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Department for Education and Employment

The Rt Hon David Blunkett MP

Sir Michael Checkland
Chairman
Higher Education Funding Council for England
Northavon House
Coldharbour Lane
BRISTOL
BS16 1QD

29 November 2000

Dear Sir Michael

HIGHER EDUCATION FUNDING FOR 2001-02 AND BEYOND

Introduction

1. In today’s knowledge economy, higher education is one of the main drivers of national prosperity. This will be increasingly true as the 21st century unfolds. Higher education generates the research, knowledge and skills that underpin innovation and change in the economy and wider society. As I said in my speech at the University of Greenwich earlier this year, higher education is now at the heart of the productive capacity of the new economy and the prosperity of our democracy.

2. As we increase the quality and standard of education at secondary schools and post-16, so the demand for higher education from young people will increase. A change in culture, greater emphasis on lifelong learning, and recognition of the importance of continually up-dating skills will lead to many more mature students wanting to return to higher education or to enter it for the first time. This will be true of those seeking part-time study as much as full-time undergraduates. Our universities and colleges must be ready to respond to these new demands.

Key Priorities for Higher Education

3. I attach particular importance to the following:

  • Widening participation in higher education is the main priority and I look to the Council to help the sector work towards social inclusion both nationally and in the local community.
  • Widening participation will not become a reality unless it has the full backing of all parts of the sector. Institutions should therefore form purposeful partnerships with FE institutions and schools as well as with business and other community groups, as set out in the Excellence Challenge consultation document.
  • I welcome the Council’s progress in developing the Higher Education Reach-Out to Business and the Community (HEROBC) programme. I want to see a consolidation of the schemes and programmes aimed at enhancing HE-business links and I encourage the Council to work with DfEE, DTI, other partners and particularly the new Local Learning and Skills Council to develop the links between entrepreneurship and innovation on the one hand, and the development of the skills to apply them on the other.
  • Foundation degrees bring together these aims. They are central to the Government’s strategy of making HE more responsive to employers’ needs and widening access.
  • I want to re-emphasise that it is important for the continuing world-class reputation of our higher education system that higher education institutions can continue to recruit and retain high quality staff over a range of disciplines. In addition to recruitment and retention of high quality academic staff, there should be recognition of the efforts of non-academic staff in maintaining high standards of teaching and research.

Higher Education Funding [1]

4. Following years of severe cuts in the amount of funding per higher education student under the previous government, the National Committee of Inquiry into Higher Education under Lord Dearing recommended that higher education institutions should be asked to deliver only a one per cent real terms reduction in unit costs up to 1999-2000. The Government acted upon that recommendation. Now we are able, for the first time in well over a decade, to ensure that funding per student will increase in real terms in 2001-02 and further expansion will be fully funded in the following two years.

5. Since July, I have announced increases in funding: for research; for the Excellence Challenge; for widening participation; for start-up and capital funding for the e-universities project and other capital investment; to develop vocationally-orientated Foundation Degrees; and to help the sector modernise and better reward the people who contribute so much to the success of higher education in this country. These increases in funding allow progress to be made towards the vision of higher education I outlined in my University of Greenwich speech. They mean that the total publicly planned funding for higher education in 2001-02 will be over £5.8 billion, an additional £412 million (7.6% in cash terms) compared to 2000-01 with a further £268m (4.6%) and £298m (4.9%) available in 2002-03 and 2003-04. As in previous guidance letters, the recurrent funding for 2002-03 and 2003-04 is indicative only, although details of planned third year funding should help the sector to plan better for the future.

6. The higher education science research infrastructure will receive a further £1 billion boost in funding over the two years 2002-03 and 2003-04 from the Government and the Wellcome Trust. The sector will also benefit from increased Research Council funding via the Science Budget which includes an extra £250 million over three years for cross-Council projects on genomics, e-science and basic technology.

7. As I have continued to make clear, I do not expect institutions to charge additional fees above the regulated fee level ("top-up" fees). Under the Teaching and Higher Education Act 1998, I have imposed a condition on the Council's grant for the past two financial years, requiring it in turn to place a condition on the funding it allocates to institutions providing higher education that they should not charge "top-up" fees. The same condition will be imposed on the Council's grant for 2001-2002.

Taking Forward Priorities

Widening Participation

8. My policies to widen access to higher education encompass greater support for mature and part-time students as well as young people on full time courses, and I am also keen that the appropriate support is available to students with learning difficulties and disabilities. I welcome the work already undertaken by the Council to address these issues but I expect to see a step change in participation rates for both these categories of students in the near future.

9. To help deliver this aim, I announced on September 14 this year that an additional £151m would be spent in the next three years to tackle the under-representation in higher education of young people from disadvantaged backgrounds. The Excellence Challenge is a substantial commitment of resource: it demands substantial progress as a result.

10. I look to the Council to strengthen the existing arrangements to ensure that this new money, £61m to HEIs over 3 years (including additional money for Opportunity Bursaries) leads directly to change. All institutions must fully demonstrate the action they have taken to widen participation so that we can assure ourselves that funds are spent effectively and institutions have to plan, monitor and evaluate the work that they are doing. An important part of this will be to incorporate widening participation into the life and work of all HE institutions rather than just some of them. I expect the Council to support this incorporation process and to be rigorous in ensuring that funding to widen participation has a discernible impact on the experience of young people before and after they enter higher education. Voluntary activity, covered later in this letter, will be a very important part of this process.

11. Notwithstanding progress on recruitment, institutions should focus on retaining students, particularly those from disadvantaged backgrounds. Widening access to higher education must not lead to an increase in the number of people who fail to complete their courses. I therefore expect to see the Council bear down on the rate of ‘drop out’. The evidence shows there are unacceptable variations in the rate of ‘drop out’ which appear to be linked more to the culture and workings of the institution than to the background or nature of the students recruited. It is therefore time for much more substantial work to be done on identifying best practice and bringing pressure to bear on those institutions whose performance falls significantly below their benchmark. I want to see within the next few months a report on a programme of work and action plan developed by the Council in conjunction with institutions.

12. Access and Hardship Funds have increased significantly over the last four years, and are central to supporting our policies on widening access to higher education and ensuring that students have the financial help they need to complete their studies. I have provided a significant package of additional measures for both mature and young students from disadvantaged backgrounds, designed to attract more of them into higher education. It is critical that institutions support these measures by effective targeting of such students both before they enter higher education - so that they are aware of the financial help available to them and can be given early commitments of funding - and once they are there, so that they receive help at the right time.

13. I particularly want to draw attention to the new Opportunity Bursaries. We have made clear our commitment to increasing the numbers of students from less well off backgrounds who enter higher education. I believe a key factor in achieving this is to provide these young people with the necessary confidence to make the transition into higher education. Institutions must ensure that academic and admissions staff, as well as student finance administrators, play a full part in promoting the Bursaries as part of their outreach work with schools and colleges. I also look to institutions to ensure they have arrangements in place to support these students once they have taken up their places, so that they are given the best possible start.

14. Following publication of the Department’s report of last year’s review of Access Funds and Hardship Loans, and also our guide “Access and Hardship Funds: good practice in higher education”, I recognise that many institutions are now re-examining the way in which they administer these funds and the advice they can offer to students. Nevertheless, I look to the Council to continue to emphasise to institutions the importance I attach to this element of the widening access programme and the priority I expect them to give to the effective delivery of the Government’s access measures.

15. In addition to the £2.7m I have already provided this year to support administration of the access measures, I am setting aside a further £1m for administration from 2001/02. I welcome the funding which the Council has also agreed to put towards this from its own resources, based on a percentage of the total amounts in the Hardship, Fee-Waiver and Access Bursary Funds in 2001-02. But institutions should not look to public funding alone, and I ask the Council to encourage institutions to look to other resources available to them to support the effective and efficient delivery of these measures. The Council should set clear objectives for institutions on the improvements in service and increased efficiency expected to result from this increase in resources of £15m, £20m and £23m respectively over the three years of the Spending Review [2].

16. As the Council is aware, the Department is currently considering the level of resources to be set aside to support HE students in FE institutions. The amount of funding to be transferred to the FEFC/LSC in respect of these students has yet to be determined. The Council should also note that the amounts set out above for Access and Hardship Funds may be revised once I have taken final decisions about how much needs to be channelled through student support.

Expanding Participation

17. When I announced the Government’s spending plans in 1998, I set a target to increase the number of students in higher education in 2001/02 by 100,000 compared to 1998/99. In doing so, the Government said that anyone who has the capacity to benefit from higher education should have the opportunity to do so. The Government still firmly supports that commitment and the principle of lifelong learning. This year the Government also confirmed its aim that 50% of those between the ages of 18 and 30 should have the opportunity to benefit from higher education by the end of the decade.

18. Revised expansion plans now allow for progress to be made towards the achievement of these different but complementary aims and targets. Since I announced planned targets for 2001-02 in November 1999, there has been a transfer of Open University student places to the Scottish Higher Education Funding Council reducing the number of places funded by the HEFCE; and the introduction of the 50% participation aim has enabled us to reconsider the pace at which we need to expand the numbers of people participating in higher education.

19. In my speech at the University of Greenwich, I emphasised the role Foundation Degrees will play in rationalising and enhancing the quality of provision below first degree level. The consortium model for development and delivery of Foundation degrees means that HEIs will need to build even stronger partnerships with employers and the FE sector. Foundation Degrees can be implemented at and through the work place, not simply at institutions. They will lead the diversification of HE provision, and for that reason, the over-subscription of the prototype competition, which is due in no small measure to the hard work of staff at the Funding Council, is welcome.

20. I expect therefore that the Council, in distributing student places in 2001-02, will give priority to good quality bids for foundation degree places. You may also wish to note that, from 2001-02, I have asked that you treat foundation degrees as a separate category for collecting and reporting data about higher education student numbers. I propose to advise the Council of the numbers and balance between places for Foundation Degrees and HND, HNC, PGCE, BEd and similar qualification for 2002-03 and 2003-04 in next year’s grant letter.

21. The targets for 2001-02 announced in November 1999 remain unchanged at an additional 45,000 student places, although I am proposing that the mix of students be changed, giving rise to an increase to 22,800 full time equivalent places in 2001-02 (2,000 of which will be allocated to the Teacher Training Agency). Our plans still require that the majority of new students will be predominantly mature and/or studying part-time, and increasingly for Foundation Degrees and HNDs, HNCs, PGCEs, BEds and other similar qualifications. Within the total of 45,000 places, I propose the following broad guidance:

  • an extra 12,500 full-time students, of which 2,000 will be first degree, 1,500 will be post-graduate and 9,000 will be for other qualifications;
  • an extra 32,500 part-time places, of which 4,500 will be first degree, 4,500 will be post-graduate and 23,500 will be for other qualifications.

22. Over the two years 2002-03 and 2003-04, planned expansion will equate to a further 28,500 full time equivalent places (some 14,300 FTEs in each financial year of which TTA will be allocated an additional 800 FTE,s in 2002-03 only).

Quality and Standards

23. As access to higher education is expanded, it is vital that standards are maintained and enhanced. I welcome the progress made by the Quality Assurance Agency towards introducing a new method of academic review, including recognition of the need to keep bureaucracy to a minimum and to make use of a light touch where appropriate. The Council should continue to work with the QAA to reduce the bureaucratic burden of quality reviews on institutions whilst maintaining standards. The Council needs to consider the experience of the first round of reviews in Scotland under the new methodology and should ensure that the standards of higher education are maintained at a consistently high level and that swift action is taken where weakness is found.

24. I continue to attach importance to the reform of arrangements for handling student complaints and appeals. I ask the Council to continue to ensure that all institutions have an independent external element within their procedures for handling student complaints.

Support for Research and Science

25. The Government is committed to invest in research in universities and I expect the Funding Council at least to maintain research funding in real terms over the next three years. I should also like the Council to take account of the findings of the cross-cutting review of science and research, which was carried out as part of the recent spending review, and which was published on 23 November.

26. The £1bn Science Research Investment Fund (SRIF) in 2002-03 and 2003-04 includes £300m via the Funding Council for institutions in England, and £375m via the Office of Science and Technology (OST) across the UK, of which the majority will also go to England. The balance of the funding includes the £225 million from the Wellcome Trust as part of the Science Research Infrastructure Fund, and £100 million will be retained by the OST to modernize Research Council institutes and to contribute to large national projects. I want the Funding Council, in partnership with the OST, to develop a mechanism for distributing the funding for English institutions. It should take account of research excellence and the volume of research carried out in institutions, and should involve minimal bureaucracy. It will be for institutions to decide their own investment priorities. In drawing up their strategies they should consider the provision of incubation facilities for new enterprises. SRIF funding should meet 75% of total investment institutions undertake under the scheme, and universities should be expected to provide 25% from their own or third-party resources except where investment is undertaken by two or more institutions in collaboration.

27. Alongside this, I have provided to the Council an extra £45 million over the three years in support of the current fund for restructuring and collaboration. This will allow this fund to be doubled, providing a greater emphasis on the rationalisation of research.

28. I am also announcing additional funding for the Arts and Humanities Research Board totalling £16million over the two years up to 2003-04. This will help further to develop research capability and provide for higher postgraduate awards. When I write to the British Academy I will confirm that, from 2001/02, stipends for new postgraduate research students in the arts and humanities are to be raised in line with those for science, increasing to £9,000 by academic year 2003/04.

Links with Industry and the Community

29. The development of the Higher Education Reach-Out to Business and the Community (HEROBC) programme is a successful first step towards embedding a third mission for universities, namely to work with industry and the wider community alongside their teaching and research. Building on this success, the Council should work with the DTI - specifically, the OST - to incorporate current HEROBC projects within a wider Higher Education Innovation Fund. This will also include an expected £80m from OST over three years.

30. I am keen to ensure that the Innovation Fund continues and builds upon the aims of HEROBC that relate specifically to strengthening links between an institution and all sections of its local community. I will be making available an extra £5 million a year for 2002-03 and 2003-04 to support community work through the Innovation Fund. I want the Council to encourage higher education institutions, both singly and through their regional associations, to engage with RDAs and other regional and local organisations, including Government Offices, Local Strategic Partnerships, and Learning and Skills Councils, and to support and assist voluntary and community organisations.

31. One means of providing this support is through HE staff and student involvement in volunteering which I know is already a strong feature in many institutions. But there is further scope for students to participate in volunteering and community outreach work. I see such activity as intrinsically beneficial to all concerned and integral to the development of generic skills among students as well as higher education’s wider responsibilities to local communities. Consequently I want the Council to encourage universities and colleges to provide help and support to students who are giving so generously of their time and energy, and to develop recognition of these activities before entering as well as during courses. This is important and worthy of further deliberation with appropriate organisations and agencies at national and regional level.

32. I also invite the Council to consider ways in which work experience – of all descriptions – can be encouraged by institutions, and to assist in the development and implementation of recommendations by the Department’s newly established working group examining how to improve and expand work experience opportunities in higher education. I am, as expressed in my previous grant letter, keen to develop vocational and work-based modules within non-vocational degree courses – and to increase entrepreneurial skills where appropriate. I want the Council to work with universities on developing closer and better links with the world of work, working together in a way that that will benefit students, institutions and business. In particular I would like to see social sciences and arts faculties engage with areas of industry and business that have high growth potential to develop creative programs and opportunities for the future. This will involve encouraging higher education institutions to work with National Training Organisations to develop Graduate Apprenticeships, which incorporate a period of work experience for a wide range of business and industry sectors, and assist small businesses to deliver them to their employees.

33. The review of higher education careers services carried out by Professor Sir Martin Harris is also nearing completion. The review report is expected to make practical suggestions for improvements that can be made quickly so as to benefit as many existing students as possible. The Council will want to consider how it can assist institutions to restructure or enhance their careers services in the light of specific recommendations from the review.

e University and HE Capital

34. Capital investment plays an important role in supporting the delivery of the Government’s objectives to improve the standards of public service in education and employment, and raise educational attainment and the employability of the workforce. The establishment of the ‘e-Universities’ in the UK is contingent upon good information and communication technology (ICT) infrastructure; and further development of ICT is vital to enable Institutions to compete in the global market for higher education. I am making available to the Council £62 million for the start-up and capital costs of the ‘e-Universities’ project over the three years up to 2003-04. This project is intended to be a collaborative venture between HEIs and the private sector. Whilst investment from private sector partners will also be key source of capital, given the potential benefits to all participants, institutions will also need to determine how much of their own resources are needed for effective participation in this venture.

35. I am also looking to the Council to maintain levels of current capital investment in student access to IT and infrastructure capital up to 2003-04. I will be making a further £40 million available in the two years to 2003-04 for improvements to institutions' local area networks to facilitate an increase in docking stations and open access PCs; further digitization of material to meet growing demands for online information; and for a significant upgrade to the transatlantic link connecting with the Joint Academic Network, to allow increased access to the world's online information resources and to further facilitate international collaboration in research.

36. To meet existing capital commitments resulting from the provision of new medical schools and support new capital costs associated with further expansion in the number of medical students after 2001-02, I am asking the Council to make available from the infrastructure capital further capital funding for medical schools up to 2003-04.

37. In order to improve the fabric of the higher education estate and thereby to contribute to improved teaching and learning, I am providing additional funding to support the investment in ‘poor estates’ made by the Council over the past few years. An extra £41 million for this purpose will be available over the two years to 2003-04. This will complement further investment in both the research infrastructure and ICT.

38. The Government is planning to introduce a Special Educational Needs and Disability Bill in the next session of Parliament to make discrimination against disabled students unlawful. Students with disabilities have the right to expect reasonable access to educational facilities and to the services that educational institutions provide for their students. I am therefore announcing funding totalling £56 million over the two years to 2003-04 for use on improving access and to help institutions provide the necessary specialist equipment and support. The additional funding will help higher education institutions to meet their obligations to students and staff under the Disability Discrimination Act 1995 and to prepare for new legislation.

39. For each of these capital streams I expect the Council to ensure that systems are in place to motivate HEIs to make effective use of capital investment in support of their objectives. In particular, the Council should encourage and support the use of sound investment appraisal and procurement processes, including public-private partnership and PFI where these seem likely to offer value for money. Through this it should ensure that providers make a contribution towards the achievement of the Government’s Construction Clients’ Panel (GCCP) targets. The Council should offer the guidance it considers necessary on investment and procurement, as well as disseminating good practice. The Council should assure that it has the necessary information to reassure itself that capital funding provided from the public purse is invested soundly. The Council should continue to provide recurrent funding to support the costs of PPP/PFI.

Pay and Personnel

40. Within the overall additions to funding for higher education for the next three years, I have allocated £50 million in 2001-02, £110 million in 2002-03 and £170 million in 2003-04 for both academic and support staff pay. As I have already announced, I will expect this to be used in part to recruit and retain high quality academic staff in strategically important disciplines or areas and to help modernise the management processes in the sector. I should be grateful if the Council could inform me of the plans it has to allocate these funds and to monitor their impact. There will also be scope within the total resources available to reach a fair and negotiated settlement in relation to non-teaching staff who form an important part of the overall approach to the delivery of higher education and research capacity. Universities and colleges are expected to follow public sector pay policy by taking account of fairness, the need to recruit, motivate and retain staff, and affordability within the limits set by this letter.

41. As in previous years it is a condition of grant that the Council enables institutions to meet any additional costs for medical and dental schools arising from the Government’s award to NHS clinicians following the Doctors’ and Dentists’ Review Body recommendations.

42. In return for an investment of this size, I will be looking for evidence of improvements in human resource development and staff management. I am determined that equal opportunities for higher education staff must improve and welcome the Equality Challenge Unit you are setting up with the other funding councils and sector representative bodies. I look to the Unit to ensure that institutions deliver the improvements in monitoring and performance that they have agreed to in their equal opportunities policy statements. I look forward to hearing of rapid progress towards greater equality of opportunity for all groups of staff.

Other Issues

DfEE Higher Education Innovations Fund

43. During 2001-02, the Council will continue to manage for the Department the programme of higher education development that was launched in 2000 as the DfEE Higher Education Innovations Fund. The Department will, as previously agreed, transfer to the Council £5m for the programme in 2001.

Dance and Drama

44. The Dance and Drama Awards scheme offers over 300 higher education students a year the opportunity to exploit their talents and to enrich the cultural life of the country. I have already announced a ‘ring fenced’ grant to the Council of £5.4m for 2001-02 for Dance and Drama Awards but this figure, which is not included in the overall grant figures, is indicative and will be subject to confirmation at the review meeting of 2 February 2001. I want to see the most talented students continuing to benefit from higher quality training. The grant will enable the Council to continue to provide per capita funding at a level that reflects the average costs involved, taking account of student contributions to fees on the same basis as for other higher education courses.

Council Administration Costs

45. The Council’s administration costs are included in the recurrent provision shown in the annex. Figures for 2001-02 include provision for the additional costs associated with the Arts and Humanities Research Board, the 2001 Research Assessment Exercise and special initiatives to promote access to higher education and outreach to the community. Provision for administration costs will be:

Financial Year 2000-01 (£ million)
2001-02
HEFCE administration costs 12.4 14.5

46. I ask the Council to continue to make efficiencies and economies in its administration costs and to seek increased value for money. As usual, the Department will discuss with Council officers the allocation of administration costs in the coming year. The Council will also need to submit a bid for administration costs in 2002-03.

Best Wishes

 

DAVID BLUNKETT

Annex

Annex - provisional figures

Footnotes

1. From 2001-02 Government expenditure will move from a cash to a resource accounting basis of measurement. Details of funding in this letter are therefore on the new basis, more fully described in the White Paper ‘Better Accounting for the Taxpayer’s Money’ and the Treasury publication ‘Executive NDPBs Annual Reports and Accounts Guidance’. Our officials will be discussing shortly the ways in which these changes affect the Council.

2. Some of this funding will be channelled through student support rather than directly to HEIs. This is still being considered.


Communication from the HEFCE to higher education institutions

 

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