1. This document summarises our provisional allocations of recurrent funding for teaching, research and knowledge exchange, and our student number control allocations, for institutions for the academic year 2013-14.
2. The overall budget we have set for the 2013-14 academic year is £4,472 million. This budget reflects the second year of the progressive shift of HEFCE grant to the student support budget, to meet the cost of increased tuition fee loans under the Government’s new finance arrangements for higher education. While HEFCE teaching grant is being reduced, the overall resource rate for teaching is set to increase as a result of these higher tuition fee loans. The total HEFCE grant comprises:
- £2,325 million for recurrent teaching grant
- £1,558 million for recurrent research grant
- £160 million for knowledge exchange, through Higher Education Innovation Funding (HEIF)
- £429 million for earmarked capital grant and other non-recurrent special funding.
3. HEFCE will invest to ensure a high-quality student learning experience. Our funding will support Home and European Union (EU) students in all years of study. We are continuing to provide funding for students who entered under the previous fee and funding regime (‘old-regime’ students) at broadly the same level as before. Meanwhile, we are increasingly focusing funding for students under the new fee and funding regime (‘new-regime’ students) on areas where costs incurred by universities and colleges cannot be met entirely by tuition fees, or where it is in the public interest that vulnerable provision receives additional support.
4. We wish to support institutions to adjust to the new finance arrangements for higher education, to minimise the administrative burden and to avoid unnecessary instability in the interest of students. Allocations to institutions are changing significantly between academic years, as we phase out funding for old-regime students and phase in funding for new-regime students. We are also routinely revisiting allocations for each academic year as we receive more up-to-date data on the numbers of old- and new-regime students in the year. These arrangements mean there is inevitably some complexity in our funding methods and processes, and in our data requirements. However, we consider that our approach to recalculating teaching allocations is the most appropriate way to balance the need to pay grant from the beginning of the academic year before student numbers are known, with the need to ensure, in the interests of fairness and accountability, that eventual allocations reflect the actual numbers of students in the year. We will look to simplify this approach as soon as we can, when funding changes between years become smaller in scale.
5. We are maintaining our commitment to funding high-cost and strategically important subjects, student opportunity and small and specialist institutions. We are also continuing to recognise the importance of postgraduate provision, by providing additional funding for taught postgraduate students within our high-cost teaching model. This consolidates the interim allocation we provided last year.
6. Although HEFCE’s grant for teaching is continuing to reduce in 2013-14, we believe that the majority of institutions remain in strong financial health thanks to good management in the sector, and that the regulated fee limits for full-time undergraduates are generally sufficient to allow institutions to maintain or increase their income. We are maintaining budgets and allocation methods for research funding, providing a large level of stability and predictability in allocations of research grant.
7. We are directly funding an additional 19 further education colleges in 2013‑14 as a result of a recent invitation to bid for full-time undergraduate places.
Funding for teaching
8. There are some significant changes to HEFCE teaching grant, following government reforms to the finance arrangements for higher education, and to the way in which student numbers are controlled from 2013-14.
9. The main changes to teaching grant for 2013‑14 relate to:
- The continued phasing-out of teaching grant for old-regime students and the phasing-in of funding for new-regime students in high-cost subjects. This results in the most significant change to HEFCE funding for most institutions in 2013‑14, although the overall impact will be very different because of the additional tuition fee income institutions will receive. Funding for new-regime students in high-cost subjects has been extended to certain subjects in price group C, and also consolidates additional funding for postgraduate taught students provided in 2012-13 through an interim allocation.
- A review of targeted and other recurrent teaching allocations. Many of these are continuing in 2013-14 and will be paid in relation to old- and new-regime students, but some are being phased out.
10. The changes to HEFCE teaching grant will affect institutions in different ways. The speed of transition for individual institutions to the new finance arrangements depends on the average length of their courses: those with shorter average course lengths will move more quickly to the new funding environment. The overall impact on institutions will depend on:
- The extent to which they are able to compensate for the loss of HEFCE grant by charging higher fees (after waivers).
- The extent to which they are able to maintain, or increase, student numbers.
- Their ability to attract funding from other sources, including other HEFCE grants such as for research.
- The strength of their balance sheet, in particular their cash position.
11. The allocations of teaching grant that we are announcing are provisional, and the main allocations for old- and new-regime students will be recalculated to reflect actual student numbers in the year. We are continuing the three-stage process to calculate and review these allocations, so that they eventually reflect actual numbers of old- and new-regime students in the year. This iterative process will apply to any allocation that is initially informed by forecast student numbers for 2013-14. Final allocations for 2013-14 will be confirmed in the light of the end-of-year individualised student data for 2013-14.
12. Our grant letter of 11 January 2013 from the Department for Business, Innovation and Skills (BIS) gave only indicative recurrent teaching funding figures for the 2014 15 financial year (although the recurrent research and HEIF figures up to 2014 15 were confirmed). In order to announce funding for the 2013 14 academic year, which has a four-month overlap with the 2014 15 financial year, we have assumed that our allocation for the 2014 15 financial year is as indicated in the BIS grant letter. If we receive information regarding our grant for the 2014 15 financial year which suggests this assumption is no longer appropriate, we reserve the right to review our recurrent teaching and special funding allocations for the 2013 14 academic year. We would do this to smooth any change in funding for institutions that might be necessary by 2014 15.
Other recurrent grants: research and knowledge exchange
13. The total recurrent funding for research is £1,558 million. The ring-fenced settlement for science and research means that we will be able to maintain overall funding at this level, in cash terms, until 2014-15. This is the same cash total as for 2011‑12 and 2012-13. The budgets for each stream of research funding are being maintained at 2012-13 levels and there are no changes to the research funding methods in 2013-14.
14. Mainstream quality-related research (QR) funding for each institution will be at the same cash level as in 2012-13, as this allocation is based on data from the 2008 Research Assessment Exercise (there may nevertheless be changes for individual institutions as a result of transfers between them). Allocations of QR funding for National Research Libraries have also been maintained in cash terms. All other research funding allocations will reflect updated underlying data, so institutions will see changes in these funding streams.
15. Total funding for knowledge exchange through HEIF is £160 million. Allocations totalling £150 million per annum for the four year period 2011-12 to 2014-15 were announced in ‘Higher Education Innovation Funding 2011-12 to 2014-15: Policy, final allocations and request for institutional strategies’ (HEFCE 2011/16) and are repeated in this publication. The balance of £10 million is a supplement to enable existing knowledge exchange strategies to be enhanced where there is evidence that the current cap on funding is a constraint to institutions’ support of economic growth. This has not yet been allocated: its distribution will be confirmed at a later date.
Funding agreement requirements: the student number control
16. Because the main teaching grant allocations will be recalculated from first principles through the three-stage process, we no longer have as many funding agreement requirements as in previous years. There remain three funding agreement requirements affecting student numbers for 2013-14:
- The student number control, applying to all institutions.
- The medical intake target, representing the maximum intake to full-time undergraduate courses that lead to first registration as a doctor.
- The dental intake target, representing the maximum intake to full-time undergraduate courses that lead to first registration as a dentist.
17. There are a number of important changes to the student number control arrangements for 2013-14. Most of these arise from recent guidance from Government, particularly that allocations should better reflect student choice. Others follow our consultation in ‘Student number controls and teaching funding: Consultation on arrangements for 2013-14 and beyond’ (HEFCE 2012/04). In particular:
- Institutions have more flexibility, following the guidance in our grant letter from BIS which allows them limited scope to exceed their student number control allocation without incurring a reduction to their HEFCE grant.
- The exemptions list has been expanded, to include grades of ABB at A-level and certain other entry qualifications that, for the purpose of determining a student number control allocation, we treat as equivalent to, or higher than, ABB. This means that students with these entry qualifications do not count against the student number control allocation.
- In general, students who are topping up from a full-time foundation degree or a full-time HND to an honours degree no longer count towards the student number control allocation.
- We have allocated 5,000 places under the ‘core and margin’ policy. A large majority of these places have been distributed formulaically to institutions charging lower average tuition fees (after fee waivers) and meeting other criteria of quality and demand.
18. Excess recruitment may result in additional student support costs for the Government, which it may meet by reducing the grant it pays to HEFCE. To reduce this risk, HEFCE will reduce the grant it pays to any institution that exceeds its student number control allocation by more than the additional flexibility allows. The rate at which grant will be reduced for each excess student recruited will be confirmed in the light of any further guidance from BIS, but in the meantime institutions should plan on the basis that a similar approach will be followed as in 2012-13 – that is:
- For institutions that charge average fees after fee waivers of up to £6,000, a rate of £5,000.
- For institutions that charge average fees after fee waivers (according to an Access Agreement with the Office for Fair Access) of more than £6,000, a rate of £1,000 less than that average fee.
19. The reduction may be repeated in subsequent years, to whatever extent we consider the excess students recruited in 2013-14 continue to contribute to excess student support costs at the institution.
20. The medical and dental intake targets are also maxima: institutions should ensure they do not exceed them. We may take further action against institutions that continue to do so. We will not count students recruited in excess of the student number control allocation plus the additional flexibility, or those recruited above medical or dental intake targets, towards our funding of new-regime students in high-cost subjects: this will apply to all years of study relating to the excess numbers recruited.
21. No action is required in response to this document.