and this guide is intended to explain them. It is divided into three main sections:

  1. 'Key points' gives a very basic introduction to how we distribute funding, why we do it that way and how we ensure the money is well spent.
  2. 'Overview: how we share out the money' is intended to be an easily understandable, broad description of the basic principles and method that we use to determine how much funding each institution gets and how we distribute it to them. It includes outline figures for 2010-11 funding.
  3. 'Full guide to HEFCE's funding methods' contains more detail about each funding stream, our methods and the principles behind them. However, it does not include comprehensive technical details: our web-site, www.hefce.ac.uk, provides more information, including the further reading suggested at the end of this guide.

4.   A glossary of terms is also included at the end of this guide for ease of reference.

Key points

5.   The total public funding for higher education in England is decided annually by the Government.

6.   We are responsible for distributing this money within broad policy guidelines provided by the Secretary of State for Business, Innovation and Skills. Periodically, we advise the Secretary of State on the funding needs of higher education in England.

7.   In academic year 2010-11 we are directly funding 130 higher education institutions and 123 further education colleges that provide higher education courses.

8.   We allocate funds to each of these universities and colleges to support teaching, research and related activities. In doing so, we aim to:

  • increase the opportunities for students from all types of backgrounds to benefit from higher education
  • maintain and enhance the quality of teaching and research
  • encourage universities and colleges to work with business and the community
  • support diversity
  • encourage efficiency in the use of public funding
  • provide predictability in funding from year to year so that institutions may budget and plan effectively.

9.   We divide the vast majority of the money between institutions using formulae to determine each one's share. These formulae take into account certain factors for each institution, including the number and type of students, the subjects taught and the amount and quality of research undertaken there.

10.   Institutions receive most of their funding as a 'block grant'. They are free to spend this according to their own priorities within our broad guidelines. We do not expect them to model their internal allocations on our calculations because they are autonomous bodies that set their own strategic priorities.

11.   We distribute a small proportion of funding by other methods such as bidding exercises, and sometimes such funding must be spent on the specific purpose(s) for which it was given. We look to reduce the number of separate funding streams (and associated separate monitoring requirements), incorporating them wherever possible within our main formulaic allocations which have just one, overarching accountability system.

12.   Institutions are accountable to HEFCE, and ultimately to Parliament, for the way they use funds received from us. As independent bodies, they also receive funding from many different public and private sources. This gives them scope to pursue activities alongside those for which they receive HEFCE funds.

13.   We are the largest single source of higher education funding, but our funding represents less than 40 per cent of the total income of English higher education institutions. Our grants do not, therefore, meet all institutions' costs: we make only a contribution towards their teaching, research and related activities. The proportion of an individual institution's total income that comes from HEFCE will depend on its activities and money raised from other sources.

14.   After HEFCE grant, tuition feesSee note 1 are usually the other major source of funding for teaching. Fees for some students are subject to regulation, with limits on what institutions may charge. This applies to most home and EU full-time undergraduates and other students on teacher training courses. Fees for most postgraduate and part-time students are not regulated.


Notes

  1. Further information on tuition fees and student support can be found at www.direct.gov.uk under Education and learning/University and higher education.