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Dear Vice-Chancellor or Principal

1.   This letter provides information on implications of recruitment in 2010-11 and beyond, for those institutions that exceeded their permitted limits on full-time (FT) undergraduate (UG) and Postgraduate/Professional Graduate Certificate in Education (PGCE) entrants in 2009-10. It explains the circumstances under which adjustments to grant for over-recruitment in 2009-10 may be repeated for the following year unless institutions take action to offset their over-recruitment by coming below their student number control limit for 2010-11.

Background

2.   For 2009-10, in response to a request from Government, we asked institutions to avoid any increase in FT UG and PGCE entrants above the level of their actual admissions in 2008-09 plus any additional student numbers awarded. The aim was to reduce the risk of over-recruitment that might lead to a transfer of HEFCE grant back to the Department for Business, Innovation and Skills (BIS) to meet consequent unanticipated student support costs. We gave further guidance to institutions in the funding agreements issued on 20 July 2009 and in 'Amendment to the funding agreements of 20 July 2009: provisional distribution of new student places for 2009-10' (HEFCE Circular letter 15/2009).

3.   In our grant letter from BIS of 22 December 2009see note 1, the Secretary of State asked us 'to make the appropriate adjustments to the allocations of those institutions that have over-recruited, at a rate of £3,700 per full-time undergraduate and PGCE student recruited above the permitted level'. We wrote to institutions individually on 5 March 2010 about our provisional assessment of these grant adjustments and inviting institutions to appeal for mitigation by 30 April 2010. These provisional adjustments are largely informed by institutions' returns to the Higher Education Students Early Statistics or Higher Education in Further Education: Students surveys. However, all adjustments (including where these are currently assessed to be zero) will be subject to review in the light of institutions' returns for 2008-09 and 2009-10 to the Higher Education Statistics Agency (HESA) individualised student record or the Data Service individualised learner record (ILR).

4.   On 24 February 2010, we wrote to institutions announcing provisional limits for a new student number control relating, in broad terms, to students starting HEFCE-fundable FT UG or PGCE study in 2010-11see note 2.

5.   The letters to institutions of 24 February and 5 March 2010 both stated:

'We wish to avoid giving any advantage to institutions that have exceeded their permitted level of FT UG and PGCE entrants in 2009-10. There remains a risk that these institutions' over-recruitment in 2009 10 could again contribute to excess student support costs in later years. Because FT UG intakes will commonly be retained for three years, the increased cohorts are likely to take some time to work through the system. It would be unfair to other institutions if those that over-recruited in 2009-10 had the benefit of increased fee income in later years, while any consequential reductions in the grant made available to HEFCE by the Department were then shared equally across the sector. Institutions should therefore note that, where we assess that they have over recruited in 2009-10:

  1. If they recruit up to their student number control limit in 2010-11, then any grant adjustment that we determine arising from their over-recruitment in 2009-10 may be applied again in later years.
  2. If they wish to avoid grant adjustments for 2009-10 over-recruitment recurring in future years, they are likely to need to reduce their intakes relative to their 2008-09 baseline in a way which offsets the over-recruitment in 2009-10.'

6.   This circular letter provides further guidance on our approach.

Guidance for institutions

7.   We will not provide guidance to institutions on how they should recruit – this is properly a matter for institutions themselves. Our guidance merely provides information on what the HEFCE funding implications of their recruitment may be. Institutions should consider carefully what recruitment strategy may be most appropriate for them. For example, if institutions take steps in 2010-11 to offset their over-recruitment in 2009-10, they may avoid another reduction in HEFCE grant for that 2009-10 over-recruitment, but this may also have other consequences, such as:

  • unviable class sizes for (some of) the 2010-11 intake
  • volatility in student cohort sizes from year to year
  • a loss of fee income, and possibly HEFCE holdback, in a future year: once the increased cohort recruited in 2009-10 has left the institution, the smaller cohort recruited in 2010-11 will remain. On the assumption that the student number control limit still applies in that future year, institutions would not be able to offset the effects of that smaller cohort by increasing FT UG intakes again in that year.

8.   In adjusting funding again for institutions that over-recruit in a particular year and do not offset it in the following year, we will take the following approach:

  1. We will monitor the extent to which institutions act to offset their over-recruitment in the following year and will adjust funding accordingly as necessary. We will not normally continue to monitor this in further years, but reserve the right to do so and to take further action if we believe institutions are not taking appropriate steps to control their recruitment. This means that, in general, an institution may face adjustments to grant for up to two years for any one instance of over-recruitment in one year, although we reserve the right to extend this where we consider circumstances warrant it. These adjustments will not be consolidated into our calculations of recurrent grant, but will be applied separately each year as necessary.
  2. The extent to which an institution might need to offset over-recruitment in a following year, to avoid a further HEFCE grant reduction, will reflect the proportion of the excess student numbers recruited in the previous year that we estimate will still be studying on similar programmes in that following year. We will calculate this proportion using individualised HESA or ILR data.
  3. Where institutions do not sufficiently offset their over-recruitment from the previous year, we will reduce their grant. This will be at a rate of £3,700 for each excess student recruited, or such other rate as may be separately specified by BIS.

9.   Annex A provides a worked example to explain this approach further. We believe our approach strikes an appropriate balance by recognising that institutions should not gain an advantage in future years by recruiting beyond specified limits, while grant reductions of £3,700 (which reflect the average cost incurred to the public purse of providing student support) will exceed the fee income retained by the institutions in any one year and thus provide a significant disincentive for over-recruitment. Our approach also avoids significant complexity from monitoring recruitment changes over an extended period.

10.   We will give institutions an opportunity to appeal for mitigation before confirming any such grant reductions.

Yours sincerely

Sir Alan Langlands
Chief Executive


Notes

  • The grant letter may be read in full at www.hefce.ac.uk.
  • The definition of the population covered by the new control is given in the 24 February letter, which is available at www.hefce.ac.uk.

Date: 9 June 2010

Ref: Circular letter 11/2010

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

Enquiries should be directed to:

relevant HEFCE institutional team