Written evidence submitted by the Department
for Business, Innovation and Skills
1. INTRODUCTION
1.1 Our universities are recognised internationally
for excellence. UK universities are in the top flight - and to
remain competitive they need sustainable funding. Our higher education
system has seen student numbers increase over 200% in the space
of three decades but we need to maintain the supply of people
with high level skills to be able to compete internationally with
those nations who are rapidly increasing their skill levels.
1.2 The economic context for HE funding has never
been tougher - the Government has had no choice but to deliver
a huge deficit reduction programme. Over the longer term, this
means that the present HE funding system is unsustainable and
unaffordable. The Government has sought to develop proposals that
maintained the high standards of our universities, were fair for
students, that put more power in the hands of students and that
were affordable for the nation.
1.3 Lord Browne's Independent Review recommended
that graduates should contribute more to the costs of their higher
education. This is because graduates gain a range of benefits
from going to university - notably the higher salaries they earn.
This increase in contributions has to be balanced against the
need to ensure that students get a fair deal. We agreed with the
broad thrust of Lord Browne's recommendations, and developed our
proposals to rebalance the costs of HE.
1.4 Funding is not the only issue affecting HE.
Institutional and structural issues also need to be considered.
A higher education White Paper will be published later this year
to address the wider issues raised by Lord Browne's report.
1.5 The White Paper will set out major reform
of the English HE system. The Government is taking the time to
engage comprehensively with stakeholders and to test proposals
more thoroughly among higher education institutions, students,
employers and other experts; and also to learn from how universities'
price setting works this spring.
1.6 The White Paper should, parliamentary time
permitting, be followed by a Higher Education Bill in the 2012-13
parliamentary session. These reforms will build on the reforms
to HE funding that we have already announced, which will be examined
in the paragraphs below.
2. A SUSTAINABLE
FUNDING SYSTEM
2.1 Lord Browne produced a range of proposals
to change the way HE is funded. Inter alia, he proposed that there
should be no upfront payment of tuition charges for students;
that the cap on tuition charges should be removed altogether;
and that a tuition charge levy should be put in place to fund
activities to widen participation. He also recommended that access
to student finance should be extended to part-time students.
2.2 The Government endorsed Lord Browne's rejection
of a graduate tax. Several factors prompted this rejection. This
includes the lack of connection between what students pay, what
they study, and where they study. A graduate tax gives universities
no incentive to improve teaching quality and could not be collected
from EU residents, who would therefore be entitled to come to
the UK and be educated for free. Universities would also see their
dependence on the state increased, thereby reducing their responsiveness
to students.
2.3 On other important points, however, the Government's
proposals differed from Lord Browne's. He recommended that the
cap on tuition charges should be removed, creating an effective
cap of £15,000. Having considered this carefully, the Government
decided to retain the caps, and allow universities to increase
their charges to £6,000, with an upper limit of £9,000
in exceptional circumstances. This was because of the concern
that uncapped costs would deter some applicants, particularly
those from low income families.
2.4 The Government believe that the two caps
achieve the right balance and make up the right package to support
our HE system and students. It was felt that a single flat rate
would be too restrictive on some institutions and courses. The
basic threshold of £6,000 per annum is the amount above which
institutions will have to commit to much tougher action to promote
fair access and widening participation as designated by the Director
of Fair Access.
2.5 Some universities and colleges may charge
less than £6,000. Given that these institutions will need
to make substantial efficiencies to do so, we do not believe in
imposing additional requirements on them. An upper limit
of £9,000 will allow those that offer excellent undergraduate
teaching to increase overall income to improve quality by investing
more in their teaching and courses. But we expect charges of £9,000
to be exceptional.
2.6 It is not for Government to determine what
each university charges. But we do expect universities to work
as efficiently as possible. If universities cluster around £9,000
and the Government funds these tuition costs upfront, savings
will need to be made in the HE budget.
2.7 The Government has not yet responded to Lord
Browne's proposals on student number controls. This is a critical
issue, with the student population growing to 2.1 million in 2009-10.
Universities must be allowed the freedom to expand if they are
capable of adequately meeting extra student demand. Ideally perhaps
number controls would be left to universities and students without
undue Government interference. But we must think carefully about
the difficulties of balancing institutional expansion with the
need to ensure stability in the student finance system. We will
consider this in the White Paper, but we expect our reforms to
allow student numbers to be broadly maintained.
2.8 It is also necessary to consider changing
the way that HEFCE allocates grant money between universities
given the new funding framework. This will be the subject of future
discussion and consultation with the sector. The Government expects
that the funding system will continue to take account of the different
costs of teaching different subjects. It may also need to incentivise
universities and colleges with competitive charge levels. But
the precise details of how funding will be allocated is and will
remain a matter for HEFCE.
2.9 HEFCE's current system to smooth grant funding
flows will necessarily need to change as the balance of funding
shifts towards student fees and away from the Teaching Grant.
We are working with HEFCE and the SLC to agree on a system of
regular and timely payments so that HEIs do not experience problems
during the transition towards a steady state, and will set out
more details of our plans in the White Paper.
2.10 Universities will, as a result of our changes,
have a future of sustainable funding. But in return for allowing
them to increase their charges to students, we will expect more.
We want to encourage excellence in areas like quality, the information
provided to students and widening participation. But we do also
expect universities to operate as efficiently as possible and
to focus their extra revenue on improving the student experience.
3. EFFICIENT
AND EFFECTIVE
INSTITUTIONS
3.1 The sector will continue to receive substantial
direct public funding via HEFCE, both for teaching and research.
Putting together HEFCE teaching and research funding and the BIS
upfront costs of graduate contributions (but excluding capital
funding), it could be that total BIS investment in HEIs in England
will rise from around £9 billion in 2010-11 to around £10
billion in 2014-15. This is an increase of nearly 10% in cash
terms and broadly maintains existing levels of participation.
3.2 We are seeking out ways that we can continue
to diversify funding streams for universities. At present for
every £5 of university revenue, £3 comes from various
public sector sources. In particular, the Government is keen to
encourage business sponsorship and several companies are now putting
forward imaginative schemes. We also want to think about how philanthropic
giving could make up a larger share of income. The importance
of philanthropic giving was recognised in Lord Browne's review
- as was the idea of supporting a more widespread culture of giving
in HE. The Government wants to reflect on his ideas and respond
in the White Paper. The Cabinet Office's Giving White Paper to
be published this Spring will set out our proposals to encourage
philanthropic giving across charitable sectors.
3.3 The Government has welcomed the fact that
voluntary giving has reached record levels in HE. Donor numbers
increased by 12% in one year to 163,000 in 2008-09. Overall cash
giving to universities reached a record level of £0.5 billion
in 2008-09, with universities receiving more gifts in excess of
£1 million in 2008-09 than any other sector in the UK (overtaking
charitable trusts and foundations for the first time).
3.4 At the present time, public money remains
the main funding stream for our universities. But we expect lower
levels of predictable public funding to promote a greater interest
in, and reliance on, income that follows student choice. This
will mean much better outcomes for students. But to ensure value
for money for students, we also expect universities to become
more efficient. We are encouraging universities and professional
bodies to consider the optimal length of course required.
3.5 Lord Browne felt that £6,000 was a manageable
charge which would instil a focus on efficiency throughout the
system. Any charge above £6,000 would not all be additional
income - universities would need to charge around £7,000
on average to recoup lost teaching grant. So alongside the requirement
to invest a proportion of additional income in access measures,
there are strong incentives for efficiency in the system. We do
expect universities to bear down on all of their costs - including
on pay and pensions.
3.6 Over time, HEIs will adapt their business
models and focus on the areas that they do well. This may include
a concentration on high quality teaching. High quality and popular
institutions will be able to expand, as students make informed
choices about the learning that meets their needs. Where possible,
we will look to reduce regulatory burdens on the sector so that
they have more freedom to do this.
3.7 The Government expects that there will be
much stronger competitive pressures and efficiencies for universities
due to variability in course costs. We also expect these pressures
because we will make it easier for alternative providers, including
FE colleges, to compete on a level playing field, thus introducing
greater competition into the system.
4. SUPPLY SIDE
REFORM
4.1 Diversity is one of the strengths of the
current HE system and one which has made it successful and relatively
efficient. In the future, we expect there to be more choice available.
Students will become more discerning customers and universities
will need to convince students of the long-term benefits of the
courses they offer.
4.2 Each university makes a unique contribution.
Universities will need to play to their strengths and focus on
what they do well: for some this may mean focusing more on high-quality
teaching; for others it may mean concentrating on employment-based
learning. Ministers have also said that they want to see more
flexible modes of learning, with more part-time courses, more
two-year degrees and more distance learning. Our increased support
for part-time students shows our commitment to the fastest growing
cohort of students. Part-time student participation has increased
by 108% in ten years.
4.3 To ensure a vibrant sector, the Government
wants to make it easier for new providers, including local FE
colleges and alternative providers, to enter the system on a fair
basis. We believe that competition is a great driver of improvement
and more providers in the system will mean more and better choice
for students and better value for money through new and potentially
innovative and lower cost approaches to teaching.
4.4 Ministers believe that opening up the system
will improve teaching quality in higher education. All providers
that access public funding or student support will have to meet
certain conditions around quality, access, information and financial
reporting to protect the interests of students and the public.
However, we will look to make this framework as deregulatory as
possible and will publish details in the forthcoming White Paper.
5. STUDENTS
AT THE
HEART OF
THE SYSTEM
5.1 We want to ensure that all students have
a high quality experience. In the future more university funding
will be in the hands of students, so their choices will shape
HE. Universities will be much more reliant on attracting students
to maintain their income.
5.2 It will therefore be in every university's
interest to persuade prospective students that its teaching arrangements,
facilities and undergraduate support are worth the investment.
They will need to be more responsive to students and focus on
improving teaching quality.
5.3 The HE sector is working on measures to improve
existing quality assurance systems. It will be introducing from
2011-12 a revised institutional review system which will be more
transparent and student-centred.
5.4 All universities and colleges, whatever contribution
they decide to charge, will be expected to publish a standard
set of information about their courses. This should include the
information that prospective students say they want, for example
about contact hours, teaching patterns and employment outcomes.
HEFCE are working with the sector on proposals for all HEIs to
publish, on a course by course basis, a standard set of 17 key
information items for prospective students.
5.5 We also want them to publish student charters
which set out clear expectations of the support that the HEI will
provide; what is expected of students in return; and what to do
if these expectations are not met. This will help to ensure value
for money and real choice for learners.
5.6 It will, of course, also be important that
universities set out clearly any financial help available to its
students. This is an important part of our strategy to widen access.
6. WIDENING
PARTICIPATION
6.1 This Government is committed to social mobility.
Ministers have been clear that they will focus on helping those
from disadvantaged backgrounds. No eligible student will be asked
to pay upfront costs. There will be more generous maintenance
support for poorer students. We have ended the systematic exclusion
of part-time students from student support, and have extended
loans to part-time students studying at 25% intensity or more.
And after graduation there will be a progressive, income-related
graduate repayment system.
6.2 In exchange for universities being able to
charge more than £6,000, the Government has issued new and
strengthened guidance to the Director of Fair Access on access
agreements. Universities and colleges that want to charge above
£6,000 for any of their courses will first have to agree
tough access commitments with OFFA. Agreements will be renewed
annually, rather than every five years.
6.3 Access agreements will include a requirement
for universities to invest some of their additional income in
access. They will have to show progress against appropriate benchmarks
to demonstrate that they are taking their obligations to widening
participation seriously. These benchmarks could be those published
by HESA or an institution's own, dependent on what that has been
agreed with OFFA. However, participation in the new National Scholarship
Programme is mandatory for universities wishing to charge over
£6,000.
6.4 We are reserving the right in the future
to allow OFFA to specify how much of a university's additional
tuition fee income should be invested in access. We will consider
using this right if universities are not making sufficient progress.
But we are not introducing quotas. They would be not only undesirable,
but also illegal.
6.5 Separately, details of the new £150
million National Scholarship Programme (NSP) were also published.
Available for students entering higher education from autumn 2012,
the NSP is designed to help students from families with low incomes
(below £25,000 a year). It will, however, be for HE institutions
to decide who to help from this broad group according to their
own priorities. HE institutions will also be responsible for making
individual awards to students and will publicise their NSP awards
schemes on their websites.
6.6 The Government will contribute £50 million
to the NSP in the financial year 2012-13, with a £100 million
contribution in 2013-14, and £150 million in 2014-15. Institutions
charging above £6,000 will have to match fund any Government
contribution at a rate of at least 1:1. Those charging less than
£6,000 will match fund at a minimum of 50% of this level.
In the first year, we have agreed that the Director of Fair Access
can apply discretion in the level of match funding required where
the match funding pressures would be very high and the effect
would be that the institution would be unable to invest effectively
in outreach activities.
6.7 We have also appointed Simon Hughes MP as
the Government's Advocate for Access to Education. He will work
with the Government to ensure that its goal of increasing participation
in further and higher education by those from the most disadvantaged
backgrounds is met.
7. SUSTAINING
EXCELLENCE IN
RESEARCH
7.1 Alongside the teaching-focused reforms set
out above, we have also considered carefully how best to sustain
and strengthen the excellence of our research base.
7.2 An effective science and research base is
vital to the UK's international competiveness and economic recovery.
Despite growing international competition, the UK research base
is second in the world to the USA for excellence and the UK is
the most productive country for research in the G8. The UK remains
first or second in the world at research in most disciplines overall.
7.3 In December 2010, alongside
the publication of the funding allocations to the Research Councils,
David Willetts made a Written Ministerial Statement confirming
the Government's commitment to the Haldane Principle. The Haldane
Principle means that decisions on individual research proposals
are best taken by researchers themselves through peer review.
Ministers need to take a strategic view on the overall level of
funding to science and research, and have a legitimate role in
decisions that involve long term and large scale commitments of
national significance, but prioritisation of an individual Research
Council's spending, or of HEFCE's detailed research funding decisions,
are not for Ministers. The Coalition Government supports this
principle as vital for the protection of academic independence
and excellence.
7.4 The Spending Review explicitly recognised
the critical contribution of the research base to UK economic
development. As a result of the Government's desire to maximise
the economic impact of the research base, science and research
programme spending has been protected at £4.6 billion pa
with a flat-cash, ring-fenced settlement for 2011-15.
7.5 To ensure the UK maintains an internationally
competitive research base, funding allocations will support the
very best research by further concentrating resources on research
centres of proven excellence and with the critical mass and multi-disciplinary
capacity to address national challenges and compete internationally.
7.6 Research Councils and Funding Councils will
focus their contribution on promoting impact through excellent
research, supporting the growth agenda. They will provide strong
incentives and rewards for universities to improve further their
relationships with business and deliver even more impact to the
economy and society. Incentives will include - 20% of the assessment
in the new Research Excellence Framework (REF) will be based on
the social, economic or cultural impacts from excellent university
research. Reforms to Higher Education Innovation Funding (HEIF)
allocations will incentivise HEIs to increase their interaction
with business and other users of research.
8. CONCLUSION
8.1 In the future, it is clear that public funding
will still have a prominent role in our university sector. Whether
it is to fund teaching, student support, research, measures to
widen access, or to promote quality - an important role will remain
for Government. That said, the current success of the UK higher
education system owes much to the historic ability of institutions
to determine their own mission, free from interference from the
state. We will consult on the reforms our White Paper will aim
to introduce, to ensure that the sector has an opportunity to
comment on them.
8.2 We believe that public accountability for
quality and standards is essential but that requirement needs
to be balanced by a simple regulatory framework which does not
infringe autonomy and an institution's governance arrangements.
These considerations will continue to be central to our thinking
as we develop our White Paper, and as we implement its conclusions.
We believe that this is the best way to ensure a future of sustainable
funding for our world-class sector, to ensure fair access for
students, and to ensure a fair deal for the nation.
14 March 2011
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