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CVU annual conference, 19 September 2014
Public spending on higher education
and the implications for partnership activity
Julian Gravatt, Assistant Chief Executive, AoC
What I’ll talk about
Higher vocational education
Public spending on higher education
Some suggestions
English College HE
Characteristics
100,000 students in 280 colleges (range 100 to 3,500)
Local, employer-led, technical, some niche
c50% apply for one course/one institution (UCAS)
70% live within 25 miles of campus
Student cohort more disadvantaged than HE average
Partnerships with Universities long-standing & important
English College HE trends
2008-9 2011-2 2012-3
Full Time Direct 31 37 44
Indirect 28 30 24
Full Time Sub-total 59 66 68
Part Time Direct 24 21 20
Indirect 33 27 18
Part Time Sub-total 56 48 38
117 116 106
% Direct 47% 50% 60%
The English HE system – not a normal market
Supply
Inertia (heritage, three-year degrees etc)
Longish lead-times to respond to demand but shortening
Full-time UG fees close to the £9,000 cap
Universities compete to be higher up league tables
Demand
Applicants need to be qualified to make a choice
Degrees are positional goods
Higher fees are paid after completion (no fees upfront)
Living costs loom larger than fees to many students
“Breaking the mould”
Analysis
English post-secondary higher-level skills system weak and small
Policy & history biased towards full-time
residential three-year degree model
Proposals
Re-balance the system
Different approaches to validation
Colleges/universities to work on progression
Government plans
Deficit reduction
Spending cuts 2009-18
Spending review in 2015
Unprotected departments
9.1% of GDP (2013-14)
7.8% of GDP (2015-16)
5.4% of GDP (2018-19)
Loans may be a safe haven
The bigger spending picture
The HE budget – up 26% in 4 years
2011-12 Teaching Student Support
Research Total RAB charge
Grants 4.6 1.3 4.6 10.5 2.1
Loans 2.6 4.4 - 7.0
Total 7.2 5.7 4.6 17.7
2013-14 Teaching Student Support
Research Total RAB charge
Grants 1.7 1.6 4.6 7.9 6.4
Loans 8.2 6.2 - 14.4
Total 9.9 7.8 4.6 22.3
Source: AoC summary of HEFCE grant letters for 2010 & 2014, BIS annual accounts
BIS revenue budget £13.2 billion in 2015-16 (£8 billion HE)Spending plans imply 31% cuts to unprotected depts (2015-18)
IFS scenarios for UUK to cut RDEL (back in October 2013)1. Breach the science/research ringfence (£4.6 bil budget)2. Cut Medicine & STEM funding (involves raising fee cap)3. Switch from HE maintenance grants to HE loans4. Reduce number of FT HE students 5. Cut 19+ FE/Skills budget further (on top of 35% cuts 2009-15)
Revenue spending in HE after 2015
Some options to reduce net loan outlays or RAB charge
Tuition fee loans to cover less than 100% of tuition fees
Graduates to repay loans faster, earlier or for longer (ie a tax)
Tighter conditions for maintenance loans than fee loans
Limit loan access to prime borrowers (eg via entry qualifications)
Wait and see (what happens with the recovery & repayments)
HE student loans after 2015
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Outlays 10.3 12.7 14.4 15.6 16.7 17.4
Repayments 1.8 2.1 2.3 2.5 2.5 2.6RAB charge@ 45% 4.6 5.7 6.5 7.0 7.5 7.8
The timetable
The spending decisionsHEFE grant letter (by January 2015)HEFCE policy on quality thresholds in uncapped marketGeneral election (May 2015)Spending review after the electionQuick BIS decisions needed to change things for 2016-17Recruitment for September 2015 is uncappedAny reform won’t really bite until 2017-18
ResultYou have time to think and plan
Suggestions
Where we are and may be
Changes to public spending permanent
These are long-term trends which take time to implement
Loans have been a financial safety net for HE
Demand exists for HE but it is evolving
Technology and working lives are changing faster
Current HE system may not be financially sustainable
University roots into local communities and economies matter