Topping up £6.5k fees and how to (re)build a funding council

Last weekend we took a very quick data-informed look at the implications of the Augar review preview that was dominating the front pages. But the question everyone (even Sam Gyimah) was asking me at Wonkfest18 was: how would the top-up work?

Call it wishful thinking, call it an informed analysis of the industrial strategy and Britain’s likely skills needs post-Brexit, but the general assumption has been that income lost to HE under the £6.5k/£13k tiered tuition fee model will be made up with government funding. Likely changes to the treatment of income contingent loans to be proposed by the Office for National Statistics in December mean that this will pass the all-important recommendation test of seeing the deficit fall.

But to allocate funding to universities you would need a funding council – and possibly a body to bring back and administer student number controls. And the OfS has taken great pains to let us know that it is a regulator – not a funder. It doesn’t do that stuff any more. And it is absolutely not, in any way, HEFCE.

What would be needed?

Our weekend calculations – which, I emphasise, were very rough – suggest something in the region of £1bn of extra funding would be needed for parity with the current model, assuming static student numbers.

For a different look at how this works on an institutional level, I’ve calculated an average unit of resource – showing how much each undergraduate student would bring in if each student brought in the same amount of cash. Back in the day, this was the primary measure we used to argue about institutional income, though with the advent of higher fees and the non-universal nature of direct state funding it has fallen from favour.

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The average unit of resource falls for most institutions when compared to the current model. This is because currently all students bring in at least £9,250 in fees, with some bringing in more from other allocations – and in the new model there are many students that bring in only £6,500 before we start looking at the other stuff.

You could assume a government funding input that tops up all student income to the current level – and it probably would if I added in some of the other current allocations described below – but I’m going to assume that income by student is being deliberately varied as an artificial market signal to prompt HEIs to provide more STEM and less of everything else.

I hardly need add that I don’t think that this is a good idea – England needs arts and social sciences. We already spend money on preventing specific subjects from disappearing entirely (this was perhaps clearer under the previous name of “strategic and vulnerable subjects”) and on making small, specialist institutions (like many arts colleges) viable. A retreat from this approach would be an enormous mistake.

Same old Act

It’s fairly common knowledge that – in many ways – OfS is HEFCE this year. Much of its regulation and funding work is carried out using powers granted to the predecessor body under both the Higher Education Act 2004 (HEA2004) and the Further and Higher Education Act 1992 (FHEA1992).

For the overall competence of HEFCE to make grants to universities and such, we look to the earlier of these two pieces of legislation. Sections 65 and 66 set out the boundaries of what the funding councils (remember FHEA1992 also set up HEFCW and SHEFC) are allowed to fund.

In short, HEFCE (and now OfS) could provide funding for “the provision of education and the undertaking of research” by HEIs, and any other HEI-based activities that governing bodies deem “necessary or desirable… for the purpose of, or in connection with, education and research”. It can also fund institutions maintained by local authorities, and institutions in the FE sector, to deliver prescribed courses of higher education. It can do this via grants, loans, or other payments – and set its own terms and conditions.

Fast-forward to 2017 and the shiny new Higher Education and Research Act (HERA2017). Much has been made and continues to be made of how new and transformative this change in HE regulation will be. But OfS will still have powers to fund higher education – sections 39, 40, and 41 of HERA2017 set out the new ways in which OfS will do this.

In short, OfS will be able to provide funding for “the provision of education” and any other activities that governing bodies consider “necessary or desirable … for the purpose of or in connection with education” by a registered provider or connected institution. It can also fund institutions maintained by local authorities (in England and Wales), and institutions in the FE sector, to deliver prescribed courses of higher education. OfS can do this via grants, loans, or other payments – and set its own terms and conditions.

These new sections of HERA2017 await their commencement, which will require a statutory instrument. Obviously, the sheer excitement of not being able to fund research and getting to support Welsh local authorities is deemed too much for our fledgeling regulator – because everything else is a straight copy and paste.

Control of student numbers

The bulk of funding with respect to HE in England comes via the Student Loans Company, and has done so since 2012, with the amounts involved set via statutory instrument (though, post the commencement of that part of HERA, this now requires a vote in both houses of parliament.)

Though less visible to the public, OfS is also a significant funder of HE – allocating more than £1.1bn, with every institution seeing a slice of it.

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These allocations primarily cover the extra expense in delivering what are called high cost subjects (largely STEM and lab-based). There are also specific allocations linked to specific types of institution and provision (specialist provision, accelerated degree, London allocation) and specific student characteristic (support for disabled and disadvantaged students).

And like HEFCE before it, OfS has responsibility to support undergraduate medical study – this includes both additional direct funding, and support for the staffing (and pension) costs linked to this provision. This is such an expensive undertaking that student number caps are set both from the UK and overseas.

In all, there were allocated places for 6,701 undergraduate medical students, and 809 undergraduate dentistry students, for 2018-19 entry.

Now the £1.1bn here looks a lot like the extra £1.1bn we’d need to top the sector up by to preserve institutional income at current levels. As above, we already use a chunk of it to pay for expensive STEM subjects, so there is a case to be argued that managing the institutional effects of this leak simply means redistributing this funding.

But not so fast! The new model doesn’t include support for widening participation, or disabled students. It doesn’t include strategic subject support (stuff like minority languages) or the extra costs involved in running a small and specialist institution, or an institution in London, or both.

The high cost subject funds only add up to about £650m, so even if we repurpose those we’d be looking for more like £1.7bn flowing through OfS if the proposals we’ve been discussing come to pass


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