New currency proves worth

February 16, 1996

As new university allocations loom, Peter Knight unveils his list of those best funded for teaching in 1994/95

It is a legitimate question of public policy to want to know which university is well funded for teaching and which is poorly funded. The winners and losers are easily identified in the research assessment exercise but it is far harder for teaching because of the method used to allocate funding.

Twelve months ago I analysed the allocation of money for teaching from the Higher Education Funding Council for England to produce a "league table" of well-funded and poorly-funded universities. The discrepancies it showed raised legitimate issues of higher education policy so I have repeated the analysis to produce a table for funding for teaching in 1994/95.

There is no suggestion that HEFCE is seeking to hide this information. The problem is that the allocation method for teaching funds is complex as it has to take account of different modes of study and the costs incurred in different subjects. The data is published each year by HEFCE for each institution for which it is responsible. However, excluding initial teacher training, which is the responsibility of the Teacher Training Agency, the funding for teaching is allocated by 15 subject groups at two levels and two different modes of study. This means that over all universities and colleges there is a possible 60 different units of funding.

If the money a university receives is simply divided by its number of students, then a meaningful result will not be produced when it comes to comparing allocations. It is obvious that a university with a predominance of expensive subjects such as science, engineering or medicine will receive more money per student, than a university that is teaching mainly in the humanities and the arts. Equally, it would not be surprising to find that full-time students are better funded than part-time students. Therefore a university with more part-time students is likely to have less money from HEFCE.

A further problem is that the allocation from HEFCE to the university does not represent the actual cost of teaching that subject there. It would be quite proper for a university to receive generous funding for one subject and decide to use it to subsidise another less fortunate.

It is possible to devise a system that penetrates the complexities of HEFCE's allocation of teaching funds and exposes the winners and losers. Starting from first principles, it is reasonable to expect that universities which are offering subjects within the same academic subject category and at the same level and mode will have comparable costs. Therefore all universities that are teaching, say, engineering on full-time taught courses might be expected to receive the same allocation of public funds. This is a single one of the 60 cells on which the allocation system is based.

Universities vary considerably in their funding for engineering. Now the fact that a university has a generous allocation in engineering does not necessarily mean that it will do as well over its other subjects. It might be that, although engineering is well funded at a particular university, the money has been vired from engineering to support science, mathematics or humanities, where perhaps the allocation is below average.

To make a fair comparison of winners and losers it is necessary to analyse the allocations over all subject categories in all universities. If a particular university in a certain subject receives Pounds 100 more per student than the average and has 200 students then that university could be regarded as having a credit of Pounds 200,000 which can be used to off-set below average funding that it might receive in other subjects.

The gains and losses over all subjects in each university are added together to see whether overall it does better or worse than the average level of funding.

There are other ways of analysing the problem, but even though they might result in a particular institution moving one or two places up or down a league table, overall the different approaches correlate. For full-time taught courses, the list from the most generously to the least generously funded university from HEFCE is given in Table 1. Subject mix has no effect on this list. By taking the average funding for the subject and looking at how much better or worse a university does against the average, there should be no advantage or disadvantage from having either particularly expensive or particularly inexpensive subjects.

The best-funded university is Oxford Brookes which has a positive unit of funding of Pounds 468 per student above the average. This is Pounds 952 per student better than Luton. The average funding for this mode is approximately Pounds 2,444. So in absolute terms Oxford Brookes is funded per student by HEFCE at approximately Pounds 2,912 and Luton Pounds 1, 960.

It might have been expected that there would have been comparatively little change in 1994/95 from 1993/94. Full-time students, who account for nearly 80 per cent of all teaching funds, are heavily affected by restrictions on student number expansion. As significant number increases are prohibited and funding is fairly stable in its decline, a slow convergence towards the average unit of funding might have been expected in 1994/95.

However, the position is complicated by the fact that funding in this mode was enhanced in 1994/95 by the addition of fee compensation. This increased the allocation from HEFCE to compensate for the reduction in the full-time student fee. However, both for an individual university and at sector level, the effect of fee compensation should have been neutral. Fee compensation was merely to provide an alternative funding route through HEFCE that in 1993/94 was provided through student fees.

Surprisingly there are quite radical and unexpected changes in the 1994/95 table of funding, particularly between different types of university. The funding for "new" universities has increased significantly and that for the old universities has declined. In 1993/94, on average, the new universities were funded at Pounds 85 per student less than the old. This year they are funded Pounds 91 per student better than the old.

This is a significant switch in funding from the old to the new universities, representing the movement of in excess of Pounds 25 million. It also means that when the efficiency gain is applied, the new universities can expect to bear a more significant loss of funds than the old.

This switch in funds from the old to the new universities appears to have been caused by the differential effect of fee compensation. It seems that, on average, the new universities had a higher proportion of science or laboratory-based courses than the old universities. It may have been possible that the new universities were more sophisticated than the old in ensuring, where there was discretion, that their courses received a higher level of fee compensation. Where this occurred, it would confer an apparent benefit on that university in relation to its funding. However, the benefit is not real; funding has simply been switched from fees to funding council allocation where it has become more visible.

A collateral effect of this switch has been that any connection between funding and quality appears to have broken. In 1993/94 those universities that were funded above average for teaching by HEFCE were nearly three times more likely to gain an "excellent" in subjects in which they were assessed, than those that were funded below average. Furthermore, only one university that was funded more than Pounds 100 below the average funding per student gained an "excellent" in any subject assessed. This appeared to confirm that there was a correlation in 1993/94 between quality as assessed by HEFCE and funding for teaching. This modest correlation has been completely overridden by fee compensation effect.

Table 2 gives the table for funding part-time taught courses. The allocations for part-time taught courses are more volatile than for full-time. Fewer institutions are significant players and they tend to be particular types of institution such as the large urban new universities. Small numbers can lead to extreme results. For example, Cambridge lost its position at the top of the table because in 1994/95 Oxford was funded at Pounds 2,559 per student but for only 22 students.

There are two further problems. First, universities are free to set their own part-time fees. These fees are paid from private funds and no public subsidy is involved. While market forces may ensure that the same part-time course attracts a comparable fee in each university, there is no data to support that contention. The second and more significant problem is that the volume measure of a part-time student may no longer be valid. Within an individual subject a student may be having a part-time commitment that varies from two hours a week to perhaps 16 hours a week. Yet at each of these extremes a student would only count for one unit.

There is no evidence to suggest that universities are cross subsidising between part-time and full-time. Universities that are well funded for full-time tend to be well funded for part-time. Once again in 1994/95 the new universities are better funded for part-time study than the old, receiving on average Pounds 262 more per student. If comparatively small part-time provision is ignored the best-funded provider of part-time courses is North London University with 3,290 students each funded at Pounds 493 above the average; nearly Pounds 1.6 million above the average level of funding. The worst-funded part-time provision is at the University of Bath which is Pounds 932 below the average, followed by Exeter at Pounds 712 below the average. This gives a total range, excluding the extremes occupied by Oxford, Cambridge and UMIST of Pounds 1,610, considerably wider than the 1993/94 range of Pounds 1,111 per student. It is interesting to note that the range of funding for part-time study has increased by nearly 30 per cent in 1994/95 over 1993/94. Overall part-time funding represents 16 per cent of the total allocation for teaching, a sum of just over Pounds 333 million.

The principal policy issue remains the widespread of funding between universities for both full time and part-time students. It is difficult to defend in the medium term a system that funds a student at Pounds 1,000 less than their counterpart simply because they have chosen to go to one university rather than another. Perhaps the only reasonable conclusion is that those institutions that are well funded should be required to make a significantly greater contribution to savings at times when the budget is restricted.

Peter Knight is vice chancellor of the University of Central England, Birmingham.

(Table not on database)

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