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Dear Vice-Chancellor or Principal

Recurrent teaching grant from 2015-16: Confirmation of arrangements

1. In November 2013 we sent ‘Recurrent teaching grant from 2015-16’ (HEFCE Circular letter 30/2013), to notify institutions of our proposals for distributing recurrent teaching grant from 2015-16 onwards. Our aim was to simplify the process that had been in place since 2012-13 to manage the transfer of a sizeable proportion of higher education funding from HEFCE grants to student fees. We invited comment on our proposals, which informed the plans that were put to the HEFCE Board.

2. This letter confirms the decisions taken by the HEFCE Board, and outlines our plans for implementation.

Summary of proposals previously announced

3. In HEFCE Circular letter 30/2013, we outlined the following proposals for our funding allocations for 2015-16. 

  1. They should no longer be subject to the three-stage recalculation process that applied for 2012-13 to 2014-15. Instead, they should be informed by student numbers in 2014-15.
  2. They should include a main allocation for high-cost subjects and a supplementary allocation for London weighting that treat all students as if they were new-regime.
  3. They should include a transitional allocation (which will be phased out in future years) based on forecasts of old-regime student numbers, using rates of grant that reflect the difference between the current old-regime and new-regime rates for each institution.

4. For subsequent years, we proposed that we would base our funding calculations on the previous academic year’s student numbers (so that, for instance, funding for 2016-17 would be based on 2015-16 numbers), continuing to treat all students as new-regime. The supplementary funding for old-regime students would be provided for a period of up to three years (to 2017-18), based primarily on our forecast of the number of old-regime students studying with each institution at that time. This funding would reduce annually as the numbers of old-regime students decreased.

5. We believed that the proposals outlined would achieve the following.

  1. Provide earlier certainty to institutions about their HEFCE teaching grants, because allocations would be informed by student numbers in the previous rather than the current academic year.
  2. Still allow for significant dynamism in institutions’ income for teaching, as the bulk of that income would be derived from the tuition fees paid by students in the year.
  3. Reduce the accountability burden on institutions arising from the current three-stage recalculation process.
  4. Simplify our aggregate student numbers surveys (the Higher Education Students Early Statistics (HESES) survey for higher education institutions and the Higher Education in Further Education: Students (HEIFES) survey for further education colleges), as we would require fewer data to be returned within them.
  5. Establish a funding system that would reflect a ‘steady-state’ position in the categorisation of students. This is a prerequisite for any move away from historical definitions and classifications of students that may be desirable in future.

6. The full detail of the proposals can be found in HEFCE Circular letter 30/2013. 

Summary of feedback received and change to proposals

7. In response to our proposals, we received feedback from 20 institutions and from one representative body. The majority of respondents supported our proposed approach. Many commented particularly that the changes to HESES and HEIFES were welcome, as was the certainty of entering into an academic year with a greater degree of certainty over funding, as opposed to recalculation after the end of the academic year.

8. Some institutions were concerned that a move to funding on the basis of historical data might cause difficulties if they were to expand their higher education provision in high-cost subject areas. This was felt to be potentially more likely as a result of the removal of the student number control from 2015-16 onwards. However, we do not believe it appropriate in general that our future mechanism should allow institutions to submit a forecast of higher numbers to HEFCE and expect funding on that basis. This would undermine our proposed simplification of the process and would effectively continue the three-stage recalculation process.

9. In general, we believe that institutions should be able to manage any short-term consequences of the time-lag between the reporting of student numbers and their counting towards HEFCE allocations for the following year. For students in price groups B and C, by far the largest contribution to institutions’ finances will come through students’ tuition fees, which will be received within the year. The impact on HEFCE grant will be less significant in comparison, and will depend (given our fixed budget) on changes at each institution relative to the sector as a whole.

10. However, we acknowledge that there might be isolated examples where an exceptional circumstance meant this issue could cause particular disadvantage. In such a rare case, provided the institution met certain criteria, we would be prepared to adjust the student numbers we counted for funding, for a specified period of time, to mitigate the issue. There is precedent for this approach in the ‘miscellaneous adjustments’ we have made to take account of transfers between institutions and other exceptional circumstances.

11. Institutions will have the opportunity to ask us to adjust the student numbers used in their funding calculation to reflect such specific circumstances. This would involve a discussion with the institution, and require at least one of the following exceptional circumstances to apply.

  1. There is a significant funding implication. In reality, this is likely to mean that significant differences are expected between the historical data for the number of price group A (clinical) students and those in the year for which funding is allocated. We would not expect this category to include, for example, institutions which merely had plans to expand student numbers in other price groups.
  2. There are agreed significant transfers between institutions (in which case we could reduce the funding for one institution and increase it for another).

12. We intend to make one further amendment to our allocation method, relating to the targeted allocation for part-time undergraduates.

13. As with the main allocations for old- and new-regime students and for students attending courses in London, we have been phasing changes to this allocation to reflect the changing balance of old- and new-regime part-time undergraduate students each year. Since 2013-14, part-time undergraduates have counted towards this allocation in all price groups (if they are old-regime), or (if new-regime) in price groups A, B and C1 only. The total allocation is therefore gradually reducing, as each successive cohort finishes its studies and funding for students in price groups C2 and D is phased out.

14. We intend that from 2015-16, this allocation should also reflect a ‘steady-state’ position, and thus be made pro rata to part-time undergraduates in price groups A, B and C1 only. However, we will supplement the transitional allocation for old-regime students each year to provide the equivalent allocation for any old-regime part-time undergraduates in price groups C2 and D, reflecting our forecast of such numbers for 2015-16 and beyond. This change is necessary to maintain consistency with the other teaching allocations, and because we will not be disaggregating student numbers by old- and new-regime status in our HESES and HEIFES surveys after 2014.

Disaggregation of students aiming for Qualified Teacher Status

15. We are also making one minor amendment to the data collection proposals presented previously.

16. We previously indicated that, for HESES14 and HEIFES14 only, we would ask for a disaggregation of students, separately by old-regime and new-regime status, between the following price groups and subject areas:

  • A (for higher education institutions only)
  • B
  • C1
  • C2
  • D
  • Media studies
  • Sports science and leisure studies
  • Initial Teacher Training (leading to Qualified Teacher Status (QTS))
  • In-service training (INSET) (QTS). 

17. Following further consideration, HESES14 and HEIFES14 will no longer include separate price groups for Initial Teacher Training leading to QTS, and INSET courses for those with QTS. Students who would have been included in these price groups in previous years should instead be reported in price group C2 and, if they are Home and European Union students, will continue to be non-fundable.

18. We anticipate publishing our full guidance for HESES14 and HEIFES14 according to our normal schedule in autumn 2014.

Next steps

19. Institutions should note that recurrent funding allocations remain conditional upon affordability in light of our annual grants from Government, and any other spending priorities that the Board may consider in light of future HEFCE budgets.

20. We indicated that we would provide an opportunity to review, through a web facility, various statistical summaries derived from institutions’ Higher Education Statistics Agency (HESA) and Individualised Learner Record (ILR) data for 2013‑14. This will include details of our estimation of the numbers of old-regime students continuing at each institution in 2015-16 and later years, which we will use to inform the levels of supplementary funding for old-regime students. Institutions should use the web facility to help ensure that their HESA and ILR data are correct.

21. We anticipate that this facility will be available to institutions on Thursday 4 September 2014, giving institutions the opportunity to comment on our proposed use of their HESA and ILR data to inform estimates of old-regime students for 2015-16 and beyond. We expect that any requests for amendments to our forecasts of old-regime students will be considered after the March 2015 recurrent grant announcement, and incorporated as appropriate into the supplementary allocation for old-regime students by October 2015.

Yours sincerely

Nolan Smith

Head of Finance and Investment

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Date: 19 August 2014

Ref: Circular letter 29/2014

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:

Rob Stroud, tel 0117 931 7499, e-mail t-funding@hefce.ac.uk