Section 3: Initial Reaction to the Proposed Changes

Section 3: Initial Reaction to the proposed changes:

The original proposals following the Browne Review to increase the maximum fee level to £9,000 and make changes to the student financial support system, OFFA Access Agreement arrangements, etc., offered a number of benefits to many potential Teesside students and were largely to be welcomed.

Most of the principles set out within the White Paper were as expected and will translate into activity which had largely been anticipated. However the details of how those principles will be implemented, and some of the other information that has emerged since publication of the White Paper, could potentially pose a great threat to the University and in responding to the White Paper, the mission group, the ‘University Alliance’, of which we are now a member, commented:

“… We must not forget that the eyes of the world are upon us as we reverse the balance of public and private investment. In a highly competitive, responsive, largely market-driven sector that is about to undergo radical funding changes….

… there are a large number of universities in the sector (all those operating below the AAB market and charging more than £7.5K average fee) that face the prospect of having 5% of their student numbers taken away year on year without anywhere to go. To be clear, even those that do manage to present a £7.5K average fee should not presume that they will be looked on favourably for the re-allocation of the ‘margin’ of 20,000 numbers because – at least in the first instance – there will be incredibly strong pressure on HEFCE to offer these to FE and for-profit private providers.

SO - for those of you for whom your average fee comes in over £7.5K your choice is to either hold your ground and take the hit in student number loss in year 1 (there is a small chance you will get some back) or whether to play their game and reduce your average fee to £7.5K in the hope of being first in line for the re-circulated 'margin' numbers once FE / Privates have had their bite of the cherry.

….. but I would strongly advise to bear in mind that this is Year 1 only. We are told that these measures are both 'testing the water' and depending on the results, the parameters are all up for grabs the following year (i.e. the AAB threshold might come down, the 'core' might be higher or lower than 5% and the £7.5K threshold could go up or down)”.

In addition to these general remarks, I would like to draw your attention to the points listed below. But, before considering the implications of these points I would like to stress that, at the present time, the Government has no way of directly restricting the recruitment of part time, full cost PG or International students (provided they met the UKBA immigration requirements) and hence despite the constraints elsewhere, part of our response to the White Paper changes must be to give urgent priority to the growth of these areas in the short and medium term.

1. Although the White Paper stresses the wish to extend part time, distance learning and higher vocational programmes, the paper does not provide any details about the

1 funding of PT education, or what incentives, if any, there may be for institutions or individuals to get more engaged with PT delivery.

2. The 85,000 students being redistributed in 2012 are not new numbers, but a recycling of existing numbers in a manner which could be damaging to Universities that do not routinely recruit a predominance of high achieving students (AAB+ at A level);

3. The ‘core + margin’ redistribution of student numbers proposals which seeks to facilitate the expansion of activity amongst providers who can combine good quality with VFM, could potentially ‘drive a wedge’ between the University and our FE partner colleges.

Whilst we know that there are some very weak/poor HE:FE partnerships nationally, and some others that will come under pressure in the future, there are those, like our own, where working in partnership offers massive advantages for both the partner institutions and the regional economy.

In our case we have agreed a Fees Strategy which charges £8,500 for UG degrees and £6,000 for Foundation Degrees (largely delivered by our FE partners) but because our average fee is not currently below £7,500 the likelihood is that we will not qualify to bid for any growth on their behalf – which could encourage them to consider bidding independently.

We are hopeful that Vince Cable and David Willetts value strong HE:FE partnerships, such as ours, and would not wish to see them undermined in this way, and that this is an ‘unintended consequence’ which is capable of being rectified through the consultation process.

4. The White Paper includes a proposal that by 2013/14, “all providers should be on an equal playing field in terms of access to student support”, but there is no detail of how this is going to be achieved – and, clearly, if students who do not currently enjoy access to student financial support are to qualify for such support in the future this would place an intolerable burden on the Treasury which could only be resolved by reducing the number of places in the existing HE funded sector to accommodate them

5. We strongly welcome the suggestion that Professor Sir Tim Wilson (who is very familiar with our work here at Teesside) has been asked to lead an investigation into University:Employer links and we hope that the Government will listen carefully to the resulting advice.

6. The Government continue to believe that there are large numbers of very bright, high achieving students who are unable to get places at the most selective universities. We remain unaware of any strong evidence to support that view in the North East, and as you will know, the biggest issue for us in to encourage bright students to participate at all - indeed, we would contend that if we were to win the battle to increase local participation in HE, most of our local residents would opt ‘by choice’ to attend their local university here in Teesside

7. Whilst the combination of: ‘good quality’, ‘value for money’, ‘a competitive market environment’ (easily accessed by small institutions, FE colleges and private providers),

2 ‘high student satisfaction’, etc. probably seems highly attractive to Government it is essential that they do not rush to reduce the burden of regulation in relation to the assignment of the title ‘University’ or the approval of ‘Degree Awarding Powers’ in order to avoid permanent damage to the global reputation of UK higher education

Most of these points are not new, and have already been made many times, but points (2) and (3) have only just emerged as a direct consequence of the way in which the ‘Core + Margin’ scheme has been defined.

Potential Impact of ‘Core + Margin’ on Teesside

The redistribution of the 85,000 places through the introduction of a 2-pronged AAB+ and ‘core + ‘margin’ approach would be likely to have the following impact on the University:

1. AAB+ (or equivalent)

In 2001/11 there were apparently 65,000 students who entered FT UG programmes with AAB or above at A level (or equivalent) – a figure that is predicted to increase by 4000 to c.69,000 by 2012/13.

The additional 4000 expected in 2012/13 have been allocated to institutions pro rata on the basis of their overall FT UG student numbers, not their % of AAB+, which has resulted in our figure increasing by a further 27.

In addition to the students that we know entered with AAB or better in 2009, HEFCE have however identified a further 400 students whose HESA record indicates that their entry qualifications or grades were incomplete – and who therefore could feasibly have been AAB+, and they have therefore indicated that the reduction to our SNC may be increased still further to reflect this.

Once our target has been adjusted to take account of all of these issues, we would of course then be free to recruit as many students as we could with entry grades at or above AAB or equivalent.

Given that many of our high achieving students are local to Teesside, and most enter niche programmes for which Teesside has a well established reputation (and which may not actually be available at many of the so called ‘elite’ universities), we are therefore fairly confident that we should be able to retain a significant proportion of the equivalent group of new entrants in 2012 .

Hence, in summary, whilst this clearly creates a great element of ‘uncertainty’ going forward (and we are challenging the accuracy of the proposed reduction in our SNC), we believe that the ‘liberalising of AAB+ admissions’ may have only limited financial impact on the University going forward.

3 2. Redistribution of 20,000 places on the basis of price

If 20,000 places are removed, pro-rata, from the sector (after first removing the 65,000 students qualified at grade AAB+), this would represent 8% of the total available number of student places in the sector, and in our case (after adjustment for AAB+, etc) would equate to a further loss of about 190 places.

Further, if the ability to make a competitive bid for reinstatement of some, or all, of those places is restricted to those institutions with an average fee (after taking account of fee waivers) of less than £7,500 then the University would currently not be in a position to bid and these numbers would simply be lost to the University.

Losing 190 first year places in 2012/13 would, over a 3 year roll out period, accumulate to an overall reduction in student numbers of nearer 530 (i.e. a reduction in recurrent revenue of over £4 million).

3. Overall Impact of ‘AAB+’ and ‘core + margin’

When taken alongside the fact that the University has already been informed that it will be losing the funding for 120 places funded through the University Modernisation Fund (UMF), it is estimated that the total reduction in our first year entrant target could be between 300 and 400 students (accumulating over the 3 year rollout of degrees to c.1000 students), which would equate to a recurrent loss of annual income of around £8 million.

This lost income, is primarily due to changes that had not been foreseen at the time of the production of the University financial forecasts and would therefore increase the need for annual cost savings (or new income generation) from c.£15 million p.a. to c.£23 million p.a. (c.17% of turnover) within the next 4 years.

Further, and importantly, is the worry that if this ‘core + margin’ approach proves to be successful it is likely to be repeated in subsequent years – leading to further cumulative reductions in FT UG student numbers and associated revenue.

The main issue raised by all of the above was recognition of the need for the University to:

 Either: ‘hold firm’ and accept the loss of c.190 student places for 2011/13 (rolling out to a cumulative loss of c.530 places, and £4+ million of student fee income p.a. by 2014/15);

 Or: take steps to reduce our average fee (after fee waivers) to below £7,500 in order to enable us to bid to recover some, or all, of the lost numbers (or possibly even grow our numbers) – but recognising that reducing our price would not in any sense guarantee success in the bidding competition.

4 ‘Holding firm’ would require no action, but reducing our average fee would necessitate either:

1. Dropping the headline price for some or all of our programmes below that originally cited in our Access Agreement (i.e. £8,500 for degrees and £6,000 for FDs).

2. Shifting the balance of our intake, by reducing the number of 3 year UG degree entrants and increasing the number of 2 year FD entrants;

3. Adjusting the balance, and volume, of our Bursary Strategy, Access Agreement and National Scholarship Programme ‘offer’ to emphasise the role of ‘fee waivers’ and reduce our average net fee payable;

Having reviewed these options the Board initially accepted a recommendation that we should:

 lobby to change the proposed bidding rules; and

 increase the number, and size, of the fee waivers offered in the early years of the scheme (to maximise the likelihood of achieving our funded SNC target), even though this would not, in isolation, reduce our average price to below £7,500