Third post – another guidance letter for the Office for Students

Back in the day, there used to be a dedicated vehicle for transporting confidential documents between HEFCE’s old office at Northavon House and the DfES (as was) in Whitehall.

I’m sure that it no longer exists, but I can’t help but think of the additional work an OfS version of this service would be experiencing now that we’ve got our fourth “ministerial guidance letter” in less than a year. If the regulator needs this much guidance should the Secretary of State be running it himself?

This three page squib is by no means a classic of the genre, but the simple language and slight stature conceal a lot that is of interest.

A little off the top

The primary thing we learn is that the budget for recurrent teaching funding is falling by around £70m next year – a 0.5 per cent cut overall. In previous years we’ve seen an explanation of such macro-level changes, but there is no such rationale presented here. A £50m rise in teaching capital is welcome – returning the allocation to what it was in 2018/19 – but this is hardly a replacement.

My first thought related to the move from direct administrative funding to OfS covering costs via subscription – the letter is clear that there is a separate letter (yet another one!) which will cover finalised resource, capital, and administration allocations that are included in the headline figures.

Part of this comes from a move between financial and academic year accounting. We’ve not yet seen OfS’ own financial statement, which was originally expected on the same day as the annual report published just before Christmas, but it is likely that re-representing administrative costs against subscription income would cover around half (about £27m) of the lost funding.

HEIF (£47m) and an expansion of medical student places (£19m) are included in the headline figures. The former has historically been included in the main teaching grant – the latter should be new money, suggesting that the cut may be deeper than it initially appears. We await the next letter with interest.

Funding review hints

The OfS consultation on the review of teaching funding in April 2020 is marked in scarlet on the Wonkhe calendar – and falls a month after the final, Board-approved, funding allocations are published for 2020-21.

This is, of course, a joint enterprise between OfS and DfE, and Williamson is keen to take DfE’s share of the credit – boasting “I know that the OfS have been working closely with my officials on funding policy”. The priorities from the Secretary of State – streamlining grant allocations to allow a strategic approach to supporting priorities (industrial strategy, access and participation, specialist providers), rethinking how the Student Premium is targeted (it will be metrics-based, of course), and a new framework for evaluation and assurance – will likely not come as a great surprise to OfS staff.

The near future

With a major review pending, you’d be forgiven for thinking 2020/21 will be a “steady as she goes” year, with few major changes. Williamson does lob in three priorities for the year of varying levels of complexity – suggesting everything will not be plain sailing.

Looking down the barrel of a funding cut – as discussed above – the instincts of the tiny funding council trapped in the body of a market regulator will be to trim numerous budget lines by a small amount (a practice known as “salami slicing”). But DfE is wise to this – requesting the OfS “continue to prioritise” numerous areas of spending. So we’d be surprised to see cuts in high-cost subject allocations, “world-leading” (love that weasel phrase) small and specialist institutions, and the student premium.

The regulator is also asked to “protect those areas of the grant where the evidence base for need is strongest, and where there is clear alignment with priority areas” – and to work closely with DfE in identifying such areas. And London weighting, specifically inner London weighting for high-cost subjects, is a final request that speaks to some high-quality lobbying.

Finding savings

So where does that leave for savings to be found? Administrative costs would probably be preferable to DfE, but we are not expecting these to be likely given that November’s Board papers flagged a “small predicted overspend” on this line.

I’d be looking at the big box marked “national facilities and regulatory initiatives” – currently sitting at around £51m – and I’m guessing that the OfS finance team is already starting to sniff around for savings. The end of the Learning Gain programme (£4m on projects, plus a little more on the abortive national pilot and metrics-based activity), and the end of the £0.5m phase 3 of the Catalyst fund) offers a little bit of recurrent headroom – but if we assume that everything that is coming to an end will not be renewed that still leaves a gap.

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