Higher Education Funding for 1999-2000 and beyond - (1) to No 4504



<br /> Oxford University Gazette: Higher Education Funding for<br /> 1999-2000 and beyond<br /> (supplement)

Oxford University Gazette

Higher Education Funding for 1999–2000 and beyond

Supplement (1) to Gazette No. 4504

Wednesday, 10 March 1999



Contents of the supplement:

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In December 1998, the Secretary of State for Education and
Employment announced
further details of the outcome of the Government's comprehensive
spending review (CSR)
as it affects higher education. These details were laid out in
a
letter from Mr R.J. Dawe
of the Department for Education and Employment, to the Chief
Executive of HEFCE,
Professor Brian Fender. This letter, the text of which is
reproduced
below, provides
important information about the Government's overall proposals
for
the funding of higher
education, and the policy priorities which HEFCE is required to
follow. Mr Dawe's letter
deals with policy and funding for the higher education sector as
a
whole in England: its
implications for the funding of individual institutions is as yet
uncertain, and remains a
matter for HEFCE itself. Some of the details will become clearer
once HEFCE's grant for
1999–2000 is announced, which can be expected to take place
very
shortly.

Council and the General Board have considered Mr Dawe's letter
as
part of their
discussions of the University's budget for 1999–2000, and
have
agreed that the letter
should be published in order to provide background information
for
members of the
University.



Letter from Mr R.J. Dawe of the DfEE to
the
Chief Executive
of HEFCE, 8 December 1998

HIGHER EDUCATION FUNDING FOR 1999–2000 AND BEYOND


Introduction

1. The Secretary of State today announced more details
of
the outcome of the
Comprehensive Spending Review (CSR) for higher education,
including
detailed figures for
the next two years. I am now writing with guidance on the
distribution of the Higher
Education Funding Council for England (HEFCE) grant in the light
of
the Secretary of
State's priorities. All the funding figures will be subject to
Parliamentary approval in
the usual way.

2. As the Secretary of State said in his letter of 15
July,
he has secured a
very good settlement for higher education. In return for the
substantial public
investment in higher education, the Secretary of State expects
universities and colleges
to deliver improved quality and standards and to take effective
measures to widen access
to under-represented social groups.

3. Compared with 1998–9 an extra £280 million
will be available for
universities, colleges and students in 1999–2000 and an
extra
£496 million in
2000–1. Detailed figures are set out in the Annexe to this
letter. The figures for
2000–1 are provisional, based on the CSR outcome. Final
figures
will be confirmed
in the course of 1999, taking into account how the Department's
programmes are
developing.

4. This guidance covers capital grant, including for
research, for 2001–2
as well as for 1999–2000 and 2000–1. Other details for
2001–2 will be
announced later. Meanwhile, the Council should plan on the basis
that funds will be
available in 2001–2 to sustain quality and standards, and
to
provide for continuing
growth in student numbers, and will be at least as much in real
terms
as the expenditure
for 2000–1 on the basis of current inflation assumptions.

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supplement



Public expenditure planning and control

5. The Government announced the outcome of its
Comprehensive Spending
Review and its plans for reviewing and controlling public
expenditure
in July. The
Department's overall budget was fixed for the next three years.
The
details contained
in this letter go a long way towards meeting the recommendation
of
the Dearing Report
that the public funding for higher education should be determined
on
a rolling three-year
basis.

6. The Department will be expected to contain
unforeseen
growth in spending
requirements, including the costs of student support, within
the,Departmental Expenditure
Limit (DEL). It will therefore be monitoring closely student
numbers
and student support
costs.

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supplement



Secretary of State's Priorities

7. The CSR settlement recognises the key role which
higher
education will be
expected to play in lifelong learning. This role was set out in
the
Lifelong Learning
Green Paper and has been supported in the responses to the
consultation on the Green
Paper. The CSR outcome and this grant letter represent the
Government's response to
the consultation on HE issues in the Green Paper.

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supplement



Evaluation

8. The Secretary of State welcomes the action already
taken
by the Council to
evaluate its funding initiatives and expects its evaluation
programme
to be designed so
as to complement the Department's. It should include, in
particular,
the extra spend on
widening access and on capital/IT and research infrastructure and
should also cover the
extent to which universities and colleges are interacting with
business and responding
to business needs. The Secretary of State expects the Council
to
evaluate progress with
rigour and report to Ministers on areas for improvement. In
doing
so, the Council should
also have regard to the need to retain diversity as reflected in
the
mission statements
of universities and colleges.

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Quality and standards

9. The settlement will enable universities and colleges
to
maintain and enhance
quality and standards. The Funding Council should continue to
look
at ways of improving
value for money.

10. Students who commit themselves to higher education
should be well taught
and helped to succeed and progress into jobs. The Secretary of
State
expects
institutions to give a high priority to enhancing the quality of
teaching and learning for
all students and to ensuring rigour and transparency in the
standards
of awards,
including clear specification of programme content and outcomes,
which make it easier for
employers to judge what skills a graduate will bring to the
workplace.

11. The Secretary of State notes that the Council
retains a
statutory
responsibility under the Further and Higher Education Act 1992
to
secure that provision
is made for assessing the quality of education for which the
Council
provides support,
and that the Council has contracted with the Quality Assurance
Agency
for Higher
Education (QAA) to carry out quality assessments for this
purpose.

12. The Secretary of State welcomes the progress being
made
by the Council,
the QAA and the higher education sector towards devising a more
flexible and effective
system of quality assurance. The QAA's recent statement on
"Quality Assurance: A
New Approach" sets out principles for further development.
The
new approach aims
to provide public assurance that each institution maintains its
degree standards;
independent verification that programmes of study are delivering
their intended outcomes;
and information on the quality of learning opportunities. The
Secretary of State
encourages the Council, working in co-operation with the QAA and
other
bodies, to
continue to secure improvements in methods of quality assurance.
The
Council should
review the QAA findings in its annual report and should report
regularly to Ministers on
changes to be made as a result.

13. The Secretary of State expects the Council to
promote
and enhance high
quality teaching and learning and welcomes the Council's
proposals to
set aside some
£30m for promoting and rewarding high quality in teaching.
He
also welcomes the
Council's constructive involvement in the preparation for an
Institute for Learning and
Teaching in Higher Education and its decision to provide start-up
funding for the
Institute.

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supplement



Increasing participation

14. The plans for growth in student numbers reflect the
Government's
commitment to the principle that anyone who has the capability
for
higher education
should have the opportunity to benefit from it. They support the
Government's national
target for 28 per cent of the workforce to have a level 4
qualification (a degree or a
higher level vocational qualification) by the year 2002.

15. Taken together, the CSR settlements for higher and
further education will
deliver an additional 800,000 students in further and higher
education in 2001–02 in
England compared to 1997–8, of which some 1 00,000 will be
in
higher education split
between part-time and fulltime. Within the total, there will be
scope for participation by
young people to reach 35 per cent by 2002, although the actual
age
participation index
will depend on the number of continuing students and the
breakdown of
the new entrants
between young and mature students.

16. The CSR settlement will allow for 36,000 extra
students
in higher education
in 1999–2000 and 61,000 extra in 2000–1, compared with
planned numbers in
1998–9. As compared with 1998–9, the plans allow for:

(a) an extra 20,000 part-time students in
1999–2000
rising to 37,000 in
2000–1;

(b) a total extra 16,000 full-time students in
1999–2000 and a total extra
24,000 fulltime students in 2000–1. Of these, 8,000 in
1999–2000 and 15,000 in
2000–1 will be on sub-degree courses, mainly in further
education colleges. The
focus on sub-degree courses, mainly in further education
colleges, is
designed to meet
the national need - identified in the Dearing Report and
recognised
in the Government's
Response - for more people with advanced technical training;

(c) within the extra 20,000 part-time students in
1999–2000 an extra
8,000 on subdegree courses and within the extra 37,000 part-time
students in 2000–1
an extra 20,000 on sub-degree courses, mainly in further
education
colleges;

(d) an extra 2,000 full-time and 4,000 part-time
postgraduates in
1999–2000, an extra 3,000 full-time and 8,000 part-time
postgraduates in
2000–1.

Financial year estimates of total full-time equivalent student
numbers for the next two
years 1999–2000 and 2000–1 are shown in the Annexe to
this
letter. Details of
the planned student numbers in 2001–2 will be announced
later.
The figures allow
for a phased increase in medical undergraduate intakes reflecting
the
Government's
commitment to an increased UK intake of 1,000 by 2005 (400 by
2001).

17. The Council should continue to exercise tight
controls
to ensure that the
number of fulltime and sandwich undergraduate students is not
exceeded and planned
participation rates are met. Separate controls should be applied
to
the number of full-
time students on first degree and sub-degree courses
respectively.
The need for
controls is even more important now that student support costs
have
to be contained
within the Department's Expenditure Limit.

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Widening access

18. In order to meet the Government's commitment to
widening access, the
Secretary of State expects much of the expansion of student
numbers
to be through part-
time and subdegree courses, as indicated above. He would like
the
majority of the
expansion in sub-degree places to be delivered through further
education colleges. The
Council should put effective mechanisms in place to monitor and
ensure that these
objectives are met in practice by institutions.

19. The Secretary of State expects the Council to
allocate
funds so as to
promote wider access. The settlement will enable the Council to
deliver its proposals for
setting aside some £30m to support this aim through
mainstream
and special funding.
He welcomes the Council's intention to introduce a premium within
the
funding formula
to recognise success in the recruitment of students from
disadvantaged backgrounds or
facing particular challenges. He would expect child-care and
assistance to students with
caring responsibilities to be among the measures eligible for
support
from these funds.
He also welcomes the further development funds to be provided by
the
Council to link
higher education institutions with schools and colleges to
encourage
retention and
progression through higher education, to target particular
disadvantaged groups and to
support the promotion and dissemination of good practice.

20. The Secretary of State expects the Council, in
allocating the additional
places being made available, to give priority to institutions
which
provide evidence of
activity to widen access, and which have mechanisms for
monitoring
the implementation
and effects of those strategies.

21. The Council should consider the implications of its
funding arrangements
for equal opportunities. The Secretary of State expects the
Council
to continue to have
regard to the needs of students with disabilities. He asks the
Council to take into
account, when allocating funds to institutions, the need to meet
the
additional costs of
providing learning support for students with learning
difficulties
and disabilities. He
further asks the Council to monitor the provision made by
institutions for disabled
students.

22. In support of the Government's commitment to
widening
access, the
Secretary of State has announced a number of improvements to
student
support
arrangements, in particular: part-time fee remission for students
becoming unemployed
after starting their course; part-time fee remission for students
on
benefit; and support
for students entering higher education from care and for mature
students through Access
Funds.

23. Provision for Access Funds and for fee remission
for
part-timers is set out
in the Table below. Access Funds guidance will be issued as soon
as
possible next year
and it is important that the Funding Council allocates these
funds
quickly. Guidance on
fee remission for students who are on benefits or low income will
be
issued separately.


£ million
Financial year 1998-9 1999-2000 2000-1
Access Funds 371 512 45
Fee remission for part-time students who become
unemployed after
joining their course or who are on benefits or low income
2 12 13



1 Since the figure of £ for 1998-9 was
announced
in the 1997 grant
letter, there has been a transfer of £1m from the HEFCE to
the
FEFC Access Fund
in respect of part-time students on HE courses in FE colleges.

2 The balance of funds between FY 1998-9 and 1999-2000
is
distorted because
the HEFCE Access Fund for the AY 1998-9 was doubled but only the
first two terms fall
into FY 1998-9.

24. Other measures to support access as a result of the
Comprehensive Spending
Review will be announced in due course.

25. The Secretary of State regards universities' and
colleges' outreach
programmes for adults as playing a very important part in
lifelong
learning and looks to
institutions to attach priority to the continuation and, where
necessary, the refocusing
of their outreach programmes. These should cover: regeneration
of
the economy of the
specific or local communities in which the university has a
legitimate interest; partnership
work with adult education and other providers offering access to
those groups who have
traditionally been disadvantaged in relation to education and
lifelong learning; and a
contribution in terms of the role education can play in making
expertise and facilities
available to overcoming exclusion and social isolation. The
Secretary of State believes
that there is advantage in the maintenance and development within
institutions of
expertise in reaching out to non-participating groups, and in
championing the case of
more flexible delivery, for example through centres of expertise.

He
will expect that some
of the development money from the widening participation fund
will be
used for this
purpose, and that the Council will facilitate the achievement of
the
objectives of outreach
programmes more generally.

26. The Secretary of State welcomes the HEFCE's
indication
of its willingness
to work with the University for Industry (UfI). He looks forward
to
continuing dialogue
between the Council and the developing UfI organisation and
requests
the Council to hold
back some part-time places from the normal allocation process to
enable institutions that
are working with the UfI in the initial stage to develop joint
provision of learning
opportunities.

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Employability

27. The Government is determined to increase the
employability of higher
education students. As the Chancellor of the Exchequer said in
his
pre-Budget report,
it is particularly important, given the substantial public
investment
involved, that
students in higher education are employable upon graduation.
Better
information is
crucial to the achievement of this aim. The Chancellor made it
clear
in his pre-Budget
report that performance indicators relating to employment
outcomes
would take effect in
2000; and the Secretary of State expects the Council to take
urgent
action to ensure that
this happens (see also para. 47 below).

28. The Secretary of State recognises the contribution
which universities and
colleges make to the economy and invites the Council to develop
measures to enhance that
contribution in its funding allocations by:-

(a) taking into account critical skill shortages and
gaps, focusing especially
on IT skills given the report of the National Skills Task Force
`Towards a National Skills
Agenda'. A particular need here is to focus on the delivery of
education and training
in forms suitable for the life styles and needs of adults;

(b) promoting other measures to encourage
institutions to
meet the needs
of industry and commerce, such as: the encouragement of work
experience opportunities
for all students and helping them to learn from the experience;
the
teaching of key skills;
a particular focus on the skills needed for employment for
students
in the arts and
humanities; and the development of links with small and medium
sized
enterprises;

(c) promoting measures to encourage the transfer and
application of
knowledge.

29. The Secretary of State welcomes the Council's
proposal
to work with this
Department and DTI in creating a new Higher Education Reach Out
Fund
to enhance
higher education/business interaction through, for example,
helping
to set up centres of
expertise within institutions. Particular objectives should be
the
encouragement of work
experience; the transfer of knowledge, including in particular
the
transfer into SMES; and
the promotion of higher education/business interaction and
employability through other
appropriate measures. The Secretary of State expects the Council
to
allocate £10m
in 1999–2000, £15m in 2000–1 and £20m in
2001–2 for this purpose.
In addition to grant from this Department, DTI will also make
available resources over the
three years, and we will write to the Council shortly to confirm
totals.

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Collaboration

30. The Secretary of State looks to the Council to
encourage higher education
institutions to work closely not just with employers but with
other
partners, including
further education colleges and schools, TECs and the new Regional
Development Agencies.
He attaches considerable importance to the development of
successful
partnerships.

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Capital and IT infrastructure

31. The settlement will enable higher education
institutions to invest in the
capital and IT infrastructure necessary to enhance teaching and
support the knowledge-
driven economy. The grant will include a separate capital line,
of
which
£35m/£50m/£100m in
1999–2000/200001/2001–2
will be available for
capital and IT infrastructure and £50m/£100m/£150m
for
research
infrastructure (see below).

32. The first call on the amount for capital and IT
infrastructure will be to
meet any necessary capital implications of the expansion of
intakes
to medical schools.
The Council should use the balance to fund the expansion and
enhancement of the
electronic infrastructure and other aspects of the learning
resource
infrastructure
available to universities and colleges to support teaching and
learning. Investment in
teaching infrastructure should include, for example, improvements
in
laboratories used
mainly for teaching purposes.

33. The settlement is intended to support developments
in
the infrastructure
for communications and information technology (C and IT) of the
following kind:

(a) improvements in network infrastructure, including
improved links
between HE and FE institutions, which will help to support the
dissemination of high
quality teaching materials;

(b) improvements in access to appropriate C and IT,
particularly for
students without access to a personal computer;

(c) the enhancement of IT subject centres; and

(d) investment in SuperJANET to enable the sector to
remain as a world
leader.

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PFI/PPP

34. 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, including
the
VAT-related grant.

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Research

35. The settlement will provide substantial new funding
for
research of
£300m over the three-year period
(£50m/£100m/£150m in
1999–2000/2000–1/2001–2 respectively). This is
on top
of the additional
provision being made available for the science and engineering
base
by OST and the
Wellcome Trust (some El billion over the three years excluding
the
Wellcome Trust's
contribution to a replacement high intensity X-ray machine).
This
major boost for
research will more than meet the Dearing Committee's
recommendation
for extra research
funding.

36. The £300 million extra capital grant for
research
is earmarked for
projects to improve research infrastructure and equipment in
universities. The Secretary
of State welcomes the Council's intention to create a £100m
fund
to run alongside the
Joint Infrastructure Fund being set up by OST and the Wellcome
Trust.

37. The Secretary of State expects the Council to
continue
to play its part in
promoting Foresight, through its funding allocations and other
means.

He also welcomes
the Council's decision to mount its Joint Research Equipment
Initiative annually in future.

38. As in previous years, the Secretary of State will
wish
to consider the
Council's proposals on the split between funding for teaching and
research for each year.

39. The Secretary of State expects that, building upon
the
existing
collaboration with the CVCP, SCOP and other funding councils on
the
Joint Costing and
Pricing Steering Group, the Council will take actively forward
the
review of the
transparency and accountability of the funding arrangements for
research, which is being
led by the Director General of the Research Councils.

40. The Secretary of State also expects the Council to
continue to allocate
research funding selectively and to concentrate it on departments
which are likely to
produce over the long term highest quality in terms of research
output.

41. The Secretary of State would like the Council, in
collaboration with the
other higher education funding bodies, to find ways of opening
up the
Research
Assessment Exercise to a greater number of influences than
academic
peer review and
involving in the assessment process informed independent members
with
research
expertise from outside UK universities and colleges. He hopes
that
the Council will seek
to ensure that assessment panels give due weight to institutions'
co-use of research
knowledge with partners. The Secretary of State also looks
forward
to hearing the
outcome of the funding bodies' consideration of how to create
disincentives to institutions'
"poaching" staff with good records of research
publications
in the run-up to
the next RAE and the outcome of the HEFCE/CVCP working group's
consideration of
whether a minimum percentage of staff should be submitted in
order
for a department or
unit to be eligible for a 5 or 5* rating. The Secretary of State
would want to consider
these issues urgently, together with concerns raised about the
closure and amalgamation
of departments in relation to the RAE.

42. The Secretary of State expects the Council to
encourage
the promotion of
knowledge transfer and the development of closer links between
universities and users
of research in order to maximise the commercial exploitation of
university research. The
Government has already set up the University Challenge Fund with
the
Wellcome Trust
and the Gatsby Charitable Foundation. Including contributions
from
universities, £50
million will be available in seed funding on a UK wide basis to
help
institutions to make
the most of research findings by supporting the early stages, of
commercial exploitation.

43. The Chancellor of the Exchequer also announced in
his
pre-Budget report
a £25 million Enterprise Challenge Scheme to take forward
on a
UK wide basis the
Government's agenda for promoting the effective commercialisation
of
science research.
Six to eight new institutes of enterprise in selected
universities
will be endowed through
a challenge competition and attract additional private sector
funding. Universities will
be invited to compete for funds to set up these new institutes
to
work closely alongside
their research departments. The institutes will have two
mutually
reinforcing roles: as
teaching bodies, building business and entrepreneurship skills
into
the curriculum; and
as centres of excellence for knowledge transfer and exploitation.

44. The Secretary of State welcomes the establishment
by
the Council and the
British Academy jointly of an Arts and Humanities Research Board,
in
response to
Dearing's recommendation 29. This brings together the creative
and
performing arts and
the humanities under one research umbrella, to their mutual
advantage. The total funding
of over £44m for the AHRB in 1999-2000 approaches the scale
of
funding which the
Dearing Report recommended for selective distribution. The
Secretary
of State sees this
as a positive development which offers many of the advantages of
a
Research Council
without the need for primary legislation or entirely new
accommodation.

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Financial management

45. The Secretary of State reminds the Council of the
importance he attaches
to the effective governance and management of universities and
colleges. He stresses the
need for institutions to have in place proper arrangements to
ensure
adequate
accountability and transparency for public money made available
for
higher education and
he asks the Council to continue to review the need for guidance
to
the sector on matters
of financial management and value for money.

46. The Secretary of State is aware of concerns raised
during the NAO's recent
study of Southampton Institute about the management of overseas
course provision and
asks the Council to follow up as quickly as possible any relevant
recommendations which
may result from the forthcoming NAO report. He expects the
Council
to consider the
scope for issuing strengthened guidance to the sector on the
management of overseas
activities.

47. The Secretary of State wishes to see rapid progress
made by the
Performance Indicators Steering Group in developing indicators
at a
sectoral and
institutional level, including indicators on employment outcomes
which will better inform
the choice of prospective students. He looks forward to
receiving
the Steering Group's
report early in the new year on which performance indicators will
be
produced and when
publication will take place. As noted above, performance
indicators
relating to employment
outcomes should take effect in 2000.

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Sustainable development

48. The Secretary of State expects the Council to have
regard to the need to
continue to encourage universities and colleges to engage in
sustainable development.
The Council should consider whether there is advice drawn from
the
best practice
elsewhere which can be disseminated to the sector.

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Year 2000

49. The Secretary of State notes the work that the
Council
has already
undertaken to assess the readiness of the sector and its own
system
for the year 2000
date change. He understands that all universities and colleges
have
submitted
declarations or given assurances about their year 2000
compliance.
In the event that the
Council considers that the state of readiness of any institution
is
inadequate to deal with
the compliance issues, including through the preparation of
contingency plans, the
Secretary of State will expect the Council to take action to
require
an institution to
achieve an acceptable state of readiness. This may include the
selective application of
conditions of grant by the Council to institutions that are not
adequately prepared.

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Tuition fee arrangements

50. The CSR settlement takes account of student
contributions, subject to
income assessment, to tuition fees. The outcome of the
settlement
means that for
1999–2000 and 2000–1 the sector will retain all the
income
from
student contributions
to fees and receive extra public funding on top. The figures are
set
out in the Annexe.

51. As for 1998–9, the figures set out in the
Annexe
provide sufficient
funds to enable the Funding Council to provide compensation for
the
average lower
tuition fee (compared with the differentiated fees regime of
1997–8
and previous years)
in respect of the planned numbers. We look to the Funding
Council to
allocate funds
between institutions so as to reflect the effect of the
differentiated fee regime.

52. The Secretary of State has made it clear that he
does
not expect
institutions to charge "top up" fees. Under the
Teaching
and Higher Education
Act 1998 the Secretary of State has the power to impose a
condition
on the Council's
grant for 1999–2000, requiring it in turn to place a
condition
on the funding it
allocates for 1999–2000 to institutions providing higher
education that they should
not charge "top up" fees. The Secretary of State is
considering whether to
attach a condition of grant for 1999–2000.

53. From 1999–2000 the Department plans to cease
to
require local
education authorities to pay examination/validation fees charged
by
external bodies on
behalf of full-time undergraduate students eligible for help with
fees and maintenance via
the student support arrangements. The Council's grant will be
adjusted to enable it to
pay tuition fee compensation to universities and colleges. We
expect
the Council to adjust
the block grants it makes to institutions for teaching in
1999–2000 so that they do
not lose significant income as a result of the change.

54. The current arrangements for reimbursing the fees
of
initial teacher
training students taking PGCE and certificate courses designed
to
train teachers in
further education, or in post-compulsory education more
generally,
will continue in
1999–2000. The student support arrangements, including fee
reimbursement, in
respect of these qualifications will be reviewed for subsequent
years, in the light of
developments on an initial teacher training qualification for
further
education.

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Other relevant developments


Oxford and Cambridge

55. The Secretary of State welcomes the Council's
further
advice on how Oxford
and Cambridge college fees can best be incorporated within the
HEFCE's standard funding
method while ensuring that excellence is maintained. He would
expect
excellence at the
two universities to be safeguarded, too, by the substantial new
funding for research
provided by the settlement (see paras. 35–43 above).

56. He is reassured by the Council's plans to take
account
of college research
staff in allocating funding for research and to ensure that the
funding method recognises
the extra costs of institutions with old and historic buildings
and
of small institutions.
He agrees with the Council's view that very small institutions
can
provide a context for
distinctive provision and that extra funds to help meet their
extra
costs can encourage
and support diversity. He particularly welcomes the
Universities'
plans for a
redeployment of private funds between the richer and poorer
colleges.

57. The Secretary of State notes that, under the
Council's
proposed approach,
the new minimum level of supplementary funding for Oxford and
Cambridge, would be
£24.2m at 1998–9 prices. On this basis, he has decided
to
proceed with the
transfer to HEFCE grant from 1999–2000 of the public funds
which
are currently
allocated to the colleges through undergraduate college fees.
He
expects the change to
be phased in over a ten year period, as proposed in the Council's
advice, and the
reduction in any one year for each university to be limited to
a
maximum of some 0.7 per
cent of its annual HEFCE grant and 0.2 per cent of total annual
income.

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Dance and Drama

58. New arrangements will be introduced from
1999–2000
for
funding the most
talented students at dance and drama schools to succeed the
Interim
Funding Scheme (the
Dearing Report recommendation 77 refers). The grant to the
Council
will be increased by
£12m (i.e. over and above the provision in the Annexe to
this
letter). This will enable
the Council 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 HE courses.

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Transfer for direct funding of HNDs and
HNCs

59. The Secretary of State welcomes the agreement
reached
by the Higher and
Further Education Funding Councils on the transfer of funding for
HNDs and HNCs to the
HEFCE from 1999–2000 onwards, in accordance with
recommendation
86 of the Dearing
Report. The transfer will be reflected in due course in the
amounts
of grant made
available to both Councils.

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Transfer of responsibility for funding
to
the Department of
Health

60. As the Council will know, earlier this year £4
million was provisionally
transferred to the Department of Health from the Council's
1998–9 grant in respect
of professions allied to medicine (PAMs) students. Over the
period
leading up to the
achievement of `steady state' a total transfer of El 9 million
will
be necessary (in respect
of some 7,000 students). The implications for future years have
still to be finalised,
depending on the phasing of progression to `steady state'.


Work by universities and colleges in
relation to student
support for 1999–2000 (including income contingent student
loans, supplementary
grants, and hardship loans)

61. The grant to the Council allows for payment to
universities and colleges
for the carrying out of administrative functions in relation to
students who fall under
the new support arrangements for 1999–2000. These payments
will
replace eligibility
and hardship loan payments previously made by the SLC, although
the
SLC will continue
to make payments to universities and colleges in relation to
eligibility assessments for old
style loan students.

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Links with the Teacher Training Agency

62. The Secretary of State welcomes the working links
that
are developing
between the Funding Council and the Teacher Training Agency and
asks
the Council to
continue to work closely with the Agency. The student numbers
in the
Annexe take
account of the new targets for intakes to initial teacher
training
courses. The effect is
to increase the number of HEFCE-funded students by some 4,000 and
5,000 in
1999–2000 and 2000–1.

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Pay

63. Universities and colleges will be 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 the Comprehensive Spending
Review in July. 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.

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Council administration costs

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



£ million
Financial year 1998-9 1999-2000 2000-1
HEFCE running costs 9.4 10.4 10.3


65. These figures include provision for the
additional
costs associated with the
next Research Assessment Exercise and the transfer of
responsibility
for the funding of
higher education provision in further education colleges.

66. The Secretary of State asks the Council to continue
to
make efficiencies
and economies in its running costs and to seek increased value
for
money. The
Department will discuss with Council officers the allocation of
administration costs in the
coming year.

                                         [Signed] R.J. DAWE

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ANNEXE

Publicly planned funding for higher education in England






(£ million)

Financial year

1998--9

1999--2000

2000--1

1998--9 grants to HEFCE and TTA 1

3,674

------

CSR outcome grants to HEFCE and TTA

---

4,138

4,268

Public contributions to fees

1,006

599

520

Private contributions to fees 2

130

235

333

Total

4,810

4,972

5,121

Capital grants for infrastucture and IT

---

35

50

Capital grants for research

---

50

100

Measures to widen access

41

74

76

Total extra funds over and above 1998--9

---

280

496

Student numbers (FTEs in thousands)

1,023

1,035

1,052


Publicly planned HEFCE sector funding





(£ million)

Financial year

1998--9

1999--2000

2000--1

1998--9 HEFCE grant

3,500 3

------

CSR outcome HEFCE grant

---

3,949

4,077

Public contributions to fees

935

556

481

Private contributions to fees

126

229

322

Capital grants for infrastructure and IT

---

35

50

Capital grants for research

---

50

100

Total

4,561

4,819

5,030

Student numbers (FTEs in thousands)

959

975

992



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

2 The forecast income that universities and
colleges will receive from private contributions to tuition fees,
after means testing.

3 This is different from the £3,504m in the
26 November 1997 grant letter because of the net effect of the
in-year transfers between HEFCE grant; the HE Access Fund; the
FEFC; the TTA; and the Department of Health.

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