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Department for Education and Employment
The Rt Hon David Blunkett MP




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

23 November 1999

Dear Sir Michael

Higher Education Funding for 2000-01 and 2001-02

Priorities for Higher Education

1. The development of higher education is key to the development of Britain's economy. Economic growth is increasingly dependent on the generation and exploitation of knowledge. The trained people, research and scholarship which universities and higher education colleges produce provide the essential underpinning for continued prosperity. Higher education institutions also have a great deal to contribute to personal development and the development of human capital. And they have the key role of preserving and developing the social and cultural fabric of the nation. For all these reasons, the public investment in higher education now exceeds £7.4 billion annually.

2. Universities carry out a high proportion of the national effort in basic and strategic research. The results are good. In both volume and quality, Britain's research compares well with our economic competitors. But our competitors are often better at exploiting the knowledge that research generates, turning it into jobs and economic growth. Universities are well placed to make links with industry, and to demonstrate how knowledge can be used to develop new businesses and to revive old ones. This is equally true of increasing productivity which results from exploiting knowledge and the use of the new technology. While some universities do this effectively, more need to follow the lead of the best.

3. Universities have always produced graduates with specialist knowledge. But graduates also need the generic skills which most employers demand: team working, communication, and some understanding of the world of work. Some universities are already making sure their graduates have these skills, and can make an immediate contribution when they begin work. More could do so. Universities need to be aware of skill shortages in the economy, adjusting the number and type of the courses they offer in response. This is particularly the case for sub-degree qualifications; and for the continuous development of those already in work. Keeping skills and specialist knowledge up to date is just as important as initial training, particularly in an increasingly fast-moving economy that depends on its human capital. I am therefore asking Universities, as already indicated, to accelerate the development of vocationally orientated elements within all courses together with improved careers guidance and information. I will want to see evidence of increased capacity in these areas over the next twelve months.

4. Institutions need to ensure their places are open to all those in society who have the potential to benefit, particularly those from sectors of society which are currently under-represented. The personal benefits of higher education are as significant as those for the economy as a whole. Higher education institutions need to be active in recruiting students from under-represented groups and, during their courses, take care to ensure that their pastoral needs are met.

5. I also give high priority to the improvement of the standards of teaching and learning. The framework for quality assurance is being revised; institutions should aim at continuous improvement in the quality of what they offer students, and should have effective mechanisms for identifying and acting on students' views.

Additional Funding for Higher Education

6. I want the Higher Education Funding Council for England (HEFCE) to continue to develop universities and HE colleges so that they can develop their missions within the overall framework for higher education which has been set out above. I am making available additional funding to pursue these objectives.

7. Roger Dawe's letter of 8 December 1998 set out the details of the outcome of the 1998 Comprehensive Spending Review (CSR) for higher education and included detailed figures for the first two years of the CSR period. Following the announcements on higher education funding, I am now writing to confirm 2000-01 figures and give provisional figures for 2001-02, and also to offer guidance on the distribution of the HEFCE grant in the light of my priorities. Figures for 2001-02 will be confirmed in the course of 2000, taking into account how the Department's programmes are developing.

8. Following the significant increases in funding received by the higher education sector in 1999-2000 and 2000-01, a further £295 million is now being made available in 2001-02 compared with 2000-01. This represents a 5.4% cash increase on the funding available for 2000-01. Detailed figures are set out in the Annex to this letter.

Taking Priorities forward

Quality and standards

9. It is vitally important that we maintain the reputation of our universities as leaders in excellence. I greatly welcome the progress that has been made, with the support of the Council, in developing new arrangements for quality assurance. The arrangements will provide clear and comparable information to both maintain confidence in standards and enhance the quality of learning and teaching.

10. It is vitally important that we are able to quickly detect shortcomings in quality and standards and deal with them effectively. On 29 October, Baroness Blackstone announced new procedures and criteria to decide whether institutions should be granted the power to award degrees. I expect the Council to make full use of its existing powers to protect standards.

11. We need to constantly improve quality by effective quality assurance and support for good learning and teaching practices and for innovation. I welcome the Council's development of funding programmes that will encourage and support good practice at the institutional, subject and individual level; and its support for the start-up of the Institute for Learning and Teaching.

Increasing Participation

12. Anyone who has the capacity to benefit from higher education should have the opportunity to do so. Our commitment to this principle is reflected in our national target for 28% of the workforce to have a level 4 qualification (a degree or a higher level vocational qualification) by the year 2002 and the aim for participation by young people to reach 35% by 2002.

13. We are also increasing student places. On top of the extra 36,000 HE students in 1999/00 a further 10,000 part-time sub degree places (2,000 full time equivalent) have been added to the extra 25,000 HE students already announced for 2000/01. This will address the demand for places arising from the increase in learners coming through the University for Industry route.

14. The further significant increase in funding secured for the sector for 2001-02 will provide scope for an additional 45,000 student places (21,000 full time equivalent) in 2001-02, with the new students being predominantly mature and studying part-time in 2-year sub-degree places in FE colleges. Within the total of 45,000:

  • there will be an extra 12,000 full time students, 2,000 of these will be at first degree level, 9,000 will be at sub degree and an extra 1,000 post-graduates.
  • within the extra 33,000 part time places, 4,400 will be at first degree level, 23,500 at sub degree level and 5,000 at post-graduate level.

These figures also allow for a phased increase in medical undergraduate intakes, taking forward our commitment to increase the UK intake by 1,000 by 2,005 (beginning with 626 additional places by 2001).

15. I expect much of the expansion of student numbers to be through part-time and sub-degree courses with a strong vocational focus. Sub-degrees are already an important part of the Government's policies for increasing participation, raising the skills of the workforce and supporting lifelong learning. I also expect over half of the expansion in sub-degree places to be delivered through FE colleges. The Council should put effective mechanisms in place to monitor and ensure that these objectives are met in practice by institutions.


16. Universities need to produce graduates with both specialist knowledge and the generic skills they need and their employers need in the world of work. I want to see a further increase in the employability of all students completing higher education courses. Roger Dawe wrote on 13 September 1999 to ask the Council to include the extent to which graduates from each HEI gain employment, as a criterion when allocating additional student places. He also asked that HEIs further improve employability performance indicator for HEIs. I now ask the Council to make additional funds available for the enhancement and promotion of employment-related key skills in the teaching and learning of all students, including more work experience placements.

17. The Government is supporting this agenda through the development of Graduate Apprenticeship frameworks which are relevant to specific sectors of business and industry. I want the Council to encourage higher education institutions to offer Graduate Apprenticeships to their students based on the frameworks which will be available in September 2000 (on which further information will follow) and those developed thereafter as the initiative develops.

18. Small and medium enterprises (SMEs) have particular needs. I have announced that £5m will be available over the 2 years starting in September 2000 to support fee remission for the employees of SMEs who choose to study part time for a higher education award as part of a Graduate Apprenticeship. I expect that this money will be used to support the delivery and assessment of the work-based element of the Graduate Apprenticeship. Guidance on the technical issues surrounding this funding will be issued separately.

Widening access

19. Widening access to higher education is a key priority and critical to tackling social exclusion. I look to the Council to review and if necessary develop the funding formula to recognise success in the recruitment of students from disadvantaged backgrounds or facing particular challenges. I also want the Council to provide further development funds to link HE institutions with schools and colleges to encourage retention and progression through higher education, to target particular disadvantaged groups and mature students, and to support the promotion and dissemination of good practice. At the forefront of these funds should be childcare support and assistance to students with caring responsibilities

20. I support this commitment to widening access, and have announced improvements to student support arrangements, including remission of fees for part-time students who become unemployed after starting their course and for part-time students on benefits. In addition, from Autumn 2000 part-time students on low incomes will be able to obtain a loan of at least £500 to assist with the costs of their courses; the Department has allocated £30 million to support the new loans over the next two years.

21. The Department has carried out a Review of Access Funds this autumn. The Review has collected evidence of good practice in providing help to students through the Access Funds and in using the Funds to promote widening access. We need to build on these successes. The Review has, however, also shown that the quality of administration of Access Funds in institutions varies widely and that students are often not able to apply for nor receive help from the Access Funds in time. In some cases, applications are not thoroughly checked and decisions on how much money to award and to whom are left to individuals. Administration of Access Funds is often poorly resourced and this results in little use being made of the bursary scheme to widen access and almost no targeting of mature students for help through Access Funds before they enter HE. We need to address these issues urgently.

22. I therefore ask that the Council ensures that institutions recognise the need to devote sufficient resources to the administration of Access Funds so that they effectively achieve the objectives of widening access and preventing hardship. I am particularly keen that institutions are encouraged to set up arrangements which prevent hardship by providing students with help from the Access Funds in a timely and proactive manner throughout the academic year. Institutions must also ensure that the arrangements provide for the money allocated through the Funds to be properly managed and accounted for.

23. We need to build on and extend the good practice already in place. The Access Funds Guidance, to be issued by April next year, will include changes arising from the Review. It will also include examples of good practice collected from institutions during the Review, both in administering and promoting the use and availability of Access Funds, and ideas for widening access which other institutions may wish to consider. Institutions will in future be allowed to carry forward Access Funds up to a prescribed limit each year.

24. Provision for Access Funds (including funds for HE students in FE colleges) is set out in the following table.

  (£ million)
Financial year 1999-00 2000-01 2001-02
Access Funds [1] 58 58 62
Transfer to FEFC for HE students -1.3 -1.3 -1.3
Fee remission for part-time students who become unemployed after joining their course or who are on benefits or low income. 12 13 15

Financial management

25. Effective governance and management of is critical to the success of higher education institutions. It is essential that institutions have in place proper arrangements to ensure adequate accountability and transparency for public money made available for higher education. The council is responsible for ensuring that sound financial control systems are in place across the HE sector. I therefore ask that you continue to be rigorous on this issue and review the need for guidance to the sector on matters of financial management and value for money.

Performance Indicators

26. I am aware of the good progress being made by the Performance Indicators Steering Group in developing sectoral and institutional indicators, including indicators on employment outcomes, which will enable prospective students to make informed choices. I look forward to the Council's report early in the New Year on the employability indicator and when it will be published.

Other Issues

Equal Opportunities for HE staff

27. I am deeply concerned about the present position on equal opportunities for HE staff. Evidence suggests that only a minority of academic staff in higher education institutions are from an ethnic minority background, are women or have a disability, and that relatively few from these groups reach senior positions. I expect institutions to have acted on the Dearing Committee's recommendation that they have equal opportunities policies in place. I want institutions to remove barriers to recruitment and progression and to make progress towards greater equality of opportunity for all groups of staff. It is for this reason that I ask the Council to ensure that all institutions have equal opportunities policy statements and that they are accountable for their full and proper implementation. I am particularly concerned to see that institutions make progress on race equality for staff. I therefore ask the Council to encourage institutions to give proper emphasis to racial equality in their policy statements.

Student Complaints

28. I expect higher education institutions to have made swift progress in reviewing their arrangements for handing student complaints and appeals in the light of the Dearing Committee's recommendation. I ask the Council to ensure that all institutions have in place student complaints procedures which meet requirements of the Dearing Committee.

Students with Disabilities

29. The Council should continue to meet the needs of students with disabilities in higher education through supportive funding arrangements. The Council has a responsibility to take into account the need to meet the additional costs of providing learning support for students with learning difficulties and disabilities when allocating funds to institutions. I ask the Council to continue to monitor the provision made by institutions for disabled students.

Tuition Fees

30. As I have made 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 imposed a condition on the Council's grant for 1999/00, 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 2000/2001.


31. I welcome the action already taken by the Council to evaluate its funding initiatives. I expect the programme to complement the Department's and include, in particular, the extra spend on widening access and on capital/IT and research infrastructure. It should also cover the extent to which universities and colleges are interacting with business and responding to business needs.

Capital and IT infrastructure

32. 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 boost educational attainment and the employability of the workforce. The settlement for investment in the capital and IT infrastructure was announced in the 1998 Grant Letter and the requirements for investment to enable higher education institutions to invest in order to enhance teaching and support the knowledge driven economy, still apply. I expect the Council to continue to promote best practice in strategic appraisal and procurement of capital, having regard for all feasible funding alternatives. I also expect the Council to have regard to the Government's requirements for each Department's 'Departmental Investment Strategy' to be rigorously grounded in factual analysis, evidence and evaluation, and that this should also extend to funded institutions.


33. The Government is very keen to maximise value for money and the flow of investment into the higher education sector. PPP/PFI can achieve this, and are a significant means by which the HE sector as well as the public sector can access the expertise and experience of the private sector. They also help realise efficiency gains which can then be re-deployed in the pursuit of educational objectives. I look to the sector to examine its activites and apply best practice through the PPP/PFI procurement routes alongside the more traditional procurement routes. The Council should continue to promote PFI/PPP as procurement options where they seem likely to offer value for money and to earmark £2 million a year of recurrent funding to support the costs of PFI/PPP.


34. The settlement for research funding was announced in the 1998 Grant Letter and the requirements still apply. The Secretary of State welcomes the Council's action to set up the fund (alongside the Joint Infrastructure Fund) for research infrastructure and equipment totalling £150m, and to take forward the review of the transparency and accountability of the funding arrangements for research.

35. I welcomed the establishment last year by the Council and the British Academy jointly of an Arts and Humanities Research Board. I am pleased that the Scottish and Welsh Funding Councils are now also contributing to the funding of the Board. This will allow researchers in all parts of the UK to benefit from the funding opportunities which the Board offers.

36. I recognise that higher education provides the main research infrastructure for the nation and am very pleased to see that the policy of selectivity has allowed institutions funded by the Council to free gifted researchers to undertake high quality work and that it has encouraged institutions to be selective themselves and to focus effort and resources on areas of strength.

Dance and Drama

37. This scheme, which is twice as big as the earlier scheme will have open access to a wide range of students and offers over 300 HE students a year the opportunity to exploit their talents and to enrich the cultural life of the country. There is already evidence that the scheme is attracting students from disadvantaged backgrounds and all awards for next year have been taken up by schools and students. To this end the Government has announced 'ring fenced' grants to the Council for Dance and Drama Awards over the period 1999-2000, 2000-01 and 2001-02 of £1.9m/£3.7m/£5.4m for each year respectively to meet the yearly cohort intake. These figures, which are not included in the overall grant figures, are indicative, and will be subject to confirmation at the review meeting of 1 February 2000. The grant will enable the Council to continue to provide per capita funding in respect of the students concerned at a level which reflects the average costs involved, taking account of student contributions to fees on the same basis as for other higher education courses.

Transfer of HND and HNC funding and provision

38. I welcome the agreement reached by the Higher and Further Education Funding Councils on the transfer of funding and student places for HNDs and HNCs to the HEFCE from this academic year. The transfers are reflected in the amounts of grant available to both Councils.


39. 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. 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.

Council Administration Costs

40. The Council's administration costs are included in the recurrent provision shown in the annex. Provision for running costs will be:

  (£ million)
Financial year 1999-00 2000-01 2001-02
HEFCE running costs 11.6 11.5 13.3

41. These figures include provision for the additional costs associated with Arts and Humanities Research Board and the 2001 Research Assessment Exercise.

42. 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.

43. This letter, sets a challenging and ambitious agenda. I would like to put on record my appreciation of the work of the Council and the recognition of their achievements in helping this Government deliver its programme for widening student participation, expanding student numbers and bringing about improvements in the quality and standards of higher education. As we now take forward our aims, objectives and aspirations for higher education into the next Millennium, I look forward to the Council's continuing help and advice in what will undoubtedly be an exciting and innovative period.

Best Wishes



  (£ million)
Financial year 1999-00 2000-01 2001-02
1999-2000 grants to HEFCE & TTA [2] 4,199    
CSR outcome grants to HEFCE & TTA   4,359 4,509
Public contributions to fees 561 476 447
Private contributions to fees[3] 243 347 405
Total 5,003 5,182 5,361
Capital grants for:  
infrastructure and IT 35 50 100
research 50 100 150
Measures to widen access 81 90 106
Total 5,169 5,422 5,717
Total extra funds (year on year) - 253 295
Student numbers (FTEs in thousands) 1,045 1,067 1088

The HEFCE and TTA total figures above include the transfers of funding from FEFC to HEFCE for the transfer of HND and HNC provision at FE colleges. Over the three years the funds transferred are £27.000m/£40.905m/£41.519m and in respect of 12,400/18,500/18,500 FTEs.

Financial year 1999-00 2000-01 2001-02
1999-2000 HEFCE grant[4] 4,010    
CSR outcome HEFCE grant   4,163 4,309
Public contributions to fees 517 435 409
Private contributions to fees 236 336 389
Capital grants
for infrastructure and IT 35 50 100
for research 50 100 150
Measures to widen access 81 90 106
Total 4,929 5,174 5,463
Student numbers (FTEs in thousands) 985 1,006 1,026


  1. The figures differ from the 1998 Grant Letter in that they include a further £6.8m/£13.0m/£16.0m as a result of the abolition of the DETR (LEA) Discretionary Awards. A further £12m for Access Funds to help mature students was announced in September 1999. This brings the total funding for 1999-2000 to £70m. Additional money will be available for widening access measures in 2000-01and 2001-02. The Secretary of State will announce details of how this money will be spent in due course.

  2. Includes TTA recurrent and capital grants for initial teacher training and in service training for teachers in higher education institutions.

  3. The forecast income that universities and colleges will receive from private contributions to tuition fees, after means testing. The figures are net of an estimated 5% cost for collection and any default.

  4. These grant figures include Tomlinson transfers £4.8m/£17m/£0

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