Debate on 25th February: Higher and Further Education Funding This Library Note aims to provide background reading for the debate to be held on Thursday 25th February: “To call attention to the consequences of the cuts to higher and further education funding that have been announced” This Note provides a snapshot of the UK higher and further education sector as it stands today, together with details of recent policy developments in these areas. It also gives details of the funding announcements made by the Government and the Higher Education Funding Council for England (HEFCE) and the reaction to those announcements by the universities and colleges. Finally, the Note outlines some of the recent contributions to the debate on how higher education in particular should be funded. Matthew Purvis 22nd February 2010 LLN 2010/006 House of Lords Library Notes are compiled for the benefit of Members of Parliament and their personal staff. Authors are available to discuss the contents of the Notes with the Members and their staff but cannot advise members of the general public. Any comments on Library Notes should be sent to the Head of Research Services, House of Lords Library, London SW1A 0PW or emailed to [email protected]. 1. The UK Higher and Further Education Sectors 1.1 Higher Education A picture of the UK higher education sector as it stood at the beginning of the academic year 2008–09 is provided below: • 132 universities and 33 higher education colleges; • 2,396,055 students and 179,040 academic staff and 203,720 non- academic staff; • Total income of £23,439 million and expenditure of £22,884 million (2007/08); • 36.3% of income came from funding body grants and 57.4% was spent on staff costs (2007/08); • As a percentage of GDP the UK spent 0.9% of public expenditure on higher educational institutions in 2006. The OECD average was 1.0 % and the EU19 average 1.1%; • According to Universities UK, the output of universities represents 2.3% of GDP, which is comparable to the contribution from computing services or the recreational service sector. (Sources: HL Hansard, 14th December 2009, col WA180; Higher Education Statistics Agency website Some Headline Statistics and Finance Data Tables; OECD, Education at a glance (2009), p 221; and ‘Higher education’s importance goes well beyond teaching’, The Guardian, 3rd November 2009) 1.2 Further Education There are currently 353 colleges in England and 426 in the UK as a whole. In England there were: 230 general further education colleges (GFE) 93 sixth form colleges (SFC) 16 land-based colleges (AHC) 4 art, design and performing arts colleges (ADPAC) 10 special designated colleges (SD) (Association of Colleges website, ‘About Colleges’, January 2010) Drawing on data from the Association of Colleges the following is a snapshot of the further education sector: • Every year colleges educate and train around three million people; • 737,000 16 to 18-year-olds choose to study in colleges (compared with 487,000 in all schools); • 172,000 students study higher education in a college; • 135,000 college students are aged over 60; • The total college income in England in 2007/08 was £7.2 billion; • Colleges employ 263,000 people,140,000 of whom are teachers and lecturers; and 1 • Staff costs (excluding restructuring) total £4.6 billion, accounting for 63% of total college spending. (Association of Colleges website, College Key Facts: Summer 2009) 2. Policy Background On 3rd November 2009, Lord Mandelson, Secretary of State for the Department for Business, Innovation and Skills (BIS), made a statement in the House of Lords in support of the publication of a paper entitled Higher Ambitions—the future of universities in a knowledge economy. The Business Secretary warned that “the coming decade will see public expenditure inevitably more constrained. Attracting the best students and researchers will become more competitive. Above all, it will be a decade when our top priority is to restore economic growth, and our universities need to make an even stronger contribution to this goal”. He added that “able people and bright ideas are the foundation stones of a thriving knowledge economy. Producing both are what good universities are all about. So in the next 10 years we will want more, not fewer, people in higher education and more, not less, quality research” (HL Hansard, 3rd November 2009, col 124). A press release that accompanied the paper summarised the Government’s proposals: • More competition between universities, giving greater priority to programmes that meet the need for high level skills; • Business to be more engaged in the funding and design of programmes, sponsorship of students, and work placements; • Creating more part-time, work-based and foundation degrees to make it easier for adults to go to university, with routes from apprenticeships through to Foundation Degrees and other vocational programmes; • Encouraging universities to consider contextual data in admissions, as one way of ensuring that higher education is available to all young people who have the ability to benefit; • Universities setting out clearly what students can expect in terms of the nature and quality of courses offered; • Sustaining our world class research base by continuing to focus on excellence, concentrating research funding where needed to secure critical mass and impact; and • Encouraging collaboration between universities on world class research, especially in high cost science. (Department for Business, Innovation and Skills Press Release, ‘Mandelson outlines the future of higher education’, 3rd November 2009) Following the publication of Higher Ambitions, the Government announced that an independent review of higher education funding and student finance had been appointed under the chairmanship of Lord Browne of Madingley. Its aim was to publish its findings in autumn 2010 with any changes implemented following the review coming into effect in the academic year 2011–12 “at the earliest”. In a written statement Lord Mandelson said that variable fees had provided institutions with an “income stream worth £1.3 billion per year, which has helped to sustain the long-term financial health and viability of this crucially important sector”. However, he added that “to continue to thrive in the coming decade, institutions will need to respond to the changing needs of students, businesses 2 and the wider community as well as adapt to demographic changes and growing international competition”. The review would therefore “consider the balance of contributions from all those who benefit from the higher education system”. The terms of reference for the Higher Education Review were outlined as follows: The review will analyse the challenges and opportunities facing higher education and their implications for student financing and support. It will examine the balance of contributions to higher education funding by taxpayers, students, graduates and employers. Its primary task is to make recommendations to Government on the future of fees policy and financial support for full and part- time undergraduate and postgraduate students. (HL Hansard, 9th November 2009, cols WS36–7) A statement in the House of Lords by Lord Mandelson on 11th November 2009 outlined the Government’s strategy for skills and their role in the economy. In support of the publication of Skills for Growth (November 2009), Lord Mandelson said that “skills in our society must always be an individual’s ladder up. That is why the skills system also needs to mesh with our university system. We need schools and colleges to make a strong vocational offer that leads to a clear vocational route from apprenticeship to technician to foundation degree and beyond. Equipping unemployed people with the skills that they need to get jobs in key sectors will be essential to a strong recovery”. In regard to further education colleges he added “many of our colleges are performing at world-class levels and overall success rates have increased by over 40 per cent in the last 10 years. We will build on this by providing progressively greater autonomy to colleges that demonstrate teaching excellence, but also by cutting funding to low priority and poorly provided courses. We will invest in the courses that employers judge are in line with their needs and requirements” (HL Hansard, 11th November 2009, cols 805–6). Subsequent to these developments press stories speculated about the likely impact on higher and further education funding of the recession and Lord Browne’s review. An article in The Observer claimed that leaked documents showed the Government were “preparing some £350m of cuts for 2010–11 that will slash the number of training places on offer by hundreds of thousands” (‘Secret Labour plan to axe spending on training for young people’, The Observer, 8th November 2009). The Times claimed that “students could pay more than double the present fees for university courses” and “the cost of repaying student loans after graduation is also likely to rise sharply as the current subsidised rate proves unsustainable” (‘Students face doubling of fees and rise in loan costs’, The Times, 9th November 2009). The Guardian reported that the “boom times look to be over for universities as managers plan thousands of job losses to respond to looming public spending cuts and the aftermath of recession” (‘Universities plan job losses in response to looming public spending cuts’, The Guardian, 17th November 2009). Following the Pre Budget Report in December, which proposed savings of a further £600 million from higher education, science and research budgets, between 2011 and 2013, it was reported that “universities are slashing thousands of jobs, scrapping courses and mothballing campuses as they struggle to survive huge budget cuts” (‘Harsh lessons in economics as cuts leave universities to find £600m’, The Times, 12th December 2009). 3. Announcements on Higher and Further Education Funding To accompany the publication of the Department for Business, Innovation and Skills strategy Skills for Growth, the Government published a paper entitled Skills Investment 3 Strategy 2010–11 (November 2009).