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Dear Vice-Chancellor or Principal

1.   This letter invites proposals from English higher education institutions (HEIs), and further education colleges (FECs) with over 100 directly funded full-time equivalent (FTE) students, for support from the new University Modernisation Fund to support new entrants and efficiency activities in 2010-11.

2.   We will allocate £250 million in 2010-11 for this purpose, using the criteria set out in paragraph 21.

3.   The deadline for submission of proposals is noon on Monday 26 April 2010.

4.   The £270 million University Modernisation Fund was announced by the Secretary of State for Higher Education following the Budget statement on 24 March. It has been established to respond to two imperatives: enabling more young people to enter higher education to gain skills that the economy needs, while also supporting universities (and colleges) to take the robust action needed to increase efficiency and reduce cost over the medium term.

5.   A separate letter ('Allocation of funding for shared service activities in 2010-11 through the University Modernisation Fund', HEFCE Circular letter 07/2010) explains how we will allocate the remaining £20 million of the University Modernisation Fund for a shared services pilot scheme.

6.   At the time of the recurrent grant announcement for 2010see note 1, we announced our intention to provide support of up to £10 million for institutions that are shifting the balance of their provision towards vulnerable science, technology, engineering and mathematics (STEM) and modern languages subjects. This initiative will continue: details of the application process are in 'Support for moving full-time undergraduate numbers into strategically important and vulnerable subjects (SIVS) in 2010-11' (HEFCE Circular letter 06/2010).

7.   The majority of the University Modernisation Fund is intended to help institutions to generate efficiency savings. We expect that institutions will determine the efficiency activities most appropriate to their circumstances. Efficiency activities may be collaborative between institutions, in which case each institution’s proposal should refer to their own share of the collaborative arrangements and efficiencies planned, ensuring this aspect of the proposal is consistent with their partner's or partners' proposal(s). We will, however, only accept one proposal per institution.

8.   Applications for additional entrants may cover a number of subject and activity areas, and institutions may allocate the additional new entrant places through partnerships such as Lifelong Learning Networks and partner FECs through franchise arrangements if they wish to do so.


9.   The Secretary of State wrote to us following the March 2010 Budget, authorising us to allocate funding for 20,000 additional new entrants for 2010-11 through the new University Modernisation Fund, providing up to £250 million in additional funding. This includes funding to support an indicative 15,000 additional places for full-time undergraduate new entrants, of which 5,000 will be foundation degree new entrants, and also funding for 5,000 part-time undergraduate new entrants (approximately 2,500 part-time undergraduate full-time equivalent students).

10.   The £250 million funding is equivalent to our contribution to the cost of teaching 20,000 additional new entrants in 2010-11 throughout the period of their studies. It will, however, be paid in full in 2010-11. Around one-third will be devoted to the cost of teaching the additional students in 2010-11. The remainder will be devoted to the delivery of efficiency activities undertaken during the year, which will help those institutions receiving the additional places to reduce their future cost base – for example, through restructuring, investment in new IT systems or facilities that will reduce future running costs.

11.   It is expected that institutions will use the savings arising from the investment in efficiency activities to support the future costs of the additional new entrants in their subsequent years of study. The new entrants will be supported at the 2010-11 rates appropriate to the price group and FTE concerned. Full HEFCE teaching grant will be provided for new entrants only and we will require confirmation that the efficiency activity undertaken in 2010-11 will secure sufficient recurrent savings to enable the sustainable teaching of these additional students in their subsequent years of study. Institutions can therefore expect to be awarded approximately the same amount per foundation degree FTE as teaching funding for 2010-11, and twice as much funding per full-time undergraduate FTE as teaching funding for 2010-11 to invest in activity to produce efficienciessee note 2.

12.   Recurrent teaching funding will not be provided for these entrants as they continue their studies in 2011-12 and beyond. In addition, provision has only been made for this cohort of new entrants to be supported. Our assumption at this point is that we will add any full-time undergraduate (including foundation degree) places awarded to institutions' student number control limits for 2010-11 only, but that this increase in intake will be withdrawn in 2011-12. As with all areas of higher education funding, however, this will be subject to the outcome of any future Comprehensive Spending Review and subsequent grant letters to us from the Secretary of State.

13.   Applications for additional places must be tied to efficiency projects. Institutions may not apply for additional places without undertaking efficiency activities. In order to minimise burden and maximise the impact of the efficiency activities, we have set a minimum threshold of 50 additional new entrants per application. There is no maximum threshold, but we reserve the right to reduce the allocation of places to successful proposals from the level sought.

14.   The University Modernisation Fund is a new initiative and the additional new entrant places will not be treated in the same way as standard additional student numbers (ASNs). As such, we will handle the allocation of funding as a separate exercise from past bidding rounds, which have seen ASNs allocated through the established processes of the Strategic Development Fund (SDF). We will, however, retain the overarching principle of the SDF process, that funding should be allocated in a flexible and relatively low-burden way.

Strategic priorities

15.   The Government has asked us to prioritise the allocation of additional places on STEM subjects, and on areas highlighted in the New Industry, New Jobs (NINJ) strategy and the UK Commission for Employment and Skills (UKCES) National Strategic Skills Auditsee note 3 as priorities to support economic growth. We intend to follow this guidance and also to continue our policy of supporting strategically important and vulnerable subjects (SIVS) and foundation degrees.

16.   Annex A lists the priorities highlighted in NINJ and by UKCES. The Joint Academic Coding System (JACS)/learndirect course codes for which we will prioritise support are provided in Annex E, which is available alongside this letter at under Publications. This represents our interpretation of the broad sectoral and occupational priorities highlighted in NINJ and/or by UKCES. Institutions may exceptionally request support for other courses not covered by these codes, however, in these cases, the proposal must explain clearly how the course contributes to the priorities highlighted in NINJ and by UKCES, and institutions should provide the relevant JACS/learndirect code in their application.

17.   The Department of Health has also asked us to accommodate growth priorities for healthcare-related higher education provision, specifically in healthcare science and paramedic science, which are intended to address skills shortages throughout the NHS, and support strategies for workforce modernisation. Proposals in these areas must be for undergraduate new entrants and must demonstrate evidence of support through letters from partner Strategic Health Authorities. Such letters should refer to the specific courses for which funding is being requested, and should be appended to the proposals.

Implications for student number control and FTE targets

18.   We will continue to implement a control on the numbers of students at each institution starting full-time undergraduate study in line with our previous communications to institutions. Where institutions are successful in their proposal for additional full-time undergraduate (including foundation degree) new entrants, we will include these numbers within the student number control and issue notification of an increase to the institutions’ limit for 2010-11 only. Institutions will need to carefully plan and manage their recruitment of full-time undergraduate students in 2010-11 in order to avoid a funding adjustment for over-recruitment. However, institutions will have an opportunity to appeal any proposed funding adjustments if they have exceeded the intake target as a result of this allocation and can show that they took reasonable steps to avoid exceeding the target. This increase in intake will be withdrawn in 2011-12 because the additional places are for one cohort only. Further information on how we will monitor these additional places is given in Annex B.

Application process

19.   The deadline for applications is noon on Monday 26 April 2010. To apply, institutions should complete the electronic versions of:

  • the template for the submission of proposals, at Annex C
  • the spreadsheet showing the breakdown of student numbers, mode, price group and level included within the proposal, at Annex D.

Both electronic documents may be downloaded from under Publications, alongside this letter. Proposals should identify the JACS/learndirect codes (given at Annex E) to which they link, or exceptionally to make a case for linkage between a course outside of these areas and the priorities identified in NINJ and by UKCES. Institutions should also give details on the template given at Annex C of the activities they intend to undertake with the funding for efficiency activities, which will secure efficiencies at a level that will enable the sustainable teaching of the additional students in their subsequent years. This should be a broad statement providing details of activity, its cost, the anticipated efficiencies and the timescales both for the activity and the delivery of efficiencies.

20.   Applications from FECs will be assessed against the same criteria as HEIs. HEFCE is restricted to supporting prescribed courses of higher education in FECs, but we are making an arrangement to support the efficiency element of this scheme within FECs working with the Skills Funding Agency. Full details of the process will be outlined in the award letter.

21.   In assessing proposals, we will take into account the following criteria (reflected in the template at Annex C):

  1. Fit of the entrants to the designated subjects listed in Annex EIn assessing proposals, and taking into account both our long-standing commitment to SIVS, and the priorities highlighted in NINJ, by UKCES and by the Department of Health, we will consider the following areas in order of priority:
    1. SIVS subjects (maths, physics, chemistry and engineering within STEM; quantitative social science; modern foreign languages)
    2. other areas of STEM
    3. other areas linked to NINJ, UKCES and Department of Health priorities.
    We will also consider any evidence of unsatisfied student demand, demonstrable for example by the ratio between applications and places on the programmes proposed, and the institution's ASN recruitment track record.
  2. Value for moneyIn particular, we will prioritise support for proposals that demonstrate:
    1. robustness in the proposed efficiency activities and the scale of efficiencies to be generated
    2. the institution's financial investment to the efficiency activities
    3. innovation for significant savings that have the potential for widespread adoption across the sector.

22.   Each application will be independently assessed by at least two HEFCE staff, whose assessment will inform the judgement of a panel that will include an element of external challenge. The panel's recommendations will be considered by the HEFCE Chair and Chief Executive, acting under delegated authority from the HEFCE Board.

23.   In allocating funding, we reserve the right to adjust provisional allocations in our final decision-making process to ensure the best fit with our overall strategic aims and objectives. We have indicated a suggested word limit for each section of the template and reserve the right to discount applications that significantly exceed the word limit. In the event of over-subscription to the fund, we will discount all bids submitted past the deadline.

Conditions for distribution of funding

24.   Payments will be profiled for distribution within 2010-11. Funding awarded to institutions must be committed and spent by March 2011. We will require confirmation from institutions that funding has been spent within this timescale and reserve the right to recover any unspent funds.

25.   Institutions will be required to provide assurance on the appropriate use of the funds allocated. In particular, we will require evidence that institutions are recruiting new entrants for the additional places, that efficiency savings have been made and leveraged by the fund, and that institutions will continue to support a higher level of student numbers due to the higher level of intakes in 2010-11 as they progress through the system.

26.   We will confirm the specific monitoring requirements for each institution in the award letter. We expect to monitor the delivery of additional new entrants through Higher Education Students Early Statistics (HESES)/Higher Education In Further Education: Student Survey and Higher Education Statistics Agency/individualised learner record returns. We will monitor the use of funding and the delivery of efficiencies driven by the fund through the annual monitoring statement.

We will also require institutions to provide a report on the progress and outcomes of such activity to drive efficiencies, and the activities developed by universities and colleges will be published as part of a good practice guide for wider dissemination to the sector. We reserve the right to recover funds if there is reasonable evidence that funding has not been spent by 31 March 2011 on activities designed to deliver efficiencies.


27.   We aim to complete the assessment process and approve allocations by 18 May 2010. Our institutional teams will contact lead HEIs by the end of May to give feedback on decisions and then provide a formal grant letter, which will also set out monitoring requirements. Allocations made through this call will be reflected in the July 2010 grant tables.

Yours sincerely

Sir Alan Langlands
Chief Executive


  1. The recurrent grant announcement, 'Recurrent grants for 2010-11' (HEFCE 2010/08) can be read on the HEFCE web-site.
  2. This is an estimate at this time because the balance of funding available for efficiency activities will be determined by the price groups and FTEs of the new entrant places supported.
  3. For more information on NINJ, see under Policies/New Industry, New Jobs. For more information on the UKCES National Strategic Skills Audit, see under Our work/Research and Policy/National Strategic Skills Audit.

Date: 6 April 2010

Ref: Circular letter 08/2010

To: Heads of HEFCE-funded further education colleges, Heads of HEFCE-funded higher education institutions

Enquiries should be directed to:

relevant HEFCE institutional team