Spending Review 2010

Written evidence submitted by the Higher Education Funding Council for England (SR 19)

Introduction

1. The role of the Higher Education Funding Council for England (HEFCE) is to allocate funding provided by the government to universities and colleges in England for teaching and research (including support for knowledge exchange). In doing so, it aims to promote high quality education and research, within a financially healthy sector. The Council also plays a key role in ensuring accountability and promoting good practice.

2. HEFCE funding for research is allocated to enable universities collectively to maintain a research base of world leading quality across the full range of disciplines, creating a sustainable and flexible national baseline capacity which enables the sector to respond strategically to a changing external environment and on which research and other activity funded from other sources can build. Within the dual support system, our funding is allocated as a grant which the receiving institutions may spend in ways that they consider will best meet these aims, and is distributed selectively by reference to robust indicators of research quality.

3. HEIs are best placed to make informed decisions on how their HEFCE grant should be spent based on the knowledge of their strengths and strategic priorities. HEIs are engaged with and informed by those who take their research forward to applications. The grant also supports HEIs in nurturing and providing support for collaborative research. Assurance of the appropriate use of research funding within the flexibility provided by the grant is provided by the periodic assessment of research quality via the RAE and benchmarking activities undertaken on behalf of the Department for Business, Innovation and Skills.

4. In particular, our funding supports HEIs undertaking innovative research, including in new fields and opening new lines of enquiry; the potential that it creates for them to make connections across subjects with a technological, business and social focus is particularly important in this context. It also makes a substantial contribution to maintaining a strong and stable physical and human environment in which excellent research funded from a variety of sources can be carried out. In our view the operation of the dual support system, under which government funding is channelled through complementary grant systems providing both block grant and project funding, has been a major factor in achieving and maintaining the exceptionally high quality of the UK research base in the face of growing international competition.

5. Research funded by HEFCE achieves positive economic and social impacts in several ways, including through the direct application and exploitation of HE research (supported by our Higher Education Innovation Fund); by underpinning the contribution of all HEIs to creating a highly educated, skilled and flexible workforce; and by contributing to a national culture of innovation. We are currently working to establish stronger and more direct links between our funding and the impacts made by the research activity that it supports.

HEFCE funding for research 2011-12

6. In 2011-12 HEFCE will distribute £1,558 million in recurrent research funding. This is a reduction in cash terms of £45 million compared to the 2010-11 allocations published in October 2010.

7. The total recurrent funding for research is made up of the following elements:

a. £1,053 million for mainstream QR grant

b. £32 million for London weighting for mainstream QR

c. £205 million for the research degree programme (RDP) supervision fund

d. £198 million for the charity support element

e. £64 million for the business research element

f. £6 million for research libraries.

8. The main policy aim underpinning our funding for research during the period 2011-15 is to maintain and strengthen excellent research capacity through a period of funding constraint. This is reflected in our grant allocation by making the following adjustments to individual elements within the grant for 2011-12:

a. We have retained the elements for charity support and business research at their cash value in the initial allocations for 2010-11. In the 2010 grant letter, the Government asked us to protect these elements. We regard them as highly significant both in encouraging HEIs to undertake research commissioned by charities and business – especially at a time when less public funding will be available for research – and in helping them to remain competitive as excellent and affordable providers in an increasingly international market.

b. We have retained the element for research degree programmes at its cash value on the same basis. This too has been identified as a national priority.

c. We have reduced the element for mainstream QR and allocated this more closely targeted on research of the highest levels of excellence.

9. Previously, mainstream QR has been allocated taking into account research activity of a quality that is at least recognised internationally (2* and above) in the 2008 RAE. The allocations weighted activity at 3* (internationally excellent) and 4* (world leading) level at 3 and 9 respectively relative to a weighting of 1 for 2* research. From 2011-12 we have now begun a two stage process to allocate mainstream QR by reference only to activity at 3* and 4* activity.

10. For 2011-12 we have removed £45 million out of mainstream QR and reset the "slope" so that only £35 million is now allocated driven by activity at 2* level – resulting in a slope of 0.294:3:9. From 2012-13 we propose to cease counting 2* activity in the allocations with a slope of 0:1:3.

11. When fully implemented over two years this will produce a modest but significant increase in the share of mainstream QR grant received by a dozen or so institutions with exceptional concentrations of 3* and 4* activity; roughly freezing the share received by the next dozen or so; and a reduction in the share received by the rest on a scale reflecting the overall research quality profile of each institution.

Concentration of total research funds

12. Although allocation to particular disciplines within universities is at the discretion of the institution, the notional effects of the change for individual discipline fields should be manageable over the two years in all cases. Some subjects, where there are comparatively more departments with a less strong quality profile, will see correspondingly greater notional reductions in 2011-12.

Breakdown on total research funding by broad subject group

13. We are currently consulting on proposed changes to the allocation method for the research degree programme supervision fund from 2012-13. We are inviting comments on proposals:

a. To increase the value of the RDP supervision fund by up to £35 million.

b. For options to link the allocation of RDP supervision funding to quality, meeting HEFCE’s aim of supporting the supervision of students in higher-quality research environments.

c. That the value of an institution’s RDP grant relative to its mainstream QR grant provides a useful indicator of the sustainability of postgraduate supervisory activity at whole-institution level, which we might take into account in future funding.

HEFCE funding for research capital

14. We aim to provide as much as possible of our funding through the core grant. Further non-recurrent funding, in the form of special funding and earmarked capital, is provided for specific purposes and to promote change that cannot easily be achieved through other routes.

15. Most of our earmarked capital for research is allocated by formula, through the research capital investment fund (RCIF). Allocations recognise the excellence of the research of an HEI and are based on a combination of HEIs’ Research Council research income, QR and other research income. £549 million is to be distributed through RCIF2 for four financial years 2011-12 to 2014-15. RCIF aims to:

a. Contribute to the long-term financial sustainability of an HEI’s research and the supporting physical infrastructure.

b. Contribute to reducing carbon emissions, improved space utilisation, and increased sharing and utilisation of research equipment.

c. Promote collaborative partnerships between HEIs, industry, charities, Government and NHS Trusts.

d. Promote world-leading research capability in all disciplines with the capacity to respond to developing national priorities.

16. Research capital comes via both HEFCE and the research Councils. The Research Councils element (£253 million out of the £549 million total) will contribute to the full economic costs of the research projects funded by the Research Councils over 2011-12 to 2014-15.

Higher Education Innovation Funding 2011-15

17. Higher education innovation funding (HEIF) is provided to support knowledge exchange activities in higher education, strengthening links with businesses, public services, communities and the wider public in order to increase economic and social impact. In recognition of the importance of universities and business continuing to work more closely together in the context of the economic recovery and growth of the nation, we have maintained in cash terms the funding for HEIF.

18. For the period 2011-15 funding of £150 million per annum will be allocated: this comprises £113 million from science and research ring-fenced funding and £37 million from HEFCE. This reflects the fact that HEIF supports all forms of knowledge exchange, and that it is interlinked with both research and teaching.

Efficiency savings

19. We have been working jointly with the Research Councils on taking forward the Wakeham recommendations. It has been agreed that indirect cost rates will be used as proxies for relative efficiencies, with HEIs required to implement efficiency reductions. We would expect to see this being achieved through actions such as:

a. Restraining pay costs

b. Further improvements in asset utilization

c. Further improvements in procurement

20. HEFCE is investing up to £10 million (from the £20 million provided under the University Modernisation Fund to support the further development of shared services) to develop shared data centres, applications and data management services and support. The major users and beneficiaries will be research intensive HEIs leading to efficiencies through data being managed more efficiently (generating both cash and carbon savings) and being more easily shared.

Higher Education Funding Council for England

27 April 2011