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Executive summary


1. This document summarises our provisional allocations of recurrent funding for teaching and research to institutions for academic year 2011-12.

Key points

2. The total HEFCE grant available for the 2011-12 academic year is £6,507 million. The total includes recurrent funding of £4,339 million for teaching (of which £142 million is for widening participation and £264 million for teaching enhancement and student success); £1,558 million for recurrent research; £150 million for knowledge exchange; and £30 million for moderation funding, to smooth the most significant year-on-year reductions to teaching and research grant. We are providing a further £223 million for earmarked capital grants and £207 million for special funding.

3. We announced in February 2011 that we were making reductions of £190 million to recurrent grant for 2010-11, largely because of cash reductions to our grant for the 2011-12 financial year, which has a four-month overlap with the 2010-11 academic year. The £190 million comprises:

  1. £122 million as a pro rata reduction to teaching grants, other than funding for widening participation and improving retention.
  2. £27.6 million as a pro rata reduction to research grant.
  3. £40 million in estimated grant reductions arising from institutions' student numbers in 2010-11 and from data audits and reconciliations.

4. The reductions to 2010-11 grant amount to 2.5 per cent of our previously planned budget for the year. The funding that we are allocating for 2011-12 constitutes a further reduction of £750 million (10.3 per cent) compared to the final budget for 2010-11, or £940 million (12.6 per cent) compared to the 2010-11 budget previously planned in October 2010. However, £255 million of this overall reduction is due to the withdrawal of short-term elements of special funding and the University Modernisation Fund. If these are excluded, the underlying reduction compared to the October 2010 budget is £685 million (9.5 per cent).

5. When compared with the allocations for 2010-11, published in October 2010, the 2011-12 allocation represents:

  • a 6.5 per cent cash reduction in recurrent grants for teaching, research, knowledge exchange (higher education innovation funding) and moderation. Within this overall cash reduction, teaching grant has reduced by 8.2 per cent and research by 2.8 per cent, while knowledge exchange funding has been maintained in cash terms
  • a 58.1 per cent reduction in cash terms in capital funding
  • a 33.2 per cent reduction in cash terms in special funding.

6. The overall funding settlement is a challenging one for institutions, although many have already taken measures to reduce their costs. The impact of the grant allocations affects universities and colleges differentially, though virtually all see cash reductions. To help institutions manage the most significant reductions in recurrent teaching and research grant we are providing moderation funding. However, some institutions will still see a significant reduction compared with last year due to the withdrawal of one-off funding that was provided for 2010-11 only (and which is not subject to moderation): most notably this applies to the University Modernisation Fund and last year’s moderation funding. We will continue to work with institutions as they adjust their activities to meet growing financial pressures and to smooth the transition to the new funding arrangements that will be introduced from 2012-13.

7. In 2011-12 we will directly fund 130 higher education institutions and 124 further education colleges. The institutional allocations announced in this publication show an average 4.1 per cent reduction in recurrent grant for teaching and research for the sector (this reduction is 3.4 per cent when the withdrawal of the University Modernisation Fund one-off allocation for 2010-11 is excluded).

8. All elements of teaching grant, with the exception of funding for widening participation and improving retention, have been subject to a cash reduction of 4.28 per cent. The total funding for widening participation and for improving retention is being maintained in cash terms, although £5 million of it remains to be allocated – this has been set aside for allocation by July to allow for changes by institutions to their underlying data. There are also reductions to teaching grant arising from the withdrawal of the University Modernisation Fund, the targeted allocation for foundation degrees, and the continuing phase-out of funding for students aiming for equivalent or lower qualifications.

9. Recurrent research funding has decreased by 1.1 per cent. We have reduced the weighting given in the mainstream quality-related research funding method to activity rated 2* in the 2008 Research Assessment Exercise sufficient to achieve the full reduction in research funding of £45 million since the 2010-11 allocations announced in October 2010, plus a redistribution of half of the remaining funding previously allocated through mainstream QR on the basis of 2* activity, towards activity rated 3* and 4*.

10. Total funding for knowledge exchange, through higher education innovation funding, is being maintained in cash terms at £150 million, but its distribution between institutions is not shown in this document. Indicative allocations were shown in 'Higher Education Innovation Funding 2011-15: consultation on a threshold allocation; and indicative institutional allocations' (HEFCE Circular letter 06/2011), but are still subject to consultation.

11. We are allocating £223 million for earmarked capital grants. The distribution of capital funding between institutions is being announced separately, but simultaneously, and is not included in this document (paragraph 83 provides further information).

12. We are also allocating £207 million in special funding for 2011-12. This represents a reduction of a third compared to the total of £310 million available for 2010-11 (excluding the University Modernisation Fund). The distribution of special funding between institutions is not shown in this document, but a breakdown of the main elements of grant is provided in Table 3.

13. The allocations in this document are provisional: we aim to finalise them in time for the funding agreements that are issued in July. Institutions should note that our grant lettersee note 1 from the Department for Business, Innovation and Skills (BIS) of 20 December 2010 gave only indicative recurrent teaching funding figures for the 2012-13 financial year (though the recurrent research and higher education innovation funding figures up to 2014-15 were confirmed). In order to announce funding for the 2011-12 academic year (which has a four-month overlap with the 2012-13 financial year), we have assumed that our allocation for 2012-13 is as indicated in the BIS grant letter. If we receive information regarding our grant for 2012-13 that suggests this assumption is no longer appropriate, we reserve the right to review our recurrent teaching and special funding allocations for the 2011-12 academic year.

14. We wrote to institutions on 31 January 2011 to announce the provisional student number control limits relating to full-time (FT) undergraduate (UG) and Postgraduate/Professional Graduate Certificate in Education (PGCE) students for 2011-12. Our grant letters to institutions of 14 March confirm the limits for 2011-12, although these may be revised formulaically for individual institutions in the light of finalisation of other grant changes – in particular, the allocation of FT UG employer co-funded additional student numbers and incorporation of any transfers of FT UG student numbers requested by institutions. We will notify institutions as soon as possible of any changes to their limit.

15. We will monitor each institution's compliance with the student number control that we have specified for them. Where we find that an institution has exceeded its limit, this will result in a reduction to grant, which may be applied in the 2011-12 and/or 2012-13 academic year. This will be at a rate of £3,750 for each student above the limit, or such other rate as may be separately specified by BIS. This reduction will be repeated in subsequent years to the extent that the institution continues to contribute to excess student support costs. In addition, where institutions over-recruited in 2009-10 and did not sufficiently offset this in 2010-11, or where they exceeded their student number control limit for 2010-11, they will need to offset this in 2011-12 if they are to avoid any repeat of the grant reductions that were applied. This offset will reflect the proportion of the excess students recruited that we expect will continue their studies in 2011-12. We will give institutions an opportunity to appeal for mitigation before finalising any such grant adjustments.

Action required

16. No action is required in response to this document.


  1. Grant letters to HEFCE from the Secretary of State for Business, Innovation and Skills can be read in full.

Date: 1 March 2011

Ref: HEFCE 2011/07

To: Heads of HEFCE-funded further education colleges, Heads of HEFCE-funded higher education institutions, Heads of universities in Northern Ireland

Of interest to those
responsible for:

Finance, Planning

Enquiries should be directed to:

HEFCE higher education policy advisers