February 2011 | ref: Circular letter 05/2011
1. This circular letter:
2. We do not require a response to this letter.
3. Universities and colleges will be told their provisional grant allocations for 2011-12 on 14 March 2011 under embargo until 0001 on 17 March, when the full grant announcement will be published. We will hold a press conference on 16 March.
4. Our grant letter from BIS confirmed that the total HEFCE grant available for the 2011-12 financial year (1 April to 31 March) is £6,530 million. The change compared to 2010-11 is shown in Table 1.
|Final funding for 2010-11 (£M)||Funding for 2011-12 (£M)||Change (£M)||Percentage change|
Higher Education Innovation Fund
total other elements
Notes on Table 1: funding figures taken from the annex to the 20 December 2010 grant letter. They exclude the matched funding scheme for voluntary giving and the Access to Learning Fund, which are BIS budgets that HEFCE administers on its behalf; and for BIS loans to institutions on the upfront costs of graduate contributions, which are expected to total £2,600 million. The 2010-11 comparison figure also excludes £152 million provided only in 2010-11 for the University Modernisation Fund.
5. The BIS grant letter also provided indicative funding figures for the 2012-13 financial year. These show a further reduction in cash terms of £830 million to recurrent teaching grant, which incorporates the estimated effect in that year of the transfer of HEFCE grant to student support to help meet the cost of tuition fee loans under the new student finance regime being introduced from September 2012.
6. Further reductions to teaching funding may be needed for 2012-13, beyond the phase-out of funding relating to students who will be subject to the new fee regime. This will not be known until our allocation for 2012-13 is confirmed (this may be subject to review in the light of demands on BIS’s student support budget) and we have received future student data returns from institutions.
7. The grant letter also confirmed funding for research and the Higher Education Innovation Fund (HEIF) up to 2014-15 and provided indicative figures for research capital up to 2014-15.
8. Our grant letter from BIS announces funding by financial year, but we allocate funding to institutions by academic year (1 August to 31 July). The overall budget we have set for the 2011-12 academic year is £6,507 million. This is an underlying reduction compared to the previously planned total for 2010-11 of £685 million (9.5 per cent). In addition, short-term funding of £255 million is ending for some special funding programmes and the University Modernisation Fund (UMF), which was for 2010-11 only. These bring the total reduction to £940 million.
9. To smooth the transition to the new funding arrangements from 2012-13, we are looking to protect teaching activity as far as possible. We are maintaining funding for widening participation (WP) and improving retention, and reducing other elements of teaching funding pro rata for the academic years 2010-11 and 2011-12. We are also providing moderation funding in 2011-12 to institutions most adversely affected by reductions in their recurrent grant; given the funding constraints this has to be limited but it is an increase on last year, recognising the grant letter’s guidance to help smooth the transition.
10. The increase in student numbers in 2010-11 is consistent with the growth planned by the Government. In line with the guidance in the BIS grant letter, the HEFCE Board has decided on allocating student number control limits that will allow entrant numbers in 2011-12 to be maintained at the same level as in 2010-11. The Council has written to institutions this week setting out their provisional student number limit for the year.
11. For the spending review period to 2014-15, the Government is maintaining in cash terms the overall ring-fenced research funding made available by BIS through its various partner bodies, including HEFCE. There is, however, a reduction in the research funding available via HEFCE for the 2011-12 financial year because of the Government’s other spending commitments in this area.
12. In allocating research funding for the 2011-12 academic year, we are taking account of the steer in our grant letter that we should selectively fund on the basis of only internationally excellent and world-leading research. We are increasing the amount of funding allocated in respect of research quality rated 4* and 3*, and reducing that for 2*. The clear implication of the steer in our grant letter is that, by 2012-13, activity rated at 2* should no longer be counted in allocating mainstream quality-related research (QR) grant.
13. It remains important that universities and business continue to work more closely together so we are maintaining HEIF funding in cash terms. Building on past success, we will be allocating HEIF by formula to the most effective performers and will consult on an eligibility threshold to apply in our allocations.
14. We are continuing to reduce the proportion of funding allocated outside recurrent grant for teaching and research. Consequently special funding is reducing from £330 million in 2010-11 to £207 million in 2011-12, as previous Board decisions to phase out programmes are implemented and other programmes come to an end. Capital funding is reducing from £532 million in 2010-11 to £223 million for 2011-12, a cash reduction of 58 per cent. Our first priority in allocating capital grants is to meet the commitment to reinstate the funding arising from the £60 million reduction in the Teaching Capital Investment Fund made in 2010-11.
15. Some of the reduction to grant in the 2011-12 financial year falls within the 2010-11 academic year, because of the four-month overlap between them: we pay 40 per cent of the total grant for the year in this period. As we warned institutions when we notified them of our allocations for 2010-11, it is therefore necessary to review the allocations that we have previously made for this year. The Board has therefore decided that:
16. The cash value of these reductions for each institution will be confirmed in March 2011, once we have incorporated changes to teaching grant arising from institutions’ student numbers in 2010-11 and from some data audit and reconciliation exercises (which we estimate will result in a further reduction of approximately £40 million for 2010-11). The reductions will be implemented through our monthly grant payments to institutions between April and July 2011.
17. The Board has decided to allocate £6,507 million for the 2011-12 academic year. This includes:
18. The overall budget of £6,507 million is an underlying reduction in cash terms of £685 million, or 9.5 per cent, compared to the previously planned total for 2010-11. In addition, short-term funding of £255 million is ending for some special funding programmes and the University Modernisation Fund (UMF), which was for 2010-11 only. These bring the total reduction to £940 million. The changes to budgets are summarised in Table 2 and set out in full in Table 4.
|Element of grant||2010-11 (£M)||2011-12 (£M)||Total (£M)|
|Recurrent teaching grant (excluding UMF)||-162*||-180||-342|
|Recurrent research grant||-28||-17||-45|
|Sub-total: recurrent grant||-190||-186||-376|
|Learning and teaching capital||-112||-112|
|Research grant capital||-197||-197|
|Sub-total: capital grant||-309||-309|
|Underlying change to recurrent and capital grants||-190||-495||-685|
|University Modernisation Fund||-152||-152|
|Special funding (excluding UMF)||-103||-103|
|Sub-total: ending of short-term allocations||-255||-255|
* This includes the £122 million pro rata reduction explained in paragraph 15a and the £40 million adjustment explained in paragraph 16.
19. A number of changes to recurrent teaching grant for 2011-12 were previously expected. These include:
20. We also need to provide for some additional commitments for 2011-12, including:
21. Notwithstanding these changes, further reductions to teaching grant are necessary to remain within the funding available. The Board has decided that the £122 million reduction to recurrent teaching grant for 2010-11 (see paragraph 15) will be consolidated into 2011-12 and supplemented by a further reduction of £175 million. As before, this will be calculated pro rata to all elements of teaching grant for 2011-12 with the exception of funding for WP and improving retention within TESS. This is a further 4.3 per cent reduction to those elements of teaching grant, compared to the totals for 2010-11.
22. The recurrent research grant total of £1,558 million is a reduction in cash terms of £45 million compared to the 2010-11 allocations published in October 2010 ('Recurrent grants for 2010-11: Revised allocations', HEFCE 2010/30). This is a further reduction of £17.4 million after adjusting for the pro rata reduction of £27.6 million for 2010-11 (see paragraph 15). In allocating research funding for 2011-12, the Board has decided that:
23. These decisions mean that the budgets within QR grant will be:
|Element of research grant||2011-12 Budget total (£M)|
|Mainstream QR (including London weighting)||1,085.2|
|QR charity support fund||197.5|
|QR business research element||63.7|
|QR Research Degree Programme supervision fund||205.2|
|QR funding for National Research Libraries||6.5|
24. We have published this week 'Higher Education Innovation Fund 2011-2015: Board decisions on method and funding' (HEFCE Circular letter 04/2011) outlining the decisions of the HEFCE Board on funding for HEIF, the method to be used to make institutional allocations and the timetable for implementation.
25. HEIF allocations will not be finalised in time for the March 2011 recurrent grant announcement. We will provide indicative allocations in March, when we will also consult on a proposal for an eligibility threshold to apply to the allocations (based on a minimum level of external income counted in the HEIF formula). This responds to the guidance in the grant letter that HEIF should be allocated only to the most effective performers. We will provide final allocations and call for institutional strategies against which funds are released in May 2011.
26. We are continuing to reduce the proportion of funding allocated outside recurrent grant for teaching and research. Consequently special funding is reducing from £330 million in 2010-11 to £207 million in 2011-12, as previous Board decisions to phase out programmes are implemented and other programmes come to an end.
27. Capital funding has reduced from £532 million in 2010-11 to £223 million for 2011-12, a cash reduction of 58 per cent, significantly more than the overall reduction of one-third in the BIS capital funding budget.
28. The HEFCE Board decided, after setting aside capital funding for the Joint Information Systems Committee, the Strategic Development Fund, the Open Education Resource programme and for a second Revolving Green Fund, that:
29. The HEFCE Board will consider how the capital funding in paragraphs 28a to 28c will be distributed at its meeting in March. We will announce the allocations and the basis on which they have been made by the end of March.
30. Table 4 summarises all the changes to grant by 2011-12: items shown in italics apply to 2010-11 grant and are consolidated into 2011-12; the remainder apply additionally from 2011-12.
|Element of grant||£M|
|Total changes to HEFCE funding by 2011-12||-940|
|Recurrent teaching (other than UMF)|
|Consolidation of 2010-11 pro rata reduction||-122|
|Grant adjustments arising from student numbers in 2010-11 and data audits and reconciliations||-40|
|Targeted allocation for foundation degrees||-12|
|Reduction in ELQ transitional funding||-18|
|Fully funded and employer co-funded ASN commitments for 2011-12||+9|
|Provision for recovery of funding in 2011-12 by those with consolidated holdback in 2010-11||+13|
|Support for institutions shifting the balance of their recruitment towards SIVS||+4|
|Other minor net adjustments||-1|
|2011-12 pro rata reduction||-175|
|Total recurrent teaching funding (excluding UMF)||-342|
|2010-11 pro rata reduction||-28|
|Further reduction to total required in 2011-12||-17|
|Total reduction in recurrent research funding||-45|
|Change to moderation funding||+11|
|Total change to recurrent grant (excluding UMF)||-376|
|JISC capital budget||-9|
|Funding for Revolving Green Fund||-3|
|SDF capital budget||-37|
|Capital to directly funded further education colleges||-8|
|Teaching Capital Investment Fund||-81|
|Research Capital Investment Fund||-171|
|Underlying change to recurrent and capital grants||-685|
|Removal of UMF funding||-152|
|Special funding (excluding UMF)||-103|
|Sub-total: ending of short-term allocations||-255|
31. Early aggregate student data returns for 2010-11 show that there has been an increase in HEFCE-fundable full-time equivalent (FTE) student numbers in all years of study of approximately 24,000, largely attributable to increases in full-time undergraduates. This is consistent with the growth in fully funded places of 20,000 planned by the Government (comprising 10,000 FTEs included in our grant letter of 22 December 2009 and the further 10,000 made available through the UMF).
32. For 2010-11, following a request from Government, we introduced a student number control to reduce the risk that over-recruitment by institutions might lead to a reduction in HEFCE grant by the Government to meet unplanned student support costs. Aggregate student data returns for 2010-11 show that the sector as a whole recruited within the limit set, although, subject to appeal, 37 institutions (15 higher education institutions and 22 further education colleges) have not. As requested in the BIS grant letter of 20 December 2010, we will reduce grant for institutions that have over-recruited at a rate of £3,750 per excess student and this applies also where institutions have not sufficiently offset in 2010-11 the over-recruitment that occurred in 2009-10. Grant adjustments will be confirmed after decisions on appeals have been made.
33. The BIS grant letter explains that entrant places into higher education for autumn 2011 should remain at the level on offer in autumn 2010. This means continuing to provide for the 10,000 additional entrant places made available to the sector through the UMF for 2010-11 only, so that those places can be carried forward for a further year. We are therefore redistributing these UMF places. Some are accounted for by existing commitments for ASNs for 2011-12: some 600 fully funded and up to 3,800 employer co-funded FTE numbers; the balance will be available to institutions through a pro rata increase of 2 per cent to their student number control limits for 2011-12. We have written to each institution this week to set out their provisional limit for 2011-12. Institutions are invited to respond by 16 February 2011 if they do not wish to receive their full share arising from this 2 per cent uplift, or if they otherwise wish to appeal for a change to their limit.
34. We anticipate that the Government's forthcoming White Paper will set out its future priorities for HEFCE grant and any changes to the regulatory framework governing higher education that may be necessary to support its policies, ensure public finances are appropriately managed and protect the interests of students.
35. Our grant letter stated that for 2011-12 and 2012-13 the Government expects the Council will continue to perform its current role on its existing statutory basis. A significant priority for us within the funding we have available in this spending review period will be to support a smooth transition for institutions to the new higher education financing arrangements. We will be working with partners, including BIS and the Student Loans Company, to achieve this, because less funding will be routed to institutions as grants via HEFCE.
36. In future, we expect that tuition fee income will become the major source of funding and therefore the route for supporting particular institutional developments. As a result, the funding environment for higher education from 2012-13 will be very different and all our approaches to funding will be subject to review. Institutions should not assume that past practices and commitments in relation to recurrent teaching, teaching capital and special funding will continue.
37. On teaching funding, we anticipate a phase-out of the existing method and its allocations and a phase-in of a new method and allocations. The details of both will be subject to consultation later this year (after the White Paper has been published). Much of this phasing is likely to reflect the changing proportions of students recruited before and after September 2012: those subject to the existing and new fee regimes respectively. However, changes to some allocations may be phased differently. This phasing-out of the existing funding method also has implications for our approach in 2011-12. For example:
38. On recurrent research funding, the BIS grant letter of 20 December 2010 confirmed our budget for all four years of the spending review period within the science and research ring fence and we are therefore planning on the assumption that QR grant will be held in cash terms at £1,558 million in each academic year 2011-12 to 2014-15. The grant letter provided guidance on research funding priorities; in particular, it stated:
'You should take forward funding both for research and for support for the next generation of researchers, by selectively funding on the basis of only internationally excellent research, and protecting funding leveraged from external sources such as the charitable and business sectors.'
39. The Board has noted this advice and the clear implication that, by 2012-13, activity rated at 2* should no longer be counted in allocating mainstream QR grant. We will be consulting institutions later this year on the development of our research funding method, with particular reference to our support for the next generation of researchers.
40. Any questions about this letter should be addressed to HEFCE institutional teams.
Sir Alan Langlands
|Enquiries should be directed to:||HEFCE institutional teams|
Page last updated 19 April 2013