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Dear Vice-Chancellor or Principal

Funding for universities and colleges for 2012-13 to 2014-15: Board decisions

1. I am writing to you to provide early notification of the decisions taken by the HEFCE Board on funding for universities and colleges for the 2014-15 academic year, and decisions taken on the approach to recalculating elements of recurrent teaching grant for academic years 2012-13 and 2013-14. On Monday 24 March 2014, institutions will be able to download their recurrent grant letter and tables for each year from the HEFCE extranet. The content of these documents will be embargoed until 0001 on Thursday 27 March 2014: we will publish full information about our allocations to all institutions on that date.

2. The Board has made decisions on the funding to be distributed in the 2013-14 and 2014-15 academic years in the light of the funding for each financial year (1 April to 31 March) announced in the grant letter to HEFCE from the Department for Business, Innovation and Skills (BIS) of 10 February 2014. That letter made changes to the funding previously announced for the 2013-14 and 2014-15 financial years, as well as providing indicative figures for the 2015-16 financial year.

Recurrent funding for research and knowledge exchange

3. Recurrent funding for research and for knowledge exchange (through Higher Education Innovation Funding) has been held constant in the BIS grant letter to HEFCE and is protected through the science and research ring-fence. We are therefore maintaining these budgets for the 2014-15 academic year at the same level as last year: that is, £1,558 million for research and £160 million for knowledge exchange.

Capital funding

4. Capital funding is determined by the amounts in the BIS Grant Letter and is allocated on a financial year basis. The total for 2014-15 is £440 million and includes £160 million for the third year of the UK Research Partnership Investment Fund, £106 million for the Research Capital Investment Fund and £129 million for the Teaching Capital Investment Fund. Teaching and research capital investment funding will follow the same allocation process as in 2013-14.

5. For the 2013-14 financial year, the BIS grant letter shows a £20 million reduction to recurrent teaching funding grant, balanced by an equal increase to teaching capital funding. The Board has agreed that we will distribute the £20 million of capital funding to institutions through the usual formula this March.

Recurrent funding for teaching

6. For the 2014-15 financial year, the recurrent teaching grant incorporates a net reduction of £45 million, but within this reduced total, the BIS grant letter also states that the Government has included the following requirements:

  1. To support an increase of up to 30,000 full-time undergraduates.
  2. To absorb the Access to Learning Fund (ALF).
  3. To support a National Collaborative Outreach Network.

7. These additional commitments mean that the underlying reduction to the 2014-15 teaching grant baseline is considerably more than the net reduction of £45 million. In the light of this, the HEFCE Board has had to take difficult decisions on how reductions to teaching funding should be made, and has taken a carefully considered approach to doing so.This includes how funding for the 2014-15 financial year should be split between the 2013-14 and 2014-15 academic years.

8. The grant letter from BIS was received later than expected. To ensure that institutions have time to plan and implement reductions in expenditure that result from it, the Board has decided that the split of funding for financial year 2014-15 between the 2013-14 and 2014-15 academic years should be applied in such a way that there will be no in-year reduction to teaching funding for 2013-14 (except for the changes set out in paragraphs 12-14 below). This means that the majority of the BIS grant letter reduction needs to be made in the 2014-15 academic year and the rest in the 2015-16 academic year.

9. In implementing reductions for the 2014-15 academic year, the Board agreed that the necessary first step was to make savings, where contractually HEFCE is able to do so, in funding that does not go directly to support universities, colleges or students. The Board has agreed that the total funding that we provide for such national facilities and initiatives (formerly known as special funding) should be reduced by £13 million in 2014-15.

10. Given the continued ring-fence for research and knowledge exchange funding, the remaining savings for the 2014-15 academic year have to come from the recurrent teaching grant. The BIS grant letter asks that we deliver savings in ways that protect as far as possible high-cost subjects (including science, technology, engineering and mathematics (STEM)), widening participation, and small and specialist institutions. Given this guidance, our Board has agreed that we will implement a reduction of 5.85 per cent to most teaching grant budgets, including the main allocations for new-regime students in high-cost subjects (but see paragraph 11 below), for widening participation, and for old-regime students. However, the following exceptions apply:

  1. The reduction to the allocation for high-cost distinctive provision at (commonly ‘small and specialist’) institutions will be limited to 3 per cent.
  2. The 5.85 per cent reduction to widening participation (student opportunity funding) will be taken entirely from the funding for full-time and part-time widening access, and not from the elements for improving retention or for supporting disabled students. Then as part of the £25 million funding available to develop the National Collaborative Outreach Network, we will provide £3 million in 2014-15 to support the national roll-out of a data tracking service, the Higher Education Access Tracker (HEAT). This will track participants on widening participation outreach activities, and their entry to, and progress through, higher education. The remaining £22 million will be distributed across the 2014-15 academic year (£9 million) and the 2015-16 academic year (£13 million) to fund the development of the national network. We will write to institutions about this programme of work in due course.
  3. We will make no reduction to the new allocation for Erasmus and other study years abroad (announced in ‘Finance arrangements for Erasmus and other student mobility years abroad from 2013-14’, HEFCE Circular letter 14/2013). This is because this allocation is linked to the Government’s student support regulations, and is part of a package of support, along with a regulated low tuition fee limit, from 2014-15. 

11. Finally, as a temporary measure for 2014-15, we are providing an additional one-off £15 million in funding for new-regime students in high-cost subjects. The grant letter from BIS reported that the Government was making available additional funding ‘over four years, from 2015-16, to allow HEFCE to increase the unit of funding, supporting institutions to deliver high quality STEM provision’. The £15 million is provided through one-off funding to avoid a dip in the rate of grant for 2014-15, before the indicative increase from 2015-16 becomes available (if confirmed).

Recalculating recurrent teaching grant for 2012-13 and 2013-14

12. The grant letters that we issue to institutions on 24 March 2014 will include revised allocations of recurrent teaching for 2012-13 and 2013-14, under the three-stage recalculation process that we have adopted to manage the transition from the old fee and funding regime. These revised allocations will incorporate several measures to address issues and inconsistencies that we have identified in institutions’ individualised student data returns for 2011-12 and 2012-13. These measures include:

  1. Making assumptions, for the allocations to be announced in March 2014, about how many students at higher education institutions (HEIs) in 2012‑13 would not have completed their year of study, where this was undetermined at the time the data were originally submitted. Later this year, we will require all institutions to submit information about the completion of such students, so that this can replace our assumptions in the final allocations we announce in October 2014.
  2. Recalculating 2011-12 rates of grant used to inform funding for old-regime students in all subsequent years to adjust for where HEIs appear to have changed students’ fundability status or attribution to price groups after 2011-12. We explained the need for this in institutions’ funding agreements (paragraph 32 of the 2013 funding agreement and paragraph 19 of the 2012 funding agreement with HEIs; similar paragraphs were included in the funding agreements with further education colleges).
  3. Undertaking further audit and reconciliation of higher and further education institutions’ data to identify and address issues and inconsistencies. This may inform updated grant allocations in October 2014.

13. Further information about the approach to recalculating teaching grant allocations will be provided in our grant notifications to institutions on 24 March 2014.

14. Finally, our grant letters to institutions of 24 October 2013 warned that we may need to adjust the scaling factors used to ensure total allocations remain within budget, when these are recalculated in March 2014. We confirm that this is now necessary, although the overall changes to institutions’ teaching grants may be positive or negative depending on how their student data have changed relative to the sector as a whole. The scaling factors are amended as follows:

  1. Final allocations of 2012-13 teaching grant will retain the same overall budget as previously. However, our calculations will incorporate a reduction of 1.4 percentage points to the scaling factors that applied in that year for old- and new-regime students.
  2. Adjusted allocations of 2013-14 teaching grant will retain the same overall budget as previously. However, our calculations will incorporate a reduction to the scaling factor of 2.5 percentage points, which includes the 1.4 percentage points in paragraph 14a above.

Yours sincerely

Professor Madeleine Atkins

Chief Executive

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Date: 14 March 2014

Ref: Circular letter 04/2014

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