Recurrent Funding for 2010-11

Recurrent funding for B23e/10 2010-11 Agenda item 5 4 March 2010

1. Approval of recurrent funding allocations for 2010-11.

Recommendation(s)

2. The Board is invited:

a. To note the adjustments to grant set out in Annexes B and C, which arise from institutions’ student numbers in 2009-10, the appeals accepted by the Chief Executive under his delegated authority and further adjustments following data audit, reconciliation and other corrections.

b. To delegate authority to the Chief Executive to finalise reductions in grant for individual institutions that have exceeded permitted limits on FT UG and PGCE entrants in 2009-10.

c. To delegate authority to the Chief Executive to finalise the 2010-11 limits on FT UG and PGCE student numbers for individual institutions in the light of appeals.

d. To agree the approach to implementing the £10 million funding for STEM set out in paragraphs 11 to 15 and delegate authority to the Chief Executive to finalise the allocations, with a view to including them within the July grant announcement to institutions.

e. To confirm that moderation funding should be limited to £20 million for the sector for 2010-11: based on the provisional grant allocations, this would lead to a threshold that means no institution will see a reduction in cash terms of more than 0.8 per cent compared with the equivalent unmoderated figure for 2009-10, but that moderation funding is not provided if it amounts to less than £100,000.

f. To agree the allocations of 2010-11 recurrent grant at Annex F subject to adjustments which may be made under the Chief Executive’s delegated authority. Timing for decisions

3. Firm decisions are required at the meeting on 4 March in order to keep to our announced timetable of issuing grant letters for receipt by institutions on Friday 12 March 2009 in advance of the press conference on 17 March and publication on 18 March.

Board members’ interests

4. The paper details proposed allocations for all institutions, including those in which Board members have registered an interest.

Further information

5. From Steve Egan (0117 931 7408, [email protected]), Mario Ferelli (0117 931 7368, [email protected]) or Toby West-Taylor (0117 931 7286, t.west - [email protected]).

2 Background

6. At its meeting on 22 January 2009 the Board considered the basis for the recurrent funding allocations for 2010-11, and made decisions on a number of matters to enable these to be calculated. In particular, the Board:

a. Considered the grant letter from the Department and decided the total funding for the 2010-11 academic year.

b. Agreed budgets for non-recurrent grant (special funding and earmarked capital grants).

c. Agreed the main budgets for recurrent grant.

d. Agreed ways in which reductions in our grant from BIS should be implemented within the teaching grant.

e. Agreed to adjust the quality weighting scale for the mainstream quality- related research (QR) funding method for 2010-11.

7. A list of decisions made at that meeting is at Annex A. This paper invites the Board to make some further decisions and to agree the provisional 2010-11 recurrent grant allocations to institutions. The recurrent grant tables at Annex F assume that the recommendations in this paper are accepted.

8. Also in January, the Board considered provisional adjustments to grant in light of institutions’ student data returns for 2009-10 (the Higher Education Students Early Statistics (HESES) survey for higher education institutions and the Higher Education in Further Education: Students (HEIFES) survey for further education colleges) and delegated authority to the Chief Executive to vary these adjustments in response to appeals for mitigation. This paper also reports on the final adjustments and the appeals accepted by the Chief Executive.

Discussion

Grant adjustments arising from student numbers in 2009-10 and other changes following data audit 9. The Chief Executive considered six cases for mitigation of grant adjustments arising from HESES data for 2009-10 and agreed to revise the holdback of grant in four cases. In addition, the Chief Executive also considered revisions to funding for seven institutions for 2009-10 and earlier years following audits or reconciliations of HESES or HEIFES data. Four of these institutions had submitted appeals for mitigation, each of which was accepted, at least in part. Annex B provides details of the individual cases accepted and details of the changes to grant arising from data audit/reconciliation. It also includes details of one other change to 2009-10 funding as a result of data correction by one institution. Annex C provides a summary of the grant adjustments for each institution that

3 result from the HESES and HEIFES data for 2009-10, after appeals accepted by the Chief Executive, but before incorporation of the further adjustments that arise from data audit.

Recommendation: To note the adjustments to grant set out in Annexes B and C, which arise from institutions’ student numbers in 2009-10, the appeals accepted by the Chief Executive under his delegated authority and further adjustments following data audit, reconciliation and other corrections.

10. The grant adjustments shown in Annexes B and C do not include adjustments for institutions for exceeding the permitted limits on full-time (FT) undergraduate (UG) and Postgraduate/Professional Graduate Certificate in Education (PGCE) entrants in 2009-10. Our 22 December 2009 grant letter from the Department asked us to reduce grant at a rate of £3,700 per FT UG and PGCE student recruited above the permitted level. We are writing separately to institutions setting out provisional grant adjustments for such over-recruitment, but these are still subject to appeals by institutions. It is recommended that the Board delegate authority to the Chief Executive to finalise such adjustments in the light of any appeals received. In the January Board paper, we tentatively estimated that these reductions might total £10 million for the sector. We now believe the figure will be closer to £21 million and the impact of this on our budgeting is discussed further below. The Department has, of course, already reduced our grant for the 2010-11 financial year for this reason: our grant letter explained that it was, in particular, the higher than expected costs of student support during the economic downturn that had lead to the reduction of £135 million from our baseline grant. We will confirm to the Board later in the year the reductions to grant for over-recruitment by individual institutions. All such adjustments will, however, be subject to review in light of the final individualised student data for 2008-09 and 2009-10 submitted to the Higher Education Statistics Agency (HESA) or the FE Data Service’s Individualised Learner Record (ILR).

Recommendation: To delegate authority to the Chief Executive to finalise reductions in grant for individual institutions that have exceeded permitted limits on FT UG and PGCE entrants in 2009-10.

Funding for 2010-11 Teaching funding and student numbers 11. In January, the Board agreed to set aside £10 million to support institutions shifting the balance of their provision towards STEM subjects. This followed the statement in our December 2009 grant letter on ‘new funding incentives for higher education programmes that deliver the higher level skills needed’, which suggested that this would ‘require a robust way of identifying those programmes and activities that make a special contribution to meeting economic and social priorities, and a mechanism to redeploy funds, on a competitive basis, to those institutions that are able and willing to develop new or expanded provision in these key areas.’

4 12. The January paper proposed an initial step, drawing upon the finding of the SIVS Advisory Group that demand for STEM subjects appears to be increasing at a greater rate than the average, and that employers consistently indicate a requirement for high quality STEM graduates. The £10 million would be provided to support institutions that are shifting the balance of their provision away from low cost (typically classroom-based) areas into STEM and where this is not already being supported through the allocation of ASNs. The aim is to support institutions responding positively to the growth in STEM demand demonstrated in the SIVS Advisory Group’s report.

13. Across the vulnerable STEM subjects (chemistry, engineering, maths and physics), the data in the Advisory Group’s report shows the following patterns over the years 2005-06 to 2007-08:

 1% increase in student FTE, compared with 0% overall1  13% increase in UCAS acceptances, compared with 15% overall (12% if the addition of nursing and midwifery applicants to the UCAS system are excluded)  14% increase in A-level entries, compared with 5% overall.

14. The latest UCAS data on applications for 2010-11 suggest a continuation of this trend, but this occurs alongside a cap on the number of full-time admissions to higher education and a real terms reduction in the funding provided for each student. Our concern, in this situation, is that institutions will be unable to respond to the upturn in demand by increasing the number of places in these subjects, and indeed may re- balance their provision in favour of subjects that cost less to deliver. As the SIVS Advisory Group’s report makes clear, this could stifle both the flow of highly valued graduates into employment and the upturn in aspiration to study these subjects.

15. With this background, our aim is to provide the support necessary to enable institutions to increase the number of places they make available in the vulnerable STEM subjects, and thereby respond positively to the increase in student demand. This has to a degree been addressed through the allocation of 10,000 ASNs for 2010-11, around one third of which were in the vulnerable science subjects. Our proposal is to supplement this with a scheme that will have the following features:

a. The focus will be on full-time undergraduate entrants and the baseline for movement will be admissions in 2008-09, in line with the cap on entrants. This also ensures that the 10,000 unfunded places that were distributed for 2009-10 do not influence the allocation. If the scheme is repeated next year, we could expect the £10 million cost to double as we provide further support for new entrants as well as 2010-11 entrants progressing through their studies. This will, however, be subject

1 The apparent low increase in total FTEs over the period 2005-06 to 2007-08 is in part because there was a high intake of full-time undergraduates in 2005-06 (the year before the variable fee regime was introduced), followed by a smaller cohort in 2006-07, combined also with reductions in part-time numbers over the period. The year-on-year comparisons may also be affected by increased reporting of student non-completions by individual institutions during the period.

5 to discussion with the Board as part of the normal consideration of 2011-12 recurrent grant. b. In the first year, we will restrict coverage to the vulnerable subjects – chemistry, engineering, maths and physics with STEM, and modern languages – and we will define the subjects eligible for this purpose in terms of the Joint Academic Coding System or academic cost centres (for HEIs) and learndirect codes (for FECs). This is consistent with our SIVS policy and our approach to ASN allocations. Demand trends in modern languages do not suggest that we can anticipate growth in this area, but they are included to ensure that numbers are not reduced as a result of this policy, thereby increasing their vulnerability. By focusing on a small number of subjects, we can test a new approach in a focused manner. There is then the possibility that we may open it out to further subjects after further engagement with government and the UK Commission for Employment and Skills on subject priorities, and the development of our thinking on teaching funding from 2012-13. c. We will provide funding for each additional full-time FTE undergraduate entrant beyond the institution’s 2008-09 entrants level in the vulnerable subjects. As each institution will be operating within an overall cap based on the same baseline, this will require a comparable movement of numbers from other subjects. We will provide £3,000 for institutions moving numbers from Band D into eligible subjects in Band B. We will provide £1,500 for movement from either Band D into vulnerable subjects in Band C or Band C into vulnerable subjects in Band B. We will not provide funding for movement between non-vulnerable and vulnerable subjects in the same price band as there are no cost implications arising from this. The sums are intended broadly to reflect the difference between the price bands. Funding will be provided as a separately identified and monitored element within the mainstream teaching allocation and so both the movement of students between subject areas and the additional funding provided will influence an institution’s position in/outside the tolerance band. d. We will issue an Electronic Publication alerting institutions to the scheme during the week following the Board meeting and a Circular to HEIs and FECs by the end of March. Institutions will be asked to submit a template to our Institutional Teams by the end of April, providing details of any movement of numbers they propose. If any reduction is required due to demand beyond the £10 million we have budgeted, Institutional Teams will lead negotiations based on criteria identified in the circular. A final allocation will then be submitted for consideration by the Chief Executive by the end of May. Allocations will be confirmed to institutions at the beginning of June and confirmed in revised 2010-11 grant allocations in July. e. Initial monitoring will be carried out by asking institutions to confirm the movement of students through their Annual Monitoring Statements. We will then undertake further monitoring through a comparison between HESA/ILR 2008-09

6 and HESA/ILR 2010-11, which will be available in December 2011. We will withdraw funds in the event that the proposed movement of numbers is not undertaken.

f. As part of our monitoring, we will need to define virement groups, so that we can identify both how student numbers have moved between the priority and non- priority subjects and between subjects of different cost: we will need to ensure, for example, that expansion in the priority price group B subjects is not at the expense of non-priority subjects in that same price group, as this would not justify the allocation of additional funding. We will also need to take into account where we have allocated ASNs, as movements of student numbers must be in addition to what is already being supported through ASN allocations.

Recommendation: To agree the approach to implementing the £10 million funding for STEM set out in paragraphs 11 to 15 and delegate authority to the Chief Executive to finalise the allocations, with a view to including them within the July grant announcement to institutions.

16. There are no other new decisions required in relation to teaching grant. However, there are some amendments required to budgets within teaching grant since the January Board meeting, which are self-balancing. These changes result from better estimation of grant adjustments for over-recruitment in 2009-10, the need to increase allocations for employer co-funded provision to ensure the Department’s plans are met, and refinements following further modelling. Annex D provides an update of the routemap that the Board considered in January (in Paper B09/08e).

17. The table below summarises the changes to elements of teaching grant within the routemap since January: negative figures refer to a saving; positive figures therefore mean an increased cost.

Element Reason +£1 million: Consolidated grant Slight change to grant adjustments agreed by the adjustments (Annex D, box J) Chief Executive following appeal compared with previous estimate.

-£11 million: Reductions for In January we tentatively estimated that the institutions that have over-recruited reductions for over-recruitment would be FT UGs and PGCEs (box J) approximately £10 million, but this was before we had responses from institutions to our monitoring return. We now believe the figure will be closer to £21 million. However, this remains an estimate, as these adjustments are still subject to appeals from institutions.

7 Element Reason +£8 million: Co-funded employer We had previously budgeted £17 million to provide engagement (box Q) additional employer co-funded student numbers. We now believe that, if we are to ensure that the Department’s plans for growth in this area are to be realised in 2010-11, notwithstanding some under-recruitment against their allocations that is to be expected by individual institutions, we will need to provide further funding for this. We have recently issued Circular letter 03/2010 inviting further proposals from institutions. If there is under-recruitment by individual institutions, this will release funding that can be made available to meet expected strong demand for the Strategic Development Fund (SDF).

+£2 million: Migration (box R) Additional requirement for migration funding following finalisation of the funding model. The main cause for the increase is the recalculation of the partial completion weighting for institutions and its effects on their position relative to standard resource. It should be noted that we are not providing migration funding to the extent that an institution’s position below the tolerance band can be attributed to over-recruitment of FT UG or PGCE entrants in 2009-10.

18. A significant issue affecting teaching for the 2010-11 academic year is the implementation and monitoring of student number controls relating to FT UG and PGCE entrants. There are two separable, but closely related issues:

a. Our assessment of over-recruitment by individual institutions in 2009-10 and the consequential adjustments to their grant that we have been instructed to implement by the Department.

b. The setting of specific student number controls for institutions for 2010-11.

19. On the first issue, we are writing separately to institutions setting out our assessment of whether they have over-recruited and identifying a provisional sum to be deducted from grant during the 2010-11 financial year. These sums are subject to appeal and will be confirmed later in the year. All such adjustments will, however, be subject to review in light of the final individualised student data for 2008-09 and 2009-10 submitted to the Higher Education Statistics Agency (HESA) or the FE Data Service’s Individualised Learner Record (ILR).

20. On the second issue, we have informed institutions individually of their provisional limits for 2010-11. As explained at the previous Board meeting, we have changed the

8 coverage of the student number control, so that it applies only to HEFCE-fundable and employer co-funded students starting FT UG and PGCE study in the 2010-11 academic year. We have shared with institutions the detail of how we have calculated their provisional limits, starting from a baseline derived from their 2008-09 HESA or ILR data and incorporating adjustments for ASNs, transfers and other miscellaneous factors. We have also explained about the process for seeking changes to the provisional limit, either through appeal or amendment to the underlying student data. We are looking to finalise the limits as soon as possible.

Recommendation: To delegate authority to the Chief Executive to finalise the 2010-11 limits on FT UG and PGCE student numbers for individual institutions in the light of appeals.

21. In setting the 2010-11 limits using a baseline derived from 2008-09 data, we have avoided giving any advantage to those institutions that over-recruited in 2009-10. These institutions face a reduction in HEFCE grant of £3,700 per excess student recruited. However, this is a gross figure: they will also have received additional fee income of up to £3,225 per student in 2009-10 (from which they may have to make a contribution towards student bursaries) and other knock-on income, such as from residences and catering. Notwithstanding any income received for these students, the institutions do of course face additional costs of supporting them through their studies.

22. Nevertheless there remains a risk that these institutions’ over-recruitment in 2009-10 could again contribute to excess student support costs in later years. FT UG intakes will commonly be retained for three years, so the increased cohorts are likely to take some time to work through the system. We therefore need to be wary of assuming that the grant adjustments we apply for over-recruitment in 2009-10 will be for one year only. It would be unfair to other institutions if those that over-recruited in 2009-10 had the benefit of increased fee income in later years, while any consequential reductions in the grant made available to HEFCE by the Department were then shared equally across the sector. We are therefore making clear to institutions that over-recruited in 2009-10 that the limit on their FT UG and PGCE numbers in 2010-11 is very much a maximum:

a. If they recruit up to that maximum they risk any reductions in grant in 2010-11 arising from their over-recruitment in 2009-10 also being rolled forward into later years.

b. If they wish to avoid the 2010-11 grant adjustments recurring in future years, they will need to reduce their intakes relative to their 2008-09 baseline in a way which offsets the over-recruitment in 2009-10.

23. The recurrent grant tables at Annex F do not include any adjustments to institutions’ grant in the 2010-11 financial year as a result of their over-recruitment in 2009-10: these sums are still to be finalised. However, we will need to consider later in the year whether they should be incorporated in the final recurrent grant tables for 2010-11: this might imply that such adjustments were recurrent.

9 Research funding 24. At its meeting in January, the Board made decisions on refinements to the research funding method for 2010-11: in particular agreeing a change to the quality weighting scale from 1:3:7 to 1:3:9 for research rated 2*, 3* and 4* respectively; and a change to the mainstream QR funding quanta for geography and psychology. The outcomes for institutions of these decisions are summarised in Annex E. This shows:

a. The 2009-10 transitional QR funding: this is funding provided for one year only to smooth some of the more significant changes in the rate of funding in the mainstream QR allocation for certain subjects. Institutions were advised to assume it would not continue in 2010-11 and it is not included in the other comparisons within Annex E.

b. A comparison of 2009-10 and 2010-11 mainstream QR funding (including London weighting): this shows the effects for individual institutions of the change to the quality weighting scale and the quanta for geography and psychology.

c. A comparison of total 2009-10 and 2010-11 QR funding: as well as mainstream QR and its London weighting, this also shows the effects of changes in postgraduate research student numbers and research income from charities and business and industry on overall research grant.

25. In January, we reported that the additional funding required for geography and psychology, which would provide 50 per cent of the additional funding that they would have received had there been no protection for STEM disciplines, was £4 million. Having finalised the research funding model, we have found that the additional funding requirement for these two subjects is only £3 million.

26. When we established the QR charities element, the Board agreed (paper B43/05e) to base allocations on eligible income averaged across the previous two years’ data, although for the first year’s allocations for 2006-07 we used one year’s data only, as this was all that was available from the Research Activity Survey (RAS). In subsequent years, however, we have continued to use only a single year’s data to inform the charities element, rather than a rolling two-year average and this has been explained in relevant Board papers on each occasion (for 2007-08 in paper B3/07; for 2008-09 in paper B5/08; for 2009-10 in paper B09/06). In summary, for 2007-08 and 2008-09 we used a single year’s data, because of concerns raised through audits about the quality of some of the charities income data in previous years. For 2009-10, we used a single year’s data because to change to a two-year average would have been complicated in that year, since much of the income is in the medical disciplines where the restructuring of Units of Assessment (UOAs) between the 2001 and 2008 Research Assessment Exercises had its main impact: we only had one year’s data according to the new structure.

27. For 2010-11 we will for the first time use two years’ data to inform the QR charities element, as originally agreed by the Board. The effect of doing so will be to smooth

10 changes in this element of grant, removing some of the year-on-year volatility that can arise.

Moderation 28. We provide moderation funding to ensure that institutions do not experience unmanageable reductions in funding in a single year. When calculating moderation funding, we compare against the unmoderated, rather than moderated, funding the year before. This ensures that moderation for any single reduction in funding is not provided for more than one year. For 2009-10, we set the threshold for moderation to ensure that institution’s recurrent grant did not reduce by more than 0.6 per cent in cash terms compared with the equivalent grant for 2008-09. This threshold was set to limit the cost of moderation to the £24 million that we had set aside for the purpose and reflected both the impact of the Government’s policy on equivalent and lower qualifications (ELQs), where we committed to ensure that institutions did not see reductions in cash terms as a result of the ELQ policy, and because of the £65 million efficiency saving that we subsequently had to implement in July 2009. We have also not provided moderation funding in recent years where it amounts to less than £100,000. We now need to consider the thresholds at which to apply moderation for 2010-11.

29. For 2010-11 there are a number of factors that may lead to adverse funding outcomes for institutions:

a. To effect the reductions in our grant for 2010-11 made by the Department, we are withdrawing £76 million relating to three targeted allocations within teaching grant (old and historic buildings, postgraduate taught students in price group D on accelerated and intensive years of study and foundation degrees). We are also providing a below inflation increase to residual teaching grant budgets.

b. This is the third year of the ELQ policy, resulting in further net reductions for the sector of some £31 million.

c. Our overall budgets for teaching and research include only modest cash increases. This means that where elements of grant can be quite dynamic, this is more likely to lead to cash reductions for individual institutions. This applies in particular to funding for widening participation, teaching enhancement and student success and other variable targeted allocations within teaching grant; and research degree programme supervision funding and the charities and business elements of QR.

30. These issues mean that the cost of providing moderation at a level that would offer significant protection to institutions in cash terms is significant. The Board agreed in January to set aside £20 million for moderation and we believe this is the limit of what is affordable for 2010-11. Any further provision for moderation will significantly reduce our flexibility to respond to unexpected demands during the year. We therefore propose that the threshold for moderation should be set to ensure that the cost does not exceed £20 million: this threshold will mean that, for the March provisional grant announcement, no institution will see a reduction in recurrent grant in cash terms of more than 0.8 per

11 cent when compared with the equivalent funding for 2009-10. This is equivalent to a 2.8 per cent real terms cut.

31. It should also be remembered that the March allocations exclude £5 million of funding for widening participation and teaching enhancement and student success which is to be allocated by July, following finalisation of underlying data. Once this funding is allocated, it may serve to reduce the requirement for moderation funding.

Recommendation: To confirm that moderation funding should be limited to £20 million for the sector for 2010-11: based on the provisional grant allocations, this would lead to a threshold that means no institution will see a reduction in cash terms of more than 0.8 per cent compared with the equivalent unmoderated figure for 2009-10, but that moderation funding is not provided if it amounts to less than £100,000.

Commentary on recurrent grant outcomes for institutions 32. The tables at Annex F, which we propose to publish, show the recurrent grant distributed to the institutions funded by the Council, assuming all the recommendations in this paper are accepted. Table 2 of Annex F shows an average increase for the sector of 0.4 per cent compared with equivalent figures for 2009-10, but there is significant variation in outcomes for individual institutions. These variations are not determined by particular categorisations of institutions (such as ‘mission groups’) – they are evident across the full range of institutions. The overall increase in our budget for teaching, research and HEIF (but excluding moderation) is 0.9 per cent and the difference with the sector average figure shown on Table 2 of Annex F is because some allocations within teaching grant are still to be finalised. These include:

a. £5 million set aside for WP and TESS, pending finalisation of institutions’ underlying data.

b. £10 million set aside for institutions shifting the balance of their teaching activity towards STEM subjects.

c. £14 million set aside for further employer co-funded ASNs.

d. £8 million set aside for further fully-funded ASNs.

33. The overall percentage point change of 0.4 per cent is made up of the following contributions – these are calculated by dividing the change in grant for these different elements by the total equivalent recurrent grant for 2009-10:

Contribution to overall percentage point change Teaching grant* -0.10 Research grant† 0.32 HEIF 0.25 Moderation -0.06 Total 0.40

12 *Teaching grant will contribute an increase of some 0.5 per cent once sums set aside for allocation later in the year are included. †The increase attributable to research funding includes the withdrawal of the £12 million provided for 2009-10 as transitional QR funding. Excluding this factor, the underlying increase in research funding contributes 0.5 percentage points to the overall change.

34. The reasons for changes across the sector can be summarised as follows:

Teaching funding

a. Core funding: All institutions have had an uplift to core (mainstream) funding of 1.25 per cent for inflation, at a cost of £48 million. A small number of institutions have also received additional funding (totalling £5 million) to help them migrate back towards the ±5 per cent tolerance band from a position below it, including as a result of the recalculation of the partial completion weighting. For the sector as a whole, the change in core funding accounts for 0.8 of the 0.4 percentage point increase in total recurrent grant since 2009-10.

b. Additional funded places: Mainstream and non-mainstream funding for additional places is lower than in recent years, amounting to £43 million in these tables. For the sector as a whole, funding for additional student numbers accounts for 0.7 of the 0.4 percentage point increase in total recurrent grant since 2009-10. These places are not, of course, distributed evenly between institutions. Additional funded places remain the main reason for the larger increases in teaching grant for individual institutions.

c. Widening participation and teaching enhancement & student success (TESS): The budgets for WP and TESS have been increased by £5 million (1.25 per cent); we have also set aside a further sum of £5 million for allocation by July pending finalisation of underlying data by institutions. This means that at the sector level, these elements of grant do not contribute to the overall change for the sector shown in the provisional grant tables. Nevertheless, they do account for some of the more significant percentage changes for individual institutions, particularly further education colleges, where the absolute sums may be small, but where they represent a large proportion of a college’s total HEFCE grant. However, for over 80 per cent of HEIs, the net change in WP and TESS funding contributes between -1 and +1 percentage point to their overall percentage change.

d. Other targeted allocations: These include the targeted allocations that replaced former premiums; the allocation to maintain capacity in strategically important and vulnerable subjects following the introduction of the ELQ policy; and funding of £25 million for the very high cost and vulnerable science subjects of Physics, Chemistry, Chemical Engineering, and Minerals, Metallurgy and Materials Engineering. The most significant change in these various targeted allocations is the withdrawal of £76 million relating to the targeted allocations for old and historic buildings, postgraduate taught students on accelerated and intensive programmes in price group D and foundation degrees. Overall, these targeted allocations

13 account for a reduction of 1.2 percentage points within the overall increase of 0.4 per cent.

e. Other recurrent teaching grants: These include a small number of allocations, amounting to £30 million, that have rolled forward since last year and which mainly relate to additional costs of medical staff (such as consultants’ pay and NHS pensions). However, the most significant elements of these grants are transitional and safety net funding relating to the ELQ policy, which together amount to £44 million. These two streams have reduced by £30 million since last year and mean that, overall, these other recurrent teaching grants have contributed a reduction of 0.5 percentage points towards the overall increase of 0.4 per cent.

Research funding

f. Changes in research funding account for some significant changes in funding for individual HEIs. The main reasons are:

i. The change to the quality weightings within mainstream QR agreed by the Board in January.

ii. Changes in volume for other elements of research funding – the research degree programme (RDP) supervision fund, and the charities and business elements of research.

iii. The withdrawal of the 2009-10 transitional QR funding.

Higher Education Innovation Fund (HEIF)

g. For the large majority of institutions, the net change in HEIF funding contributes between 0 and +1 percentage point to their overall percentage change in recurrent grant. However, two institutions, University of London and London Business School, see increases of over 6.7 and 4.0 percentage points respectively that are attributable to HEIF.

Moderation funding

h. Moderation funding can result in positive or negative contributions to the overall percentage change in recurrent grant for individual institutions: it will be positive where we are providing moderation for 2010-11; it will be negative where moderation funding provided in 2009-10 is now being withdrawn.

35. The following tables provide explanations for some of the more significant changes in recurrent grant for individual institutions.

a. The first table explains the main factors that have contributed to percentage changes of more than +4 per cent, as shown on Table 2 of Annex F.

14 b. The second table explains the main factors that have resulted in 24 institutions seeing reductions in recurrent grant of more than 1 per cent in cash terms. In total, just over half of HEIs (69 out of 130) see reductions in recurrent grant in cash terms. It should be noted that although the moderation threshold for 2010-11 is recommended to be set so that institutions’ do not have a reduction in recurrent grant of more than 0.8 per cent in cash terms, this is compared with the equivalent grant for 2009-10. Certain elements of grant which are due to be phased out after 2009-10 are not subject to moderation (otherwise their withdrawal would be phased over a longer period), but they are included when we compare overall recurrent grant between 2009-10 and 2010-11 in Table 2 at Annex F. These elements that are not moderated comprise:

i. 2009-10 Moderation funding.

ii. 2009-10 Transitional QR funding.

iii. Changes to certain institution-specific targeted allocations within teaching grant following the review of exceptional funding for institutions.

iv. The phased withdrawal of £12 million from the targeted teaching allocation for foundation degrees.

c. The third table explains the reasons why individual institutions are receiving moderation funding for 2010-11.

Table A: Main reasons for overall changes greater than +4 per cent Institution Overall percentage change and main reasons for it. Anglia Ruskin University +4.3% overall. Mainstream and Non- mainstream ASNs account for 5.1 percentage points. Because the provision of ASN funding does not serve to reduce moderation funding, the University is nevertheless receiving moderation for other reductions in teaching grant, notably relating to ELQs and other targeted allocations Canterbury Christ Church University +8.3% overall. Mainstream and non- mainstream ASNs contribute 7.4 percentage points University of Chichester +5.0% overall. Mainstream and non- mainstream ASNs contribute 6.0 percentage points. Also receiving moderation funding largely due to reductions in other targeted allocations (mainly for old and historic buildings)

15 Institution Overall percentage change and main reasons for it. Coventry University +4.5% overall. Non-mainstream ASNs contribute 2.3 percentage points and WP and TESS a further 2.0 Guildhall School of Music and Drama +4.3% overall. Largest factors are HEIF (1.2), other targeted allocations (1.1) and core teaching (0.9) Harper Adams University College +10.0% overall. Mainstream and non- mainstream ASNs contribute 9.3 percentage points University of London +6.3% overall. HEIF contributes 6.7 percentage points. HEIF is not included in our moderation calculations and this means the University is receiving significant moderation for reductions in teaching grant relating to other targeted allocations (mainly accelerate/intensive PGT provision in price group D) and ELQs London School of Hygiene and Tropical +5.3% overall. Mainstream QR contributes Medicine 3.1 percentage points and the QR charity support fund a further 2.7 Newman University College +4.5% overall. Core funding contributes 6.7 percentage points and this is due to migration funding as a result of the recalculation of the partial completion weighting Ravensbourne College of Design and +7.1% overall. Mainstream ASNs Communication contribute 7.2 percentage points Southampton Solent University +6.3% overall. Core funding contributes 6.8 percentage points and this is due to migration funding as a result of the recalculation of the partial completion weighting Universities of Essex and East Anglia: Joint +4.6% overall. Mainstream ASNs Provision at University Campus Suffolk contribute 5.3 percentage points University of Worcester +13.3% overall. Mainstream ASNs contribute 9.2 percentage points and core funding a further 4.1 (due to the partial completion weighting)

16 Table B: Main reasons for overall reductions of more than 1 per cent Institution Overall percentage change and reason why change is below the threshold for moderation. Bath Spa University -1.5% overall. Phasing out of foundation degree targeted allocation, which is not moderated and otherwise below £100,000 moderation threshold University of Bedfordshire -1.1% overall. Phasing out of foundation degree targeted allocation University of Birmingham -1.2% overall. Withdrawal of 2009-10 transitional QR funding and phasing out of foundation degree targeted allocation University College Birmingham -1.8% overall. Phasing out of foundation degree targeted allocation Bishop Grosseteste University College -1.6% overall. Phasing out of foundation degree targeted allocation Buckinghamshire New University -1.4% overall. Phasing out of foundation degree targeted allocation and withdrawal of 2009-10 transitional QR funding Institute of Cancer Research -10.3% overall. Withdrawal of 2009-10 moderation Courtauld Institute of Art -10.9% overall. Withdrawal of 2009-10 moderation Cranfield University -3.8% overall. Phased reduction in institution-specific targeted allocation following REFI Institute of Education -1.5% overall. Withdrawal of 2009-10 moderation Goldsmiths College -1.7% overall. Withdrawal of 2009-10 moderation and 2009-10 transitional QR funding Heythrop College -6.8% overall. Not moderated, as the calculated moderation value is just below the £100,000 threshold Keele University -1.8% overall. Withdrawal of 2009-10 moderation and 2009-10 transitional QR funding Liverpool Institute for Performing Arts -1.5% overall. Not moderated, as the calculated moderation value is below the £100,000 threshold University of the Arts London -4.7% overall. Withdrawal of 2009-10 moderation and 2009-10 transitional QR funding London Business School -11.9% overall. Withdrawal of 2009-10 moderation and 2009-10 transitional QR funding

17 Institution Overall percentage change and reason why change is below the threshold for moderation. London School of Economics and Political -6.3% overall. Withdrawal of 2009-10 Science moderation and 2009-10 transitional QR funding University of Newcastle upon Tyne -1.0% overall. Withdrawal of 2009-10 transitional QR funding Norwich University College of the Arts -2.9% overall. Phasing out of foundation degree targeted allocation and calculated moderation value is just below the £100,000 threshold University of Reading -7.7% overall. Withdrawal of 2009-10 moderation and 2009-10 transitional QR funding Royal Agricultural College -1.7% overall. Not moderated, as the calculated moderation value is below the £100,000 threshold Royal College of Art -3.5% overall. Withdrawal of 2009-10 moderation and 2009-10 transitional QR funding -2.1% overall. Withdrawal of 2009-10 moderation and 2009-10 transitional QR funding and phasing out of foundation University of Salford degree targeted allocation -2.1% overall. Withdrawal of 2009-10 moderation and 2009-10 transitional QR University of Surrey funding -1.2% overall. Phasing out of foundation Writtle College degree targeted allocation

Table C: Main reasons for moderation funding in 2010-11 Institution Moderation Reason funding (£) Anglia Ruskin University 1,340,577 Reductions in WP, TESS, other targeted allocations and relating to ELQs University of Bedfordshire 459,799 Reductions in WP, TESS and other targeted allocations Birkbeck College 722,679 Reductions in other targeted allocations (mainly accelerated/intensive PGT provision in price group B) Birmingham City University 1,126,756 Reductions in WP, TESS and other targeted allocations

18 Institution Moderation Reason funding (£) Bishop Grosseteste University 484,382 Reductions in other targeted College, Lincoln allocations (mainly old & historic buildings) University of Bolton 117,235 Reductions in WP and other targeted allocations (foundation degrees being the largest single element) University of Bradford 705,888 Reductions in TESS and other targeted allocations (old and historic buildings and accelerated/intensive PGT provision in price group D) Brunel University 511,386 Reductions in other targeted allocations (accelerated/intensive PGT provision in price group D and old and historic buildings), WP, TESS and mainstream QR University of Chichester 343,640 Reductions in other targeted allocations (mainly old and historic buildings) and TESS City University, London 1,538,890 Reductions in other targeted allocations (mainly accelerated/intensive PGT provision in price group D), TESS and relating to ELQs University of Cumbria 211,285 Reductions in other targeted allocations (mainly old and historic buildings) University of East Anglia 180,372 Reductions in other targeted allocations (mainly accelerated/intensive PGT provision in price group D) and RDP supervision funds University of East London 585,118 Reductions in other targeted allocations (accelerated/intensive PGT provision in price group D and old and historic buildings) and relating to ELQs Goldsmiths College 462,719 Reductions in other targeted allocations (mainly old and historic buildings)

19 Institution Moderation Reason funding (£) King’s College London 731,622 Reductions in other targeted allocations (mainly old and historic buildings) University of Leicester 1,075,785 Reductions in other targeted allocations (mainly accelerated/intensive PGT provision in price group D) University of Liverpool 383,979 Reductions in other targeted allocations (mainly old and historic buildings) Liverpool John Moores University 276,876 Reductions in other targeted allocations (mainly old and historic buildings) University of London 179,038 Reductions in other targeted allocations (mainly accelerated/intensive PGT provision in price group D) and relating to ELQs London Metropolitan University 1,962,551 Reductions in WP, TESS, other targeted allocations (mainly accelerated/intensive PGT provision in price group D) and relating to ELQs London South Bank University 800,538 Reductions in other targeted allocations and relating to ELQs University of Newcastle upon Tyne 350,373 Reductions in other targeted allocations (mainly old and historic buildings) University of Northumbria at 383,104 Reductions in WP, TESS and Newcastle other targeted allocations Nottingham Trent University 443,672 Reductions in other targeted allocations (old and historic buildings and part-time undergraduates) and TESS School of Oriental and African Studies 428,489 Reductions in other targeted allocations (mainly accelerated/intensive PGT provision in price group D) University of Plymouth 1,372,654 Reductions in other targeted allocations (mainly accelerated/intensive PGT provision in price group D and foundation degrees)

20 Institution Moderation Reason funding (£) Roehampton University 231,658 Reductions in other targeted allocations (accelerated/intensive PGT provision in price group D and old and historic buildings), WP and TESS Royal Academy of Music 183,083 Reductions relating to ELQs Royal College of Music 130,159 Reductions in other targeted allocations (mainly old and historic buildings) and relating to ELQs University of Sunderland 716,195 Reductions in WP and other targeted allocations (largest element is foundation degrees) Trinity Laban Conservatoire of Music 109,889 Reductions relating to ELQs, and Dance and TESS University of Westminster 257,796 Reductions in other targeted allocations (mainly accelerated/intensive PGT provision in price group D) University of Wolverhampton 864,332 Reductions in WP, TESS and other targeted allocations (mainly part-time undergraduates) York St John University 217,593 Reductions in other targeted allocations (mainly old and historic buildings)

36. The outcomes for further education colleges (FECs) show some significant changes in percentage terms, but this is often because the absolute sums involved are much smaller:

a. The main reasons for the larger increases for FECs are increased funding for WP and/or TESS. A small number of colleges have also received additional student numbers.

b. The main reasons for reductions in grant for FECs are reductions in funding for WP and/or TESS. Often, because of the small sums involved, these reductions are not offset by moderation, because they fall below the threshold of £100,000 that we apply. In addition, a small number of FECs see reductions because of the withdrawal of 2009-10 moderation funding.

c. In general, moderation for FECs is largely being provided because of reductions in WP and TESS funding, but in some cases reductions in the targeted allocation for part-time undergraduates is also a minor factor. For North East

21 Surrey College of Technology, the most significant reason is a reduction in the funding for accelerated/intensive provision. Some of these reductions may be due to institutional data error. If there are corrections to underlying data, we will adjust the funding, if necessary, using the £5 million set aside for WP and TESS, which may reduce the need for moderation at individual FECs.

Financial implications

37. Annex D provides an updated route map showing the distribution of funding for 2010- 11. There is no change to the overall total agreed by the Board in January, but there are some changes within teaching grant, as explained at paragraph 17.

38. The tables at Annex F, which we propose to publish, show the recurrent grant distributed to the institutions funded by the Council, assuming all the recommendations in this paper are accepted.

39. Some adjustments and corrections are still being processed and the allocations that are announced may vary slightly from those shown. If the Board’s decisions vary from the recommendations put to it in this paper, then the outcomes for institutions will change. Members are now invited to agree the allocations in Annex F subject to any adjustments which will be implemented under the Chief Executive’s delegated authority.

Recommendation: To agree the allocations of 2010-11 recurrent grant at Annex F subject to adjustments which may be made under the Chief Executive’s delegated authority.

Risk implications

40. There are risks to institutions’ financial health arising from this grant settlement and we cannot assume settlements in the near future will be any easier. Those institutions that are seeing significant cash reductions are generally doing so because of the withdrawal of 2009-10 moderation funding and transitional QR funding: they will have had an opportunity to plan for these reductions over the last year. There are a large number of institutions receiving further moderation in 2010-11, even though we do not have a high eligibility threshold for this moderation. Overall, the sector as a whole, and three- quarters of HEIs individually, have a change to grant that is below what would be required to provide an uplift for inflation on the equivalent grant for 2009-10, with 46 HEIs seeing cash reductions. Institutions’ reputations may be affected by perceptions in the media about which are the ‘winners’ and ‘losers’ and the decision on moderation may also be significant here.

41. There are also risks to HEFCE’s reputation arising from the public presentation of the funding outcomes. If the Board do not make clear decisions on the allocation methods and outcomes at this meeting, then the grant announcement may be delayed and this would damage HEFCE’s reputation. We also need to ensure that the underlying HEFCE policies and decisions are clearly understood. The individual grant letter to institutions and the sector summary publication will address this.

22 Sector impact assessment

42. This paper makes recommendations about the distribution of grant. None of the recommendations require new data collection from institutions to inform allocations or, in the case of recurrent funding, to monitor the use of funds.

Public presentation

43. Grant letters to individual institutions will be made available through the HEFCE Extranet on Friday 12 March. A press conference to accompany the grant announcement is planned for 17 March. Publication by the press of information relating to the grant announcement is embargoed until 0001 hours on Thursday 18 March 2010.

44. Because of the particularly challenging nature of this year’s grant announcement we are making special preparations for briefing heads of HEIs which have been most adversely affected in advance of the announcement. We are also planning to brief representative bodies and mission groups who normally comment on our announcement so that they have a better understanding of the reasons behind our decisions. We are also making special preparations for explaining our decisions clearly to the media at the press conference and through follow-up enquiries.

45. The media are taking a particular interest in grant adjustments for institutions that have over-recruited FT UG and PGCE entrants in 2009-10. However, those grant adjustments are not part of our 2010-11 grant announcement in March. We will not publicly confirm any such adjustments until they are finalised after appeal.

23 Annex A

Summary of decisions taken by the Board on 22 January 2009 BIS funding announcement for 2010-11 1. From Paper B10/06 on analysis of the BIS grant letter for 2010-11, the Board:

a. Noted the main policy priorities of the Secretary of State in the 2010-11 grant letter and the accompanying activities to be delivered by HEFCE.

b. Noted the overall settlement values and the decrease in grant-in-aid available for 2010-11.

c. Agreed to assume that funding for the financial year 2011-12 should be the same in cash terms as that which had been provided for 2010-11; and that institutions should be advised that, if this assumption should prove to be too high, then allocations for the 2010-11 academic year might need to be reduced.

d. Agreed that the total grant to be distributed for the 2010-11 academic year was £7,356 million (a cash decrease of 1.59 per cent and a real terms decrease of 3.52 per cent on funding for 2009-10 after adjusting for capital brought forward from 2010-11).

e. Agreed that the £20 million reduction in recurrent teaching grant for April to July 2010 should be met from holdback.

Non-recurrent funding for academic year 2010-11 2. From Paper B10/07, the Board:

a. Having agreed that the Teaching Capital Investment Fund should be reduced by £32.5 million, then agreed that the reduction should be applied proportionately to the balances to be paid to HEIs in 2010-11. The Board also agreed that restoring the reductions in capital commitments, ie SDF (£10M), TCIF (£32.5M), FECs formula capital funding and open learning (£10M), should be a first call on 2011-12 capital funding and that the other areas should be considered as a priority if funds were available.

b. Agreed budgets for special funding of £294 million, which included the £10 million increase to the SDF budget, and earmarked capital of £562.4 million for the academic year 2010-11 as detailed in Annex B of the paper.

1 Recurrent grant for 2010-11 3. From Paper B10/08 on recurrent funding, the Board:

Grant adjustments for 2009-10

a. Noted the provisional adjustments to teaching grant arising from institutions’ student numbers in 2009-10.

b. Confirmed that formulaic adjustments to mainstream teaching grant should be effected as set out in institutions’ funding agreements and HEFCE 2009/24, or as separately notified for Lifelong Learning Network ASNs.

c. Delegated authority to the Chief Executive to vary the adjustments to grant in individual cases in the light of institutional appeals.

Funding and student numbers for 2010-11

d. Agreed that £20 million should be set aside for moderation funding for 2010-11.

e. Agreed that the total recurrent funding for research, HEIF and teaching for the academic year 2010-11 should be set at £1,603 million, £150 million and £4,727 million respectively.

f. Agreed that reductions in teaching grant in 2010-11 should as far as practical be targeted at particular areas so as to limit pro rata reductions for the whole sector.

g. Agreed that the targeted teaching allocations for old and historic buildings and for accelerated and intensive PGT courses in price group D should be withdrawn in full for 2010-11, but subject to the overall rules for moderation of teaching and research grant to be agreed at the Board’s meeting on 4 March 2010.

h. Agreed that the targeted allocation for foundation degrees should be phased out in equal instalments over two years and its withdrawal should not be subject to moderation.

i. Agreed that the uplift for inflation to be used in determining teaching funding allocations should be 1.25 per cent.

j. Agreed to set aside £10 million for allocation in 2010-11 to support institutions that were shifting the balance of their provision towards STEM subjects.

2 k. Agreed that total funding for widening participation (WP) should be £144 million for 2010-11. l. Agreed that total funding for teaching enhancement and student success (TESS) should be £269 million for 2010-11. m. Agreed to set aside £5 million from within the total of £413 million for WP and TESS to allow for changes to allocations between the March and July grant announcements arising from corrections to institutions’ underlying student data. n. Agreed the changes to London weighting within the teaching grant to be effected from 2010-11 for the Conservatoire for Dance and Drama, the University of Greenwich and Thames Valley University. o. Noted the development of the control on FT UG and PGCE admissions proposed for 2010-11 to reduce the risk of the sector over-recruiting. p. Agreed that within the total funding for recurrent research, funding for research degree programme supervision and the business research element should be increased by 1.25 per cent; funding for the charity support element by 2 per cent; and funding for national research libraries should be maintained in cash terms. This would allow an increase very slightly above the GDP deflator in the mainstream QR allocation. q. Agreed to adopt a slope of 1:3:9 for allocating funds to 2*, 3* and 4* work (as assessed in RAE2008) for all disciplines in allocating research grant for 2010-11. r. Agreed to modify the allocation of mainstream QR funding to return one half of the notional reduction in funding for geography and psychology resulting from the protection from 2009-10 of funding for STEM disciplines.

3 Annex B

Appeals for changes to 2009-10 grant adjustments accepted by the Chief Executive under delegated authority 1. This annex provides details of changes to formulaic grant adjustments for 2009-10 agreed by the Chief Executive under this delegated authority. It also reports on some further changes to grant agreed following recent data audits.

Background 2. There are a number of circumstances under which we adjust teaching grant in the current year as a result of changes in institutions’ student numbers. These are set out in the funding agreement that we have with each institution and the publication HEFCE 2009/24, ‘HEFCE grant adjustments 2009-10’.

a. Where an institution’s position relative to standard resource is above its contract range, we hold back grant sufficient to bring the institution back within its contract range. Institutions may receive moderation funding in-year as a result of such holdback, so that they are not faced with an immediate, unmanageable reduction in core funds.

b. Institutions that experienced holdback for exceeding the top of their contract range in 2008-09 will also have had that holdback consolidated into a lower funding baseline for 2009-10. However any such funding deducted from their 2009-10 baseline can be repaid in 2009-10 to the extent that its reinstatement keeps the institution within its 2009-10 contract range. This gives institutions a second chance before a holdback of core funding becomes permanent.

c. Institutions are able to receive additional funding to the extent that they make good in 2009-10 shortfalls in additional student numbers (ASNs) awarded for 2008-09.

d. Institutions are liable to holdback of ASN funding if they do not deliver sufficient growth awarded for 2009-10. Such holdback will not lead to the allocation of any further moderation funding.

e. Institutions are liable to holdback of grant if they do not meet FTE targets for full-time undergraduate medical or dental courses. Such holdback will not lead to the allocation of any further moderation funding.

f. Some ASNs for lifelong learning networks (LLNs) are funded outside the mainstream, tolerance-banded element of teaching grant and subject to separate monitoring arrangements. Funding for such ASNs will be adjusted to reflect the level of activity that the lead institution has reported on their HESES09 return.

1 These adjustments may be positive (if the LLN has made good shortfalls in 2008-09) or negative.

3. The first four types of grant adjustment are applied in the current year and consolidated into the baseline mainstream funding level for the 2010-11 academic year. Holdback for shortfalls against medical and dental FTE targets is an in-year adjustment only, not consolidated into a lower baseline for the following year. Adjustments to the separate LLN ASN funding will also be made in-year and consolidated into a lower level of funding for 2010-11 but, like other ASNs, institutions will have a second chance to recover funding in 2010-11 relating to sums held back in 2009-10, if they make good the previous shortfalls.

Decisions relating to grant adjustments arising from HESES08 4. Five institutions submitted appeals for mitigation relating to grant adjustments arising from their HESES09 returns (no further education college submitted an appeal). The Chief Executive agreed to changes to the formulaic adjustments for three of these institutions and their cases are described below.

5. The Universities of Durham and Kent appealed on similar grounds. Both argued that, because they had increased their reporting of non-completion in HESES09, it now appeared as if they had not delivered the growth arising from their ASN allocations. It was agreed that the student FTE targets for the two Universities should be reset to ensure we were assessing the achievement of year-on-year growth on a like-for-like basis. In both cases this served to reduce holdback of ASN funding to zero.

6. London Metropolitan University appealed against holdback for exceeding its contract range. For 2008-09, the University had had an extended contract range of -5% to +17.6%. This was a necessary consequence of the Board’s decision in July 2008 (paper B08/64), to cap the reduction in the University’s recurrent funding for 2008-09 at £15 million. This capping recognised the exceptional circumstances facing the University, its overall financial position and its need to continue operating while a full strategic options review was carried out. It also allowed the University some scope to recover its position. Because we had capped the reduction at £15 million, this left the University significantly above the tolerance band, at +17.6 per cent. We therefore set the University an extended contract range for that year, reflecting this position, which would allow the University to migrate back towards the ±5 per cent tolerance band by increasing its student numbers and the effects of the flexible study measure relating to partial completions, which was introduced from 2009-10.

7. By the time of the grant tables for 2009-10, the University appeared to have come back within the tolerance band. The reason for this was a combination of the student numbers reported on HESES08 and the effects of the new flexible study measure. We therefore reset the University’s contract range for 2009-10 to be the tolerance band (as is the normal formulaic approach). It is now clear, however, that the HESES08 return overstated the University’s numbers (notwithstanding the reporting of much more realistic non-completion rates). While these would not have resulted in holdback in that year, they

2 would equally not have meant the University would be back in the tolerance band in 2009-10 and we would not, therefore, have reset its contract range for 2009-10 as we did. Had the 2009-10 grant tables been derived from the University’s 2008-09 HESA, rather than HESES, data, it is clear that the University would not have been in the tolerance band, and it would therefore have had a different contract range, and therefore a different holdback position.

8. The underlying issue for London Metropolitan University is that it still needs time to migrate back to the tolerance band from the position of +17.6 per cent originally agreed for 2008-09. The narrowing of its contract range for 2009-10 was a formulaic outcome arising at least in part from an overstated HESES08 return and this contributed to the holdback identified for 2009-10. We have therefore agreed to reset the University’s contract range for 2009-10 retrospectively, to allow for a standard three-year migration period back into the tolerance band from its 2008-09 position and this recognises the exceptional circumstances of the University.

9. This results in contract ranges in successive years of:

2009-10: -5% to +13.4% 2010-11: -5% to +9.2% 2011-12: -5% to +5%.

10. A contract range extending to +13.4% in 2009-10 means that the University’s position at +12.7% does not result in contract range holdback this year. We expect further migration in future years will need to be achieved by improving student retention, or increasing recruitment in areas not covered by the current cap on full-time undergraduate and PGCE entrants, otherwise grant adjustments will arise.

11. In addition to the above three appeals, the Chief Executive also agreed a change to holdback for Leeds College of Music (LCM). We have been working with the College for some time to secure a sustainable future for its distinctive provision. At its meeting in July 2008, the Board agreed that HEFCE would provide LCM with up to £525,000 of additional funding for 2008-09, of which £425,000 was allocated, to provide a necessary level of financial security. This funding was included as part of LCM’s mainstream teaching grant allocation and was initially intended for 2008-09 only, but in December 2008 the Board agreed a second (and final) year of interim funding.

12. The inclusion of the £425,000 as part of mainstream teaching grant has resulted in contract range holdback in both 2008-09 and 2009-10. As last year, given the debilitating effect the holdback would have on LCM’s resources, the Chief Executive agreed that we should not apply holdback to LCM where it is attributable to the additional funding provided. This results in no in-year contract range holdback payable for 2009-10 and therefore none to consolidate into 2010-11. It should be noted, however, that the £425,000 is due to be withdrawn from 2010-11.

3 13. Annex C shows the final adjustments to grant arising from institutions’ HESES and HEIFES returns for 2009-10, incorporating the decisions above.

Further changes to grant agreed following audits or reconciliations of HESES and HEIFES data 14. In addition to the above cases, the Chief Executive agreed some further changes to grant for individual institutions which followed from recent audits of HESES and HEIFES data. The changes agreed are as follows (and are in addition to the figures given in Annex C):

Institution Data exercise Change to Change to grant for 2009-10 2007-08 to grant (£) 2008-09 (£) HESES08 audit and 2007-08 data University of Chichester reconciliation -£1,672.347 -£768,611 2007-08 data De Montfort University reconciliation -£182,119 -£34,781 2007-08 data Institute of Education reconciliation -£62,140 +£1,438 Manchester Metropolitan University HESES08 audit -£2,290,856 +£350,039 University of Northampton HESES08 audit -£542,577 -£272,464 Norwich University College of the Arts HESES08 audit -£205,986 -£243,238 Roehampton University HESES08 audit £0 -£374,357 University of Salford HESES07 audit -£2,167,864 -£1,159,573 University of Wolverhampton HESES07 audit -£2,953,191 -£1,353,518 Total -£10,077,080 -£3,855,074

15. The figures for Chichester, Manchester Metropolitan, Northampton and Wolverhampton universities shown above are after the acceptance by the Chief Executive of appeals for mitigation. The details of these cases are set out below.

16. Chichester, Manchester Metropolitan and Northampton all appealed on similar grounds. They argued that, because the audits had identified higher non-completions than were previously reported in HESES, it now appeared as if they had not delivered the growth arising from their ASN allocations. It was agreed that the student FTE targets for the three Universities should be reset to ensure we were assessing the achievement of year-on-year growth on a like-for-like basis.

17. The HESES07 audit for the University of Wolverhampton had also identified under- reporting of non-completions. The University appealed on the basis that the non- completion rate identified at the audit had been derived from a student population that included some students not funded by HEFCE, who had a disproportionately high non-

4 completion rate. The Chief Executive accepted this appeal and the funding implications were recalculated accordingly.

5 Other miscellaneous change to 2009-10 recurrent grant 18. The Chief Executive also agreed one other change to grant for 2009-10. University College Plymouth St Mark & St John recently requested to make late amendments (too late for the October announcement) to their 2007-08 HESA data to affect their 2009-10 WP and TESS funding. The reason for this is that they had a large amount of data missing relating to qualifications on entry, and after investigation they discovered the reason for the missing data was due to a change in UCAS code following their recent name change - we understand that UCAS had not provided complete data for them. Having obtained extra data from UCAS, they submitted amendments to HESA. We have processed these and re-calculated their 2009-10 WP and TESS allocations. This has resulted in an overall change of +£190,264.