Memorandum 1

Submission from the Open University

Withdrawal of funding for equivalent or lower qualifications (ELQs

Executive Summary

The Open University (OU) is committed to enlarging the opportunities for students to engage in lifelong learning and skills development and our curriculum provides significant opportunities for professional training and development. We are making further investment in new curriculum and new teaching approaches to improve vocational relevance and employer engagement and, with support from HEFCE, we are working with other institutions to develop our national role in these and other areas.

We also promote widening participation in higher education by providing high-quality university education to all who wish to realise their ambitions and achieve their potential. We have a long track record in this area and we are constantly working to improve the recruitment and retention of students from disadvantaged groups.

The ELQ policy will undermine the OU’s capacity to deliver these objectives, and thus to support the Government’s lifelong learning and skills agendas, in two important respects:

· It will frustrate our attempts to enable people of working age to update and broaden their knowledge and skills in line with the changing needs of the economy and of society more generally. Three-quarters of ELQ students at the OU are studying wholly or partly for vocational reasons.

· It will reduce the resources we have available for our core services and will jeopardise our plans for growth and innovation. The total future funding either lost or at risk from 2010/11 is £49M per annum.

Government is committed to reviewing HE fees and funding in 2009 and HEFCE has decided to make no further changes to the funding method for part-time study until then.

In line with this strategy, and in order to provide time for a considered assessment of the ELQ policy, we urge that the decision should be suspended pending the planned review of fees and funding in 2009.

The Policy

1. The Open University is opposed to the withdrawal of funding from students with equivalent or prior qualifications because:

a) It departs from the Dearing Committee principle that the State, employers and individuals should take shared responsibility for the funding of higher education.

b) It contradicts the Government’s commitment to the Leitch agenda on skills and lifelong learning and to its pronouncements about nurturing the talents of all its people.

c) It withdraws funding disproportionately from the part-time sector.

d) It hits hardest those institutions and departments that are making the largest contributions to widening participation and lifelong learning.

e) It causes collateral damage to non-ELQ students who may find whole programmes and courses withdrawn through lack of funding.

f) It will make it harder for institutions to create flexible, part-time vocational provision that is financially viable.

g) It adds cost and complexity at a time when Government is committed to reducing bureaucracy in public administration.

2. We do not accept the Government’s rationale for introducing the policy. Like Ministers, The Open University is committed to widening and increasing access for those who have not previously experienced higher education. We have been working successfully in this field for almost 40 years. We acknowledge that more needs to be done and we are keen to play our part. But there are two problems with the Government’s current approach:

a) Government assumes that potential first-time students are being denied entry to university because places are being offered instead to students who already have a degree. We find no evidence in either the full-time or part-time sectors that non-ELQ students are being turned away to make room for ELQ students.

b) Government claims employers are now willing to contribute more towards the costs of university-level teaching. Again there is no evidence to support this assumption. Richard Lambert, the Director General of the CBI, said on 11 December, in a speech critical of the ELQ policy, that:

“[Businesses] are not going to step up to the plate just because the public purse is too constrained and because students can’t afford to pay either. They are not expecting their employees to stay with them for a lifetime, and they have lots of choice about where in the world they are going to find – and locate - their talent”.

Students are, in any case, often undertaking courses to equip themselves for a new career and they are not likely to be supported by their current employer.

3. We want to work constructively with Government, the HEFCE and other stakeholders to increase participation in HE amongst employers and employees. We do not believe that this is achieved by a policy change that has the effect of suppressing demand from one section of the population and offers no guarantee of stimulating demand from any other.

The timing of the decision and implementation of change

4. The Open University is concerned about the timing of the decision and of the date of implementation for a number of reasons:

a) There was no prior consultation with stakeholders and therefore no opportunity to influence the decision and its implementation. Important considerations have been overlooked, such as the curious decision uniquely to include OU students in Northern Ireland within the scope of the policy (para 22 below). Others have been underestimated, such as the significant additional costs and complexity of administering a policy that cannot be policed and cannot be applied uniformly and equitably across the sector.

b) The Department does not appear to have met its legal duty to assess the impact of the policy decision on groups protected by equality legislation and for ensuring that appropriate sector-wide measures are in place to mitigate the likely impacts.

c) The Department has not allowed time for institutions to adjust their curriculum and student support strategies, their marketing and fees strategies, or their staffing levels and financial plans. When HEFCE announces the results of its consultation exercise in February 2008, the OU (and all universities) will be already enrolling students for 2008/09.

d) The decision penalises institutions that have enrolled ELQ students in previous years when they were of equal priority with other students in national policy terms.

e) The calculation of the amount of grant to be withdrawn from institutions in respect of ELQ students is based on data that were collected for a different purpose and are unsuited to present purposes.

Exemptions

5. Ministers have made some exemptions to the ELQ policy and HEFCE has proposed others but the exemption categories are arbitrary and they do not go far enough. Only 4.6% of HEFCE-funded ELQ students at the OU will be exempt under the current proposals.

a) Professional groups: Government plans to exempt courses leading to practice as a teacher, nurse, midwife, social worker or other related healthcare professionals. We see no reason why these professions should be advantaged over others of value to the economy, society and culture. Some of the sciences (but not all) and some other ‘strategically important and vulnerable subjects’ are protected for three years but there is no undertaking to exempt these subjects on a permanent basis or to provide for growth above 2005/06 levels. Other subjects of obvious importance are not exempt either - IT, management, psychology and economics to name but a few. Moreover, exemption (where it applies) covers only initial training. It does not include subsequent training and development. We see no reason why those undertaking professional updating in all of these important areas should not also be eligible for public support.

b) Foundation degrees: HEFCE proposes that foundation degrees should be exempt because they give students the technical and professional skills in demand from employers and they keep open a route for ELQ students who wish to acquire new skills for use in the workplace. However, there are many other modules, courses and qualifications that do this as well as or better than foundation degrees (HNCs, HNDs, degrees with workplace learning). They, too, should be exempt.

c) Co-funded places: HEFCE plans a major expansion of co-funded places for ELQ and other students. Expecting employers to spend more on undergraduate teaching is a high risk strategy: our latest research reveals that only 15% of OU students studying 30 and 60 credit courses receive any help from employers towards tuition fees. Richard Lambert sees no to reason to suppose that employers will spend more in the future.

6. Others: We believe that the following should also be exempt:

a) Students who received their awards more than five years previously. In modern, high-skill labour markets the level of a qualification is not always the best indication of its currency or value. The knowledge and skills contained within degrees and other qualifications need periodic updating and refreshing. It is reasonable to assume that the State, as a major beneficiary of graduate development, should join with employers and individuals to help maintain the employability of those whose qualifications are losing their market value.

b) Students who are unemployed, on benefit or unwaged (such as carers, including those preparing for a return to paid employment). Institutions will only be able to support such students if they study a foundation degree or train for one of the exempt professions. This is a crude and inappropriate instrument for women, for example, choosing to access flexible study during pregnancy and the early years of childcare, for carers needing to re-skill when returning to work after years of child or elder care responsibility, or for the long-term unemployed trying to get back into the workforce.

c) Students on low incomes. People in low paid employment, and particularly those in part-time jobs, are less likely to be able to afford the costs of study and much less likely to be offered employer support for higher education.

d) Students with disabilities. People with disabilities are less likely to be in work than others. Some will choose to study beyond their first degree to maintain an active lifestyle. Others will study to refresh their skills for a return to paid work. Neither group will have ready access to employer support and this will reinforce inequality amongst an already disadvantaged group.

Impact on Students

7. The policy will withdraw Government support from most graduate development. This will lead to higher fees for ELQ students and will create a disincentive to continuing professional development (CPD). Some may be able to afford higher fees or persuade employers to contribute; some may find exempt provision that meets their needs. Most will find it more difficult to improve their skills. There is a risk, therefore, that the main economic benefits of CPD will be lost.

8. Most ELQ students are studying for vocational reasons. At the OU, ELQ students are spread across the major academic subject areas (Table 2 of the Statistical Appendix), with business studies, mathematics, computing, technology, science, education and languages topping the list. OU ELQ students are also evenly spread across the age groups between 25 and 49 (Table 4). Survey research conducted following the policy change indicates that three-quarters of OU ELQ students are taking courses partly or wholly for vocational reasons (Table 6). Amongst this group, the commonest reasons for studying are to improve career prospects, change career, and update or refresh knowledge (Table 7).

9. Most ELQ students are paying their own fees. Only 13% of ELQ students at the OU receive any fee contribution from their employers; just 10% have all their fees paid by their employer (Table 9). We know from pricing research undertaken both by UUK and by the OU that part-time students are extremely price sensitive. There is a high risk that thousands of ELQ students studying for vocational reasons and paying their own way will be priced out of CPD by the Government’s ELQ policy.

10. Certain groups of students will be particularly affected. Research undertaken by UUK has revealed that employers have tended to offer support mainly to full-time workers from the wealthiest households [Part-time Students in Higher Education, UUK Policy Briefing 2006, para 4.7]. Part-time employees, the self-employed and those on low incomes will be disadvantaged as will those such as carers who are temporarily out of employment. Current OU ELQ students have written to us making the same point:

“I’m self-employed, so ‘support by employer’ is basically the same as paying my own fees. I’m studying with the OU Business School … I can barely afford it as it is.”

“I am a single mum trying to survive on a less than average ‘public service’ salary in expensive London … these changes would effectively bar me from the opportunity to help myself!”

“Part-time study while working is difficult enough as it is; adding a large financial burden will most likely provide the justification for not bothering in the first place.”

“If even part of the funding was to be withdrawn, there is no doubt whatsoever that I would never be able to complete the qualification that would lift me out of benefits and into decent employment … ”

Impact on Institutions

11. The Part-time Sector. As HEFCE recognises, the policy affects the part-time sector particularly badly. The full-time sector will lose funding for 2% of its FTE students; the part-time sector for over 20%. This imbalance will further exacerbate the under-funding of part-time provision.

12. Part-time under-funding. The part-time sector is already under-resourced in two respects. First, it has not been able to benefit as much as the full-time sector from increases in student fees or from the generous fee loan arrangements available through the Student Loans Company. Second, the part-time premium/allocation (currently +10%) fails fully to compensate institutions for the per-capita costs of supporting part-time students (put at +15% to +40% by the JM Consulting report commissioned by HEFCE).

13. The Open University. Within the part-time sector it is two institutions, the OU and Birkbeck, that will bear the brunt of the loss of numbers and grant funding. The Open University will lose funding for about 25% of its 140,000 students in England. HEFCE has estimated the loss in grant at £32M.

14. The Loss of funding. Ministers have claimed that the OU has overstated the financial impact. They point out that once transitional measures and safety netting are taken into account, the actual reduction in grant will be around £12M by 2010-11 (equivalent to 3% of current OU turnover). But this misses the point. Our principal concern is for the period beyond 2010/11 when the transitional measures and safety netting come to an end.

15. Long term impact. The extent of our vulnerability is illustrated in Table 1 and Chart 1 of the Statistical Appendix. Some £28M of our HEFCE funding for teaching is either temporary (ELQ teach out monies and safety netting) or subject to review (the SIVS and part-time students allocations) and cannot be relied upon beyond 2010/11. A further £8M is at risk if corresponding adjustments are made to widening participation and capital funds. Another £13M will have been lost through failure to index our teaching grant in line with inflation over three years. The total future funding either lost or at risk from 2010/11 is £49M per annum (12.3% of turnover).

16. Managing risk. We cannot plan and invest sensibly with this degree of risk. We need the DIUS and HEFCE either to confirm that the above allocations will continue beyond 2010/11 and that money allocated to institutions for safety netting will be rolled into their baseline grant once the £100M saving has been achieved in 2010/11 or they should suspend this policy and all its associated transitional measures until they conduct the planned review of fees and funding in 2009. We believe the latter is the sensible option.

17. The £100m. Ministers claim that the OU will, in competition with the rest of the sector, share in the reallocated £100M if it recruits new students. We will be working hard to do so but replacing 29,000 students with an equivalent number of hard to reach students over a very short period is not achievable. Reconfiguring our programmes will incur additional cost at a time when our teaching funding is being reduced. We shall therefore be looking to HEFCE for significant sums of money for realigning and restructuring our business.

18. Administration. The stated aim of Government and HEFCE is to reduce the burden of accountability but the implementation of the ELQ policy will result in a major increase in bureaucracy and cost. Checking existing qualifications, understanding the provenance and status of overseas awards, determining the equivalence of existing qualifications to planned study aims, advising students of the fee implications of their choices, setting and collecting differential fees, and determining eligibility for institutional grant (for students funded at 0%, 50% and 100% of standard rates) will add very significantly to administrative costs. It will be at best expensive and at worst physically impossible to police a system that incentivises students to conceal qualifications and requires institutions to uncover them by reference to an inadequate or non-existent national database. The scheme will lead to a reduction in confidence in the allocation of public funds by HEFCE and DIUS.

Other Comments: OU Students in Northern Ireland

19. The HEFCE advise us that our ELQ students in Northern Ireland have been deemed unfundable whereas those at Queen’s University and Ulster University have not. The OU has been treated as an English institution rather than as an institution operating in Northern Ireland on the same basis as QUB and Ulster. This runs counter to The Education and Libraries (Northern Ireland) Order 1993 which recognises the OU as an HE provider in Northern Ireland on the same basis as in Wales and Scotland (under the FHE Act and the FHE (Scotland) Act of 1992 respectively). Ministers in both Westminster and Belfast should confirm that the ELQ policy is not to apply to OU students in Northern Ireland.

January 2008

Appendix 1

Table 1: Financial impact on The Open University of the withdrawal of ELQ funding from the HEFCE.

Figure 1: 2006/07 HEFCE grant income with projected loss.

Table 2 and Figure 2: ELQ students at The Open University by academic unit.

Table 3 and Figure 3: ELQ students at The Open University by gender.

Table 4 and Figure 4: ELQ students at The Open University by age.

Table 5 and Figure 5: ELQ students at The Open University: years since gaining qualification.

Table 6 and Figure 6: ELQ students at The Open University: reasons for studying.

Table 7 and Figure 7: ELQ students at The Open University: vocational reasons for studying.

Table 8 and Figure 8: ELQ students at The Open University: average contribution towards fee from different sources.

Table 9 and Figure 9: ELQ students at The Open University: proportion receiving a full or partial contribution towards fees from employers.

Table 1: Financial impact on the OU of the withdrawal of ELQ funding from the HEFCE.


Notes	Description	2007/08	2008/09	2009/10	2010/11	2011/12	2012/13	2013/14
(PTO)		£	£	£	£	£	£	£

1	Mainstream teaching grant non ELQ	100,777,907	103,498,911	106,293,381	109,163,302	112,110,712	115,137,701	118,246,419
1	Mainstream teaching grant ELQ exemptions	2,061,610	2,117,274	2,174,440	2,233,150	2,293,445	2,355,368	2,418,963
1,2	Strategically Important & Vulnerable subjects' allocation	4,896,640	5,028,850	5,164,629	5,304,074
1,4	Transitional funding to be phased out over 6 years	31,628,519	22,955,962	10,062,074	7,666,933
1,3	Supplement to part-time allocation	0	0	4,652,429	4,777,018

1	Total teaching grant funding	139,364,676	133,600,997	128,346,953	129,144,477	114,404,156	117,493,069	120,665,381

1,4	Safety net funding		5,763,681	11,017,723	10,220,199
	Rounding	1	-1	1	1
1	Funding on 2007/8 cash basis	139,364,677	139,364,677	139,364,677	139,364,677	114,404,156	117,493,069	120,665,381

5	5-year financial forecast of July 2007	139,218,318	142,977,213	146,837,597	150,802,212	154,873,872	159,055,467	163,349,964

	Lost teaching grant compared to previous forecast		-3,612,536	-7,472,920	-11,437,535	-40,469,716	-41,562,398	-42,684,583

	Other implications due to reduction in funded numbers:
6	Reduction in Widening Participation		-3,607,006	-3,704,396	-3,804,414	-3,907,134	-4,012,626	-4,120,967
6	Reduction in Capital grant		-3,866,692	-3,971,093	-4,078,312	-4,188,427	-4,301,514	-4,417,655

	Lost grant after WP & capital reductions		-11,086,234	-15,148,409	-19,320,262	-48,565,276	-49,876,539	-51,223,205

	Inflation uplift		2.70%	2.70%	2.70%	2.70%	2.70%	2.70%

Notes to Table 1

1	Figures in bold are taken from the "modelling of the impact on institutions, subjects and mode of study" published by HEFCE in October 2007 as part
	of Circular 2007/27. Figures not in bold are extrapolations by the OU of funding streams using the inflation uplift quoted above.
2	Para 33 of HEFCE Circular 2007/27 states:
	"This allocation will remain fixed in real terms up to and including the 2010-11 academic year. At this point, we will review the effectiveness of the allocation.
	We will also reconsider the list of SIVS, and the population of students studying for ELQs in SIVS at each institution."
	It follows that the allocations are not secure beyond 2010/11 and no funding has been assumed by the OU after that year.
3	Para 35 of HEFCE Circular 2007/27 states: "This supplement will be subject to review in 2011-12."
	It follows that the allocations are not secure beyond 2010/11 and no funding has been assumed by the OU after that year.
4	Para 37 of HEFCE Circular 2007/27 states: "We will aim to supply this funding until the end of the current Comprehensive Spending Review period in 2010-11.
	At that point, we will review whether this safety net is still required."
	It follows that the allocations are not secure beyond 2010/11 and no funding has been assumed by the OU after that year.
5	The University's assumptions are in line with those required by HEFCE Circular 2007/10 dated May 2007 entitled "Annual monitoring and corporate planning
	statements and financial forecasts 2007", where para 3a of Annex F stated that "institutions may assume that the unit of teaching funding that underpins the
	HEFCE core teaching grant for all price groups will be maintained in real terms each year".
6	HEFCE Circular 2007/27 is silent on these grants; however, historically the amount allocated has been in direct proportion to the amount of teaching grant
	and so the amounts calculated above by the OU are at risk.

Figure 1: 2006/07 HEFCE grant income with projected loss

Table 2: ELQ students (excluding proposed exemptions) at The Open University by academic unit

(Student numbers are expressed on the same basis as HEFCE’s modelling, i.e. FTE students in England and Northern Ireland in 2005/06 who completed their courses; 1 FTE roughly equates to 2.5 OU students)

Academic Unit	All students (FTEs)	ELQ students (FTEs)	ELQ students as % of all students
Business	3,106	872	28.1%
Maths, Computing and Technology	6,677	1,826	27.4%
Science	4,377	1,179	26.9%
Education and Languages	4,346	1,115	25.7%
Arts	7,716	1,871	24.2%
Social Sciences	6,185	1,266	20.5%
Health and Social Care	3,884	349	9.0%
Other	171	58	33.9%
Total	36,462	8,536	23.4%

Figure 2: ELQ students (excluding proposed exemptions) at The Open University by academic unit: proportion of all students

(See the note to Table 2 for the basis of the student count)

Table 3: ELQ students (excluding proposed exemptions) at The Open University by gender: undergraduate students only

(See the note to Table 2 for the basis of the student count)

Gender	All students (FTEs)	ELQ students (FTEs)	ELQ students as % of all students
Female	21,056	4,225	20.1%
Male	12,610	3,547	28.1%
Total	33,666	7,772	23.1%
% Female	63%	54%
% Male	37%	46%

Figure 3: ELQ students (excluding proposed exemptions) at The Open University by gender: undergraduate students only: proportions

(See the note to Table 2 for the basis of the student count)

Table 4: ELQ students (excluding proposed exemptions) at The Open University by age: undergraduate students only

(See the note to Table 2 for the basis of the student count)

Age band	All students (FTEs)	ELQ students (FTEs)	ELQ students as % of all students
0 - 17	120	0	0.0%
18 - 20	838	9	1.1%
21 - 24	2,984	358	12.0%
25 - 29	4,911	1,025	20.9%
30 - 34	5,117	1,119	21.9%
35 - 39	5,841	1,193	20.4%
40 - 44	4,984	1,147	23.0%
45 - 49	3,455	898	26.0%
50 - 54	2,122	673	31.7%
55 - 59	1,536	575	37.4%
60 - 64	914	390	42.6%
65+	845	384	45.5%
Total	33,666	7,772	23.1%
% aged 0 - 17	0%	0%
% aged 18 - 20	2%	0%
% aged 21 - 24	9%	5%
% aged 25 - 29	15%	13%
% aged 30 - 34	15%	14%
% aged 35 - 39	17%	15%
% aged 40 - 44	15%	15%
% aged 45 - 49	10%	12%
% aged 50 - 54	6%	9%
% aged 55 - 59	5%	7%
% aged 60 - 64	3%	5%
% aged 65+	3%	5%

Figure 4: ELQ students (excluding proposed exemptions) at The Open University by age: undergraduate students only: FTE students at completion

(See the note to Table 2 for the basis of the student count)

Table 5: ELQ students at The Open University: years since gaining an equivalent or higher HE qualification.

(These data are based on an electronic survey of a sample of OU students carried out in December 2007. The sample was drawn randomly from all OU students taking 30 points or more regardless of domicile or level of study. There were 1603 responses, representing a response rate of approximately 45%).

Years since gaining ELQ	%
1 - 5 years	24
6 - 10 years	20
11 - 15 years	15
16 - 20 years	14
Over 21 years	27
	100

NB Three-quarters of the ELQ students had gained their previous highest qualification over 5 years ago.

Figure 5: ELQ students at The Open University: years since gaining an equivalent or higher HE qualification.

Table 6: ELQ students at The Open University: reasons for studying