Budget may bring good tidings for colleges

March 17, 2000

Next week's budget could bring rewards for universities and colleges as the government rolls out its plans for innovation and enterprise, perhaps with extra support for further education students.

Chancellor Gordon Brown used his pre-budget speech in November to outline next Tuesday's budget statement, including the prospect of new incentives for universities and industry to develop research commercially.

Mr Brown said: "Subject to consultation on the details, the budget will make a more radical reform to promote not just high-tech investment, but long-term

investment across the economy."

Tax incentives are the obvious way to further encourage research and development. Investors and entrepreneurs will see capital gains tax fall and there may be further incentives for corporate venturing. There may be more money for the research-and-development tax credit for small and medium-sized businesses, currently worth Pounds 150 million a year.

But there is unlikely to be any more money for higher education teaching. Mr Brown will not pre-judge the outcome of the second comprehensive spending review due in the summer, which will outline departmental spending targets up to 2004.

Universities are looking for an end to the year-on-year 1 per cent cuts. They will look for a significant increase in public funding over and above the contributions made through tuition fees.

The government claims it has put more new money into higher education teaching than is being paid by students and their parents in tuition fees. But this approach to accounting resembles the one that has led the government into a row over claims that it is investing Pounds 19 billion in education overall when the figure is actually Pounds 6 billion.

In 2001-02 students' contribution to fees will be Pounds 405 million. This is Pounds 405 million that the government no longer has to pay from the public purse. It is a saving accruing to the education department. In the same year universities will receive Pounds 295 million more than they did the year before.

The government's argument is that the Pounds 295 million is far more than the marginal extra that universities will receive in 2001-02 compared with 2000-01 in student fees. Hence their claim to be investing in universities.

But, while universities do get to keep all of the fees contributed by students - Pounds 405 million in 2001-02 provided they pay in full - the government claws back an equivalent amount from the funding council grant. Looking at the accounting this way means that universities' effective net benefit is Pounds 58 million in student fees plus Pounds 237 million from public funds.

The assumption is that the balance in 2001-02 is redistributed to further education and other areas. The government has always said tuition fees would benefit higher and further education.

Among the options being considered for the further education sector is extending the education maintenance allowance pilots. The sector is hoping that the chancellor will announce their national roll-out from September next year to cover all 16 to 19-year-olds. It could cost about Pounds 400 million nationally.

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