Dear Vice-Chancellor or Principal
Formula Capital allocations for teaching and research 2015-16
1. This letter sets out formula capital grants under the Capital Investment Framework (CIF) for the financial year 2015-16. It includes allocations to higher education institutions (HEIs) and directly funded further education and sixth-form colleges (FECs) for the Teaching Capital Investment Fund (TCIF) and to HEIs for the Research Capital Investment Fund (RCIF).
2. Following receipt of the annual grant letter from the Department for Business, Innovation and Skills (BIS), in February 2015 the HEFCE Board agreed that £90 million should be distributed through TCIF (which includes £10 million for science and engineering teaching laboratories) and £194 million should be distributed through RCIF in financial year 2015-16. RCIF is provided from the Science and Research budget, but is in two elements. It comprises:
‘HEIs Research Capital England’
‘Research Capital England’
3. In March 2015 the Board agreed the allocations listed at Annex A1. These funds are available to support capital investment in learning and teaching, and research.
How the 2015-16 allocations were calculated
4. In addition to setting the capital budget for the 2015-16 financial year, in February the Board agreed the methodology for allocation of formula teaching and research capital to institutions through CIF2 in financial year 2015-16. While the development of the allocation methods will result in some redistribution between institutions, the main reasons for changes to TCIF and RCIF compared to 2014-15 allocations arise from the use of the most up-to-date data and the overall changes to the budgets. Further details are provided below.
Methodology for allocating teaching capital
5. The revised methodology for TCIF, agreed by the Board in February 2015, maintains the approach of allocating funding based on teaching resource (HEFCE recurrent teaching grant plus assumed fee income), but uses the most recent student data and reflects changes to the finance arrangements for higher education introduced from academic year 2012-13. We plan to use this approach for 2015-16 only and are planning to review this methodology for future years.
6. For TCIF in 2015-16 £80 million has been allocated pro rata to the sum of each institution’s:
- Estimated 2015-16 resource for teaching. This comprises HEFCE recurrent teaching grant (including for student opportunity and other targeted allocations), plus an assumed fee income of £6,000 per full-time equivalent student (FTE), based on the HEFCE-fundable FTEs from the 2014-15 Higher Education Students Early Statistics (HESES) survey from HEIs and the Higher Education in Further Education: Students (HEIFES) survey from FECs.
- Estimated resource for non-fundable students on initial teacher training (ITT) courses leading to Qualified Teacher Status (QTS), using FTEs from the 2013-14 HESES and HEIFES surveys. These FTEs are treated for these calculation purposes as falling within price group C2 (consistent with other HEFCE-fundable ITT students) and eligible, where relevant, for the targeted allocation for students attending courses in London, as well as attracting an assumed £6,000 in fee income in their resource total.
7. A further £10 million has been allocated for science and engineering laboratories pro rata to the estimated teaching resource for price group B activity only. A London targeted allocation has been included in the resource total where applicable.
8. It should also be noted that franchised-out FTEs are included in the calculations.
9. Where the operation of these formulae would result in an overall TCIF allocation of less than £10,000 for 2015-16 we have allocated no funding.
10. Further information for HEIs regarding the aims of TCIF can be found in the March 2011 publication ‘Capital Investment Fund 2: Capital allocations for learning and teaching 2012-13; Capital allocations for research 2011-12 to 2014-15’ (HEFCE 2011/08).
Methodology for allocating research capital
11. The Board also agreed to update the methodology for RCIF to reflect the most recent data on research income from the UK Research Councils for the HEI Research Capital England element, and the outcomes of the 2014 Research Excellence Framework (REF) and the most recent data on research income from selected sources for the Research Capital England element.
12. The £86 million for the HEI Research Capital England element is distributed to HEIs in proportion to their research income from the Research Councils2. An average of three years (2011-12 to 2013-14) of research income from the Research Councils was used to calculate this element. This is taken from the Higher Education Statistics Agency’s Finance Statistics Return (HESA’s FSR) Table 5b Column 1, ‘Net research grants and contracts’ (Head 6 in 2011-12 and 2012-13, Head 8 in 2013-14).
13. The £108 million for the Research Capital England element is distributed to HEIs in proportion to the sum of 2015-16 HEFCE quality-related research (QR) funding3 and the 2013-14 research income from the following sources:
- UK-based charities4
- UK central government bodies/local authorities, health and hospital authorities5
- UK industry, commerce and public corporations6
- EU sources (both EU government bodies and other EU sources)7.
14. As with our TCIF allocation, where the operation of these formulae would result in an overall RCIF allocation of less than £10,000 for 2015-16 we have allocated no funding.
Allocation methodology for directly funded FECs
15. Historically, directly funded FECs and HEIs have had a slightly different allocation methodology for formula teaching capital grants8. In February the HEFCE Board agreed that the TCIF methodology outlined above should apply to all institutions, ensuring consistency between them.
16. The allocations for each college are listed at Annex A: a number of colleges do not meet the £10,000 threshold and will receive no allocation.
Grant payments and monitoring
17. We will notify institutions separately about the payment profile for these allocations.
18. HEIs will be required to undertake monitoring in 2017 for funding allocated during 2015-16. Further details will be published nearer the time.
19. In April 2017 we will request information from directly funded FECs on how the funds have been used, via a monitoring return. These returns may be subject to audit. If we are not satisfied that the funds have been used for the purposes described in HEFCE Circular letter 14/2014, we may seek to reclaim some or all of the funding provided.
Complying with state aid
20. HEIs and FECs must ensure compliance with European Union state aid law in their own uses of this capital funding. In the case of any breach of state aid law we may be required to recover all or some funding, together with interest. HEFCE may also be required to withhold funding or aspects of funding to any institution which is subject to a state aid enquiry or which has an outstanding recovery notice against it. Guidance on state aid is available from https://www.gov.uk/state-aid. If in doubt, institutions should seek legal advice.
21. Most HEIs have been informed whether they have satisfied the requirements of CIF; no further action is required from them. A small number of institutions that have become directly funded HEIs since 2014-15, may still have outstanding requirements relating to their compliance with CIF. We will write separately to those institutions about the associated conditions that we are applying to their allocations.
2016-17 and beyond
22. The 2015 grant letter from BIS has not provided indicative figures for formula capital funding for 2016-17 and beyond. However, we will be reviewing our priorities, methodology and monitoring arrangements for any future formula capital funding over the coming year. We will write to institutions as soon as we are able to provide details about the arrangements for any capital funding from 2016-17.
Professor Madeleine Atkins
1 Some HEIs have not met the requirements of CIF1 and CIF2. In these instances we have allocated only 60 per cent of their original formula-based allocation. Further information about the priorities of CIF is available in HEFCE 2011/08.