The Society for Research into Higher Education

Policy and Funding in England (January 2017)

By Rob Cuthbert, Editor, SRHE News

Autumn Statement boosts UK research spending

After a Prime Ministerial announcement at the CBI conference on 21 November 2016, Chancellor of the Exchequer Philip Hammond confirmed a significant increase in spending on research and innovation in his Autumn Statement 2016 delivered on 23 November 2016. By 2020-2021 the plan is to increase spending by £2billion a year. It remains to be seen how this will be distributed, but the intention is that UKRI, the new umbrella body for UK research, will be in the driving seat. UKRI is now headed by Sir John Kingman, a former senior Treasury official and the son of former Bristol VC Sir John Kingman and WonkHE commented that the move ‘had his fingerprints all over it’.

More on selling student loans

Andrew McGettigan revisited the sale of student loans issue when the Chancellor went before the Treasury Committee in December and was questioned on freezing the repayment threshold for post-2012 loans. Questioned by former NUS President Wes Streeting, the Chancellor tried to justify the move as preparation in the longer term for the sale of these loans. McGettigan suspected there were different motives, not least because selling loans is ‘economically illiterate’, as the Financial Times has pointed out. There is a reminder of the full story in London Review of Books in March 2015.      

New University of Bristol campus might stretch debt too far

On his Critical Education blog Andrew McGettigan turned his attention to institutional debt, after HEFCE’s latest report of more variable financial performance in the sector. Ant Bagshaw of WonkHE blogged on 10 November 2016 that the HEFCE report was ‘bleak’, and the knowledgeable Julian Gravatt added his comment that HE finances were unsustainable. On debt, McGettigan started with Bristol, after reports in the Bristol Evening Post that the university planned to develop a new campus in the city. He pointed out that Bristol’s debt was already comparatively high, with a debt-income ratio of 43%, against a sector average of about 30%. The costs of the new campus would be an estimated £300million. McGettigan suspected Bristol would have to raise most of it by borrowing, raising its debt-income ratio to an unlikely 100%, and went into more detail on 28 November. In a post on 14 December 2017 he pointed out that as public funding declines and government becomes more accepting of institutional failure, one inevitable consequence is that university credit ratings go down, as credit ratings agency Moody’s has made clear.

Then he blogged on 16 December 2016 about new financial rules which compel universities to reveal details of interest rate swaps on their borrowing. LSE and UEA are two of the universities affected, with paper losses due to fixing interest rates through swaps. At the time the loans were taken out the universities sought to protect themselves against rate increases, but the long-term falls in rates have meant that extricating themselves from the swap deals would now incur substantial costs. For LSE the stated ‘loss’ is £25.9million. Although, as McGettigan points out, the fundamentals of each university’s operation remain the same, there is a potential impact on current or further borrowing, since lenders would take a more negative view of the creditworthiness of such university borrowers.

The Higher Education and Research Bill

Line-by-line scrutiny of the HE and Research Bill in the House of Lords began on 9 January 2017. The biggest issue is likely to be university autonomy, with Chris Patten, former Conservative Minister, leading the charge. Labour, Liberal Democrat and crossbench peers are supporting proposals to include definitions of the nature and functions of universities in the Bill. The government’s proposed amendments to the HER Bill, described by WonkHE as ‘slight’, were tabled on 3 January by Viscount Younger, the government’s HE spokesperson in the Lords. WonkHE thinks they mean that the government expects the Bill will have to return to the Commons at least once before reaching Royal Assent. Labour’s HE spokesperson in the Lords is Wilf Stevenson, former Secretary of the predecessor of Edinburgh Napier University, who has tabled amendments on the Office for Students which aim to address criticism about student representation. He has also proposed that OfS and UKRI should produce an annual joint report on the state of the HE sector, some consolation for those who feel the separation of teaching and research has already gone much too far. Another Stevenson amendment would establish a Quality Assurance Office and remove the power of OfS to assess quality by putting the function in an explicitly independent agency. The TEF is subject to many proposed amendments, which may force a debate, but as TEF was a manifesto commitment it is less likely to be obstructed in the Lords. Consideration of the Bill is expected to take some time, and no less than six days were scheduled in the period to 25 January.

Paul Greatrix suggested some amendments of his own on his Registrarism blog on 16 December, about definitions of standards, but his analysis was academically and historically well-informed, so we don’t hold out much hope for it.

HEPI weighed in with a timely report on 5 January 2017, when it published Alternative providers of higher education: issues for policymakers (HEPI Report 90) by John Fielden (CHEMS Consulting) and Robin Middlehurst (Kingston/Leadership Foundation for HE). The paper discusses the present state of higher education providers that do not receive direct public funding, summarises the strong opinions for and against them and examines experience in the USA and Australia, before drawing policy lessons for the UK. The authors suggest the HE and Research Bill  risks missing the Government’s own declared objective of encouraging a vibrant and high-quality range of alternative providers. Notably, over two-thirds of alternative providers (553) are expected to remain outside of the new regulatory system, with just 207 coming within it. John Fielden said: “… while it removes some barriers to market entry, the new high-speed approval system for degree-awarding powers is a risk too far.” Robin Middlehurst said: “Experience in the USA and Australia shows overly generous rules for alternative providers are a magnet for questionable business practices. The end results can include stranded students, a bill for taxpayers and regulatory intervention”. Andrew McGettigan’s blog on 5 January 2017 was a useful summary and review of the failings of government in its handling of new for-profit providers, justifying his conclusion that: ‘The government’s insistence on accelerating the process by which new providers enter the funded system runs against all the evidence …’

Alex Bols, Deputy CEO of GuildHE, blogged on 6 December 2016 about proposals in the HE and Research Bill which might make the new probationary route to degree-awarding powers become the norm, especially as costs for the existing QAA route have become much more significant – especially for smaller institutions.

The Department for Education is inviting comments on the fees which might be payable to the Office for Students, in a public consultation issued on 14 December 2016. The Consultation Document says: ‘We have already committed in the HE white paper: ‘Success as a Knowledge Economy: Teaching Excellence, Social Mobility and Student Choice’ (May 2016) that the level of registration fee will in part be determined by the size of the provider. This document … seeks views on how the size of a provider might be measured. It also proposes that the registration fee will vary by the category of registration in which the provider sits, broadly reflecting the level of assurance that the OfS requires from a provider and the level of government support that it is eligible to access. It provides examples of where the OfS could use its power to charge other fees, separate to the registration fee. It also suggests guiding principles to be applied in making judgments about areas where the OfS might receive supplementary funding from government.’

The OfS will certainly charge an initial fee for registration, and then an annual fee for providers to remain registered. Additional fees would be for such things as application for degree-awarding powers, and respondents to the consultation are invited to supply a shopping list of other issues for which OfS might be able to charge a fee. There is to be a technical consultation at a later stage which will suggest actual fee levels. Meanwhile university finance officers will no doubt be working overtime to work out which models will be least expensive for their institutions. Government is committed to a regime which does not discourage new providers, so expect a system which milks the large universities and hits those with high proportions of part-time students particularly hard. The Open University should start pleading now for treatment as a special case, and Birkbeck will say ‘us too’.


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