Clarke eases cash flow

November 29, 1996

Kenneth Clarke's budget statement has loosened the garrotte imposed on further and higher education by last year's budget, but only temporarily.

There was relief at the allocation of an extra Pounds 280 million over the next two years - Pounds 200 million for higher education and Pounds 80 million for further education.

Vice chancellors are now unlikely to vote to impose an entry levy on new students when they next week. And Sir Ron Dearing's commission of inquiry will report on future funding methods before any more heavy cuts are imposed.

Vice chancellors and unions can claim some success in their campaign to force the Government to recognise damage done by years of funding squeeze, culminating in last year's cuts.

The extra Pounds 200 million for higher education (Pounds 100 million a year), mitigates but does not fully reverse last year's cuts of Pounds 0 million over three years. The system will still lose Pounds 86 per student over the next three years.

A letter from Roger Dawe, director general for further and higher education and youth training at the Department for Education and Employment to Brian Fender, chief executive of the Higher Education Funding Council for England, points to an efficiency gain of 0.5 per cent in 1997/98 rising to 2.5 per cent in 1998/99 and 4.5 per cent in 1999/2000. Professor Fender has warned institutions of a 6 per cent cut in real terms over the next three years.

The failure of the Private Finance Initiative is acknowledged tacitly in projections that it will account for a steady Pounds 30 million for the whole education sector, only part of it for further and higher education. Value added tax relief on schemes will give universities an extra Pounds 2 million and further education another Pounds 2 million but they will be hit by a Finance Bill provision halting the backdating of VAT claims. And Pounds 7 million of savings following a reduction in new university pension contributions will be clawed back over three years rather than one.

Just over Pounds 8 million of the extra Pounds 200 million goes to the Teacher Training Agency, which will lose Pounds 16 million to HEFCE over the same period to account for lower intake targets.

Mr Dawe's letter calls for greater selectivity in research funding, which should be good news for departments that receive starred 5 ratings in next month's assessment exercise but threatens the funding of those rated 2.

Higher education is still losing ground as a Government spending priority. Total Government receipts will rise by Pounds 16.5 billion next year. Higher education takes 1.5 per cent of Government spending, but the extra Pounds 100 million in 1997/98 represents only 0.6 per cent of this increase in income.

Pay for academics, hit harder than any other professional group since 1979, will continue to be squeezed and those considering introducing profit-related pay are likely to think again following the phasing out of this tax relief.

But universities could claim a small triumph in an extra Pounds 7 million allotted for the current year. This will allow a pay award to bring medical academics up to the levels of their NHS counterparts. They have been pushing for extra cash since the Government refused to fund a matching pay rise earlier this year, breaking long-established practice. Mr Dawe's letter reaffirms parity for this and succeeding years..

Student loans, grants and parental contributions will rise by 2.5 per cent, in line with projected inflation, in the coming year. The planned sale of the student loans debt, projected to raise Pounds 3 billion in the next three years, would not affect the terms on which loans were issued. Access funds are frozen at Pounds 22 million.

* Colleges of further education will have to make annual efficiency savings of more than 5 per cent for the next three years and face a real-terms cut of 7.6 per cent by 1999/2000. The extra Pounds 80 million promised over the next two years will be offset partly by a Pounds 17 million baseline funding cut for European-funded programme reductions and savings from pension changes.

* Training and Enterprise Councils will receive Pounds 1.4 billion in each of the next three years. TECs said this failed to acknowledge rising demand.

* The science budget for 1997/98 is set at Pounds 1.3 billion, the planning level announced last November, a cash increase of Pounds 18 million over this year. Save British Science said the figures represented a Pounds 13 million real-terms cut on top of Pounds 24 million this year.

* Allocations to the Scottish and Welsh funding councils will be known in the next few weeks.

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