Second time unlucky, by Stephen Court

14 Feb 08
Despite receiving real-terms funding increases, the Department for Innovation, Universities and Skills is busy making value-for-money savings, with science and second-chance students among the losers. Stephen Court reports

15 February 2008

Despite receiving real-terms funding increases, the Department for Innovation, Universities and Skills is busy making value-for-money savings, with science and second-chance students among the losers. Stephen Court reports

Although it is less than one year old, the Department for Innovation, Universities and Skills has been quick off the blocks to make savings. Already its controversial measures are threatening thousands of 'second chance' students in universities, as well as high-tech research in physics and astronomy. With only half of the savings announced so far, further and higher education and the science community are fearful of where the Dius axe will fall next.

The department's measures are part of the government's value-for-money programme. Dius has to find savings of at least 3% a year over the three years of the 2007 Comprehensive Spending Review period. But given that its budget will be £20.8bn in 2010/11, critics are wondering why it is set on savings of £1.5bn – or more than 7% – a year by then.

The government says that overall funding cuts are not intended. Dius should receive an average real-terms increase of 2.2% a year over the spending review period. Rather, the aim is to reprioritise and reinvest, slicing money from one area and putting it into another, enabling the government to 'get more bangs for its bucks', says the department.

In September, Innovation, Universities and Skills Secretary John Denham announced that over the next six years £100m of funding would be cut for students who already have a higher education qualification, and who are studying for another one at an equivalent or lower level (ELQ).

There are a number of exemptions, including students who are studying for a foundation degree; those who are on courses co-funded with employers; students in medicine and health-related subjects; and those studying strategic or vulnerable subjects, such as science, mathematics and modern languages. Denham told the Higher Education Funding Council for England that the funding could be reallocated in line with its priorities.

To protect higher education institutions with large numbers of ELQ students – particularly the Open University, and Birkbeck College in the University of London – funding levels are being kept constant in current cash terms over the next three years. But by 2014 the Open University is set to lose more than £31.6m in teaching funding and Birkbeck College £7.8m. Birkbeck will lose more than one-third of its teaching funding and the Open University almost a quarter. Twenty-four higher education institutions stand to lose at least £2m each and 50,000 full-time equivalent students will be affected.

The ELQ cuts have met with widespread criticism. In January, Professor David Latchman, master of Birkbeck College, told the Commons' innovation, universities and skills select committee that the policy meant: 'We will restrict support for a number of people who are reskilling in order to take advantage of changes in the labour market – women returning to work, people who have had disabilities and so on, and people who simply want to change careers.'

Gemma Tumelty, president of the National Union of Students, added: 'It is ridiculous to think that ELQ students are taught somehow in different lecture theatres to other groups of students. If this funding is cut then what it could do is damage the viability of courses and therefore have an impact across the sector on first-time students as well.'

And Sally Hunt, general secretary of the University and College Union, which represents academic and support staff, told the committee: 'If we believe that we ought to be supporting and broadening the base of higher education, what we must not do is cherry-pick in terms of funding between the sectors.'

Defending the government's decision, higher education minister Bill Rammell said: 'In order to be internationally competitive, we need to move from today with 29% of adults educated to Level 4 to at least 40% by 2020 and, arguably, we need to go significantly beyond. We took the view that we wanted some further levers within the system to… ensure that universities prioritised the recruitment of students in the workforce who are not yet at first-degree level.'

There have been some concessions, such as increasing the funding for part-time provision to £30m in 2009/10 to compensate for the loss of ELQ income and exempting disabled students. But the cuts are set to go ahead. Dius estimates that its ELQ policy will create an extra 20,000 student places in higher education by 2010/11 for entrants without an HE qualification.

However, there was no consultation on the principle behind the measure and it has attracted widespread protest in higher education. Of the 478 responses to the select committee inquiry, only seven were in support.

The value-for-money savings are also affecting spending on science research. Dius is aiming for efficiencies worth £243m by 2011, through trimming administration costs, increasing income from joint funders of research – including the private sector – and changing priorities. But getting more cash out of the private sector might be a struggle. The proportion of investment in research and development by UK industry is well below the levels of that of competitor countries such as the US, Germany, France and Japan.

Funding for university capital through the Science Budget is being cut by 28% to enable resources to be used for 'entirely new investment projects'. The decision to restrict spending increases for the Science and Technology Facilities Council has meant a shortfall of at least £80m.

The knock-on effect of this is that the UK is withdrawing from investment in the International Linear Collider, which collides sub-atomic particles to investigate the nature of the universe. There will be no more funding for high-energy gamma ray astronomy experiments. The council will also be withdrawing from the Gemini observatory, which has telescopes in Chile and Hawaii. Other cuts in investment are being considered.

The shortfall in the council's funding is likely to lead to a 25% reduction in its grants to university physics departments. This will affect some more than others, depending on how much of their income relies on STFC grants. This varies from a small proportion to as much as 75%. The grant cuts will lead to job losses, particularly among postdoctoral research students, and technical and support staff. More than 12,000 people recently signed the petition on the Number 10 website to 'reverse the decision to cut vital UK contributions to particle physics and astronomy'.

A spokesman for Universities UK, a body that represents heads of higher education institutions, says: 'Scaling back Science and Technology Facilities Council funding over the current CSR period throws up some worrying scenarios. It is crucial that we can now move swiftly to resolve it.'

The ELQ and science cuts still leave Dius with more than £1bn of savings to find elsewhere in its budget. In December, the department said in its value-for-money agreement that it would be using co-funding, changes in priorities and improved procurement as the main levers.

In further education and skills, Dius sees the development of the employer-led Train to Gain programme as an opportunity to cut costs. Because a Train to Gain qualification is cheaper to provide than one through the traditional further education route, the department is looking for savings here of £170m a year by 2010/11.

The risk is that Train to Gain is a relatively unproven scheme, which began national roll-out only in 2006. It might be too early to tell whether it can deliver the expected belt-tightening. And if the current economic turbulence results in recession, employers might cut their training budgets. But Julian Gravatt, director of funding and development of the Association of Colleges, comments: 'It's difficult to say whether the £170m saving is correctly calculated, but given that the Train to Gain budget will exceed £1bn in 2010/11, it doesn't seem unreasonable.'

Dius believes more efficient procurement by colleges and universities could save £40m a year by 2010/11 in further education, and £75m in higher education. In addition, the department reckons that universities could trim a further £75m a year by 2010/11 through sharing services.

Further education consultant Mick Fletcher believes it is likely 'that attempts to impose standard purchasing arrangements across the sector would bring greater costs than benefits and be self-defeating'.

But Gravatt says: 'Colleges have made good progress in improving their purchasing since a target was first set in 2004. The £40m target appears reasonable and achievable by 2011.'

Cutting £75m from higher education procurement – on top of similar savings made under the 2004 Gershon review – and making institutions save through sharing might be more of an uphill task. Universities are autonomous organisations, competing against each other for students and research income, so sharing commercially sensitive services might not be workable.

Steve Egan, HEFCE deputy chief executive, also says that savings from shared services might be difficult, if not impossible, because universities – normally VAT-exempt – cannot reclaim VAT paid on bought-in services.

To date, Dius has itemised only about half the intended savings. There is still another £700m to be found. Hunt has written to Denham asking for an urgent meeting to clarify the unspecified amounts. A spokesman for the department says: 'A large majority of specific measures have been fully defined; many of the smaller ones are not defined in the agreement, and some are still being developed.'

He adds: 'On employer co-funding, we are exploring with the HEFCE approaches where employers fund part of teaching and learning costs for their employees' development. It is right they share in the cost.'

But employers seem unwilling partners in this plan. Sir Richard Lambert, director-general of the CBI, recently told university leaders: 'Businesses can and do pay for training employees in the skills that they need in the workplace today and tomorrow. But they can't be expected to be ready to invest in the knowledge that society might be needing in five or ten years' time.

'And I think it's very difficult to argue that they should be responsible for funding the teaching of generic skills that people are going to require as they move from job to job over their working lives.

'They'll pay for a course that meets a particular requirement – and it may well be that co-funding will provide a lever for more activity of this kind. But such courses are very unlikely to have the character of a three-year undergraduate degree.'

If Lambert is right, then Denham and his ministerial colleagues at Dius have got their work cut out over the next three years if they are to keep Chancellor Alistair Darling happy.

Stephen Court is senior research officer at the University and College Union


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