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Executive summary

Purpose

1. This document summarises our provisional allocations of recurrent funding for teaching, research and knowledge exchange, and our student number control (SNC) allocations, for institutions for the academic year 2014-15.

Key points

2. The overall budget we have set for the 2014-15 academic year is £3,883 million. This budget reflects the third 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:

  • £1,582 million for recurrent teaching grant
  • £1,558 million for recurrent research grant
  • £160 million for knowledge exchange
  • £583 million for national facilities and initiatives and capital funding.

3. In addition, we will distribute £50 million on behalf of the Department for Business, Innovation and Skills (BIS) for the National Scholarship Programme.

4. 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) while we increasingly focus 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, particularly high-cost and strategically important subjects, student opportunity, and small and specialist institutions.

5. There are some significant changes to HEFCE teaching grant compared with last year, following government reforms to the finance arrangements for higher education, and to the way in which student numbers are controlled. The most significant change to teaching grant for most institutions relates 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. The overall impact on each institution will vary because of the additional tuition fees they will receive.

6. 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 2014-15. Final allocations for 2014-15 will be confirmed in the light of the end-of-year individualised student data for 2014-15.

7. Recurrent funding for research and knowledge exchange is stable. The budgets for each of the separate elements within the total for research remain unchanged in cash terms since 2013‑14. The allocations for each institution for knowledge exchange (provided through Higher Education Innovation Funding) will be the same cash figures as for 2013-14.

8. Our grant letter of 10 February 2014 from BIS gave only indicative funding figures for the 2015‑16 financial year. In order to announce funding for the 2014‑15 academic year, which has a four-month overlap with the 2015‑16 financial year, we have assumed that our allocation for the 2015‑16 financial year is as indicated in the BIS grant letter. If we receive information regarding our grant for the 2015‑16 financial year which suggests this assumption is no longer appropriate, we reserve the right to review our funding allocations for the 2014‑15 academic year. We would do this to smooth any change in funding for institutions that might be necessary by 2015‑16.

The student number control

9. There are some significant changes to the SNC policy for 2014-15 following announcements in our grant letter of 10 February 2014 from BIS, the Government’s Autumn Statement for 2013, and our consultation ‘Student number controls: Consultation on arrangements for 2014-15 onwards’ (HEFCE 2013/10), published in May 2013. In particular:

  1. The Government has made 30,000 additional places available for 2014-15 compared to its previous spending review assumptions for 2013-14, and has announced that the SNC will be removed from HEFCE-funded providers from 2015-16.
  2. We have increased SNC allocations for institutions that recruited strongly (above their SNC allocation, but disregarding recruitment above the top of their flexibility range) in 2013-14 and reduced allocations for those that significantly under-recruited.
  3. All institutions have increased flexibility to recruit above their SNC in 2014-15, by either 6 per cent of the (non-medical or dental) student numbers in the previous year who count against the SNC or are exempt from it, or 15 students, whichever is the higher. We have also provided additional flexibility to ensure institutions with a reduction to their SNC due to under-recruitment have an opportunity to recover their position.
  4. The exemptions list has been expanded, to include certain combinations of qualification types where grades are considered, for SNC purposes only, to be equivalent to ABB at A-level or higher. The combination of qualification types involves A-levels with certain BTECs, OCR or Cambridge Pre-U qualifications.

10. 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 flexibility allows. Over-recruitment in any given year will have an impact on the student support budget not just in that year but in future years as students continue their studies. The arrangements in the event of over-recruitment are therefore designed to lead to grant reductions for up to three years (depending on the average length of courses and student continuation rates at institutions), reflecting the longer-term cost implications arising from over-recruitment in any given year. Because there will be no SNC for 2015-16, there is no opportunity to offset over-recruitment in 2014‑15 by recruiting below an SNC allocation for 2015-16.

Action required

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

Date: 27 March 2014

Ref: HEFCE 2014/05

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

Of interest to those
responsible for:

Finance, Planning

Enquiries should be directed to:

HEFCE institutional teams or e-mail recurrentgrant@hefce.ac.uk