The sector has performed a difficult balancing act to come up with a set of funding proposals that should secure the sector through a financially difficult 2020-21 academic year.

The diversity of the sector (in England, where I primarily focus in this analysis) is such that it is no longer possible to propose a single, blanket, formula that would please everyone. Every provider will lose significant income next year – the fall in international recruitment has hit the headlines, with increased competition for UK and EU students likely to spread the damage beyond those providers that depend on it.

Martine Garland examined the varying levels of exposure to this risk in England and Wales last week on Wonkhe – here’s another (more visual, but less sophisticated) way to understand the issue.

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Here I’ve plotted the percentage of provider income related to tuition fees against the percentage of the student body from outside of the EU. Providers with marks towards the top right would look to be at the greatest immediate risk – everyone towards the right of the graph will be losing substantial income.

This, of course is only one issue – research income from industry is drying up, income from residences and conferencing is slowing down, with premises costs and salary outgoings staying stable (though furloughs could hit the latter, there is very little slack in a system where the “quiet” summer is a distant memory).

The Universities UK proposals touch on multiple parts of institutional activity – under each I have plotted existing data in an attempt to understand who will benefit from each measure.

QR, research grants, and innovation

First and possibly simplest is a proposal to double the QR allocation – which in England comes via Research England. We’ve not seen the 2020-21 allocations yet, but in proportion and volume they are unlikely to differ from this year. So each provider would – depending how the sub-categories of QR are used – see around double the allocation shown below, at a total cost of just under £1.7bn.

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The proposal to pay the full economic cost of UKRI grants – up from 80 per cent of the full economic cost value as currently – is an attempt to restrict the reliance of research activity on cross subsidies from other income. It’s been a point of contention between providers and funders for some time – the calculation of full economic cost (the value of resources allocated to a project that already exist within a provider) is complex and controversial.

We don’t get financial information in this much detail, but it seems reasonable to assume that this measure will have a greater impact on those who are in receipt of more grants – as I’ve plotted below.

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I’d also imagine the requested increase in innovation funding would be linked to the formula-based (and soon to be KEF based) allocations from Research England, so I’ve plotted last year’s below at value of around £200m in England.

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For each of these we are seeing a top up for providers with a substantial research income, with little for those outside of the main research intensity spectrum. It’s a substantial spend, and although it could do a great deal to support the research capacity over next year, it adds to public research funding that already exists and would not be expected to drop other than due to government austerity measures. We don’t yet know for sure the extent in the drop in commercial and charity supported research – but the existing £2.1bn from public project funding, and the aforementioned £1.7bn in formula funding in England and proportional sums in other nations should be safe.

Student recruitment

The Universities UK submission offers a formula that seems very carefully designed:

Institutions in England and Wales in 2020-21 would be able to recruit UK and EU-domiciled undergraduate students up to the sum of the 2020-2021 total forecast for UK and EU-domiciled full-time undergraduate students (plus 5% of the intake), submitted to the Office for Students (OfS) and HEFCW.

This draws heavily on the projections submitted by providers to the Office for Students and HEFCW. The last published examination of these by OfS was accompanied by warnings that providers were being over-optimistic in their recruitment projections. We took a look a year or so later and found that this was indeed proving to be the case.

As the forecasts themselves are not provided to the public as anything other than tariff group data I’ve had to make a few assumptions drawing on last year’s UCAS cycle, and information from HESA and OfS to get an idea of what these caps (and this is a cap) would look like per provider. Because the sector had been performing so badly against the last targets we can construct, we can assume the entire multi-year increase projection lies between current 2019 and projected 2020 recruitment. Add in the 5 per cent tolerance band (my very favourite part of the old HEFCE funding system) and we are still looking at the potential for substantial increases in some providers and corresponding decreases in others.

This is coupled with the delayed introduction of the new immigration regime for EU students, and flexibilities introduced into the visa system to account for things like delays in English language testing.

Here’s a plot comparing my calculation to last year’s UCAS intake by provider. I’ve also plotted by mission group for those who are interested.

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To me, this doesn’t go far enough. It’s an attempt to keep an element of competition (sorry, “student choice”) in the cycle – but the caps (and attendant penalties – “clear guidance and significant sanctions” no less) work as a check on the most damaging excesses. If larger providers become more popular it is still possible that small providers (who traditionally recruit primarily from home students) will be dangerously squeezed – that’s what we need to mitigate against. An “agreement on fair admissions practices” may not be enough.

Other support streams

If the research and recruitment strands were the entirety of the proposal, I would worry. But there are other elements that could help support providers, often in the form of targeted grants. Support for “key worker” subjects is a key one – there will be a huge demand for nurses, medics, healthcare professionals, and teachers in the years after Covid-19. Here I would expect allocations to link to existing student numbers in relevant subjects, which I’ve plotted for you behind that link. For me, if the lockdown has taught us anything it is that artists and musicians are also essential workers – but there is nothing for them here.

I’ve likewise plotted the current situation as regards age (greater than 21) and mode (PT) – a proposed income stream that should benefit the Open University in particular. There’s a call for similar money for retention and progression, which I would expect to be linked (in England) to access and participation plans.

The Office for Students already recognises and allocates additional funding to small and specialist providers – here’s the current state of play – and you would expect a similar set of criteria to inform future allocations there.

Likewise, for those who have an “international mission” this is calculable by proportional student numbers (as we covered on the site recently). There’s also some sensible stuff on reprofiling income from tuition fees and grant allocations.

Bail-outs?

Though the Office for Students was quick to dismiss the idea of institutional bailouts when it launched, circumstances are such that the ideologically unthinkable is happening every day. So there should be no surprises in a request for bridging loans (where providers are experiencing acute short-term cashflow problems) and a transformation fund (which supports the wider reconfiguration of the sector via resource sharing and mergers) forming a part of the UUK list. Though both I and UUK focus on England here, it is expected that Barnett consequentials would allow for similar measures to be taken in all four UK nations.

Like much of this money a great deal of strategic planning will be required – an avowed sector regulator and a ministerial team committed to a market in higher education will have to take radical, interventionist, action. We need, within all this, a proper discussion of the way the sector is shaped and the way it serves the nation – it is not clear at what level or point this will happen (the UUK request does not include space for consultation) but it does need to.

Talk of turning a crisis into an opportunity is facile and unwarranted, but one way or another the voices of students, staff, and the public, need to be heard as a part of the biggest change in UK higher education since 1918.

5 responses to “Too big to fail? A request for government support for providers following Covid-19

  1. Interesting that so much of the requested funding is focused on the Russell Group, who for example receive 70% of all QR funding. Necessary to compensate them well for revenue losses to get them to sign up to a numbers cap that excludes non-EU students I guess?

    This is also a massive opportunity for government who will surely attach some strict conditions on the support package to turbocharge their desired shift away from degrees & towards higher technical qualifications at “low value” institutions and permanently embed the principle of a numbers cap on degree-level study as effectively recommended by Augar.

  2. As Pete comments, it will be interesting to see what conditions the government attaches to any support. Vice-Chancellor and senior management pay may get attention again – and universities will be in a weak position if they try to defend salaries over £200k. VCs and Boards are also going to be better able to make internal change / savings if they lead by example and reduce their salaries (very significantly in some cases).

  3. 4 day weeks for everyone – literature says it’s more productive anyway. More working at home (reduce the physical infrastructure of universities). More online teaching – save face to face for practicals, special celebration lectures, field trips, student support and tutorials; students are ahead of us on this, many don’t come to lectures but watch the recordings because many of them need to work to get through university or have family commitments. All money that comes to universities from student fees should be spent on teaching and facilities for students. Many degrees offered by less research intensive universities (modern equivalents to polytechnics) are already becoming higher technical qualifications – big focus by some on transferable skills and things that employers want.

  4. 4 day weeks for everyone – literature says it’s more productive anyway. More working at home (reduce the physical infrastructure of universities). More online teaching – save face to face for practicals, special celebration lectures, field trips, student support and tutorials; students are ahead of us on this, many don’t come to lectures but watch the recordings because many of them need to work to get through university or have family commitments. All money that comes to universities from student fees should be spent on teaching and facilities for students. Many degrees offered by less research intensive universities (modern equivalents to polytechnics) are already becoming higher technical qualifications – big focus by some on transferable skills and things that employers want.

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