No easy options to fill the higher education funding black hole

Published: January 24, 2014

“It’s around this time of year that we would usually be expecting Ministers at the Department for Business Innovation and Skills (BIS) to send their annual grant letter to the Higher Education Funding Council for England (HEFCE). However, the news that the letter has been delayed confirms that this year could see some surprises. ”

It’s around this time of year that we would usually be expecting Ministers at the Department for Business Innovation and Skills (BIS) to send their annual grant letter to the Higher Education Funding Council for England (HEFCE). The letter is an important point on the university planning calendar, outlining Government’s contribution to things like undergraduate and post graduate teaching costs and capital investment programmes. HEFCE use the letter to inform policies on how funding will be distributed – predominantly though the allocation of student places (at least until next year, when numbers will be uncapped). The letter is often a relatively predictable affair that mostly adds a degree of detail to funding decisions already announced in Budgets and Autumn Statements. However, the news that the letter has been delayed confirms that this year could see some surprises.

The likely reason for the uncertainty is the simple fact the BIS HE budget is well and truly in the red. Recent reports suggest that the costs of maintenance grants for unexpectedly high numbers of poorer students and a failure to control the numbers of students at private institutions have left BIS with a £1.4billion overspend. In light of this, the grant letter delay is no doubt down to the extra time BIS number crunchers need to come up with a clever solution. Unfortunately, none of the possible scenarios are particularly attractive.

One option is convert some of those maintenance grants into loans. This will be politically difficult. Ministers will be reluctant to reopen wounds inflicted during the battle to increase tuition fees. In any case, this is a measure that would take time to be implemented and do little to alleviate immediate budget pressures.

More likely (at least in the short term) is the prospect that BIS will reduce one of two HE budget lines that don’t resonate so readily on the doorstep. First, the science and research budget. For many, this is central to the global success of UK HE. Indeed, so far under the coalition it has been deemed important enough to ring fence (and freeze in cash terms). This is perhaps not surprising when the predominant beneficiaries are taken into account: the established research powerhouses typified by the Russell Group, the smaller centres of excellence once represented by the now defunct 1994 Group, and the entrepreneurial innovators often found in the University Alliance. These are powerful champions and a single unified call would be hard to resist. However, ongoing debates over the extent to which funding is concentrated among a few or distributed among the many could provide room for Ministers to cut the budget in absolute terms, enabling some institutions to do well at others’ expense.

Alternatively, Ministers may choose to cut into the Student Opportunity Allocation, which is distributed to institutions with regards to the numbers of students from poorer backgrounds they take on. There are strong social mobility arguments against this, a case being powerfully made by the million+ group of newer universities. However, when push comes to shove there are many in Government who believe excellence should trump opportunity in HE, and rumour has it that the Treasury is pushing for the axe to
fall in this direction.

So, Ministers have to choose between some equally problematic options, each supported by a compelling argument being articulated by a powerful champion. Little wonder that, in true academic style, they have sought an extension on their grant letter deadline. It can’t be put off forever though, and the decisions that it eventually outlines will provide a powerful insight into where influence over HE policy really sits.

Mark Fuller, Associate Director

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