By Lucy Phillips
26 November 2010
The higher education sector has ‘strong cash balances and healthy levels of reserves’ as it moves into a period of ‘unprecedented difficulty’, university leaders were told this morning.
Speaking at the annual meeting of the Higher Education Funding Council for England, chief executive Sir Alan Langlands said university balance sheets for 2009/10 were in ‘a very healthy position’. He expected similar results at the end of the current financial year.
He added that Hefce did not exist to bail out failing institutions. He said it gives about £4m a year to institutions deemed at risk, less than 0.1% of total Hefce funding.
But the scale of the cuts announced in last month’s Comprehensive Spending Review should not be underestimated, Langlands warned. The headline £2.9bn, or 40%, reductions from the HE resource budget by 2014/15 ‘did not tell the entire story’, with massive cuts to capital and other funding streams too.
He revealed the extent to which HE funding would be shifted from the public purse to graduates and their families. Between 2010/11 and 2014/15, the proportion of HE funding provided by Hefce would reduce from 56% to 26% while fee income from home students would rise from 24% to 56%.
Overall, income levels in the sector should be the same in 2014/15 as now, based on an estimate of average tuition fees of £7,000 per student per year. But there were significant risks during the transition period, including loss of international reputation and competitiveness, Langlands warned.
He added: ‘There certainly will be a loss of financial flexibility. Our ability to support institutions will be reduced significantly.’
With the new system of financing due to take effect from 2012, universities are still in the dark about cuts to their budgets for next year, since grant allocations will not be known until the New Year. Exactly how student numbers will be determined is also unknown.
Hefce chair Tim Melville-Ross said: ‘There is a distinct absence of information on the emerging HE settlement. We are trying very hard to encourage ministers to fill the gaps but there are unusual and unique political hurdles.’
Hefce leaders also sought to stem concern from the audience that the sector would become over-regulated in the new system, inhibiting innovation. Deputy chief executive Steve Egan said he ‘entirely agreed’ with a tapered approach to regulation that would put less burden on well performing institutions. He added: ‘What matters most is does the regulation add value, create confidence and make the market work better? The nature of discussion from government has to change from less regulation to better regulation.’
A government white paper on the future strategy of higher education will be published in early 2011. It will include details on the new regulatory environment and the role of Hefce in this.
