The Higher Education Funding Council for England is preparing to balance difficult funding decisions for the next academic year against the financial impact of the research assessment exercise.
After last year's "share the misery" exercise, in which the council tried to save some universities from cuts by rationing out cash from better-off institutions, it now faces the same challenge with slightly more money but many more factors to juggle with.
Preliminary decisions on funding for 1997/98 announced before Christmas indicate that most universities and colleges can expect slightly better grants than last year in cash terms when the council publishes its allocations late next month.
Translated into real terms, this means there will be an average funding loss across the sector but this is unlikely to be as severe as last year's 5 per cent cut, according to Brian Fender, HEFCE's chief executive. Total resources fall in the next academic year in real terms by Pounds 38 million compared with 1996/97, representing a reduction of nearly 1 per cent. However, the range of real-terms reductions applied by the council will probably be about the same as last year.
"We will be looking at the maximum financial strain we expect institutions to be able to take. Maintaining financial stability in the sector is still a key aim for the council," Professor Fender said.
Managing stability is a more complex business, however, thanks to the RAE and the council's review of its funding method for research.
HEFCE will signal its intentions for linking funding to RAE ratings after its board meeting next Tuesday. Last year there was very little movement on research grants, but this time the full impact of rises and falls in research ratings, combined with the funding council's decisions on how to distribute around Pounds 700 million according to those grades, will have a significant impact. The council is expected to increase the amount of safety-net money available to Pounds 15 million to help it soften the effects of any big funding swings resulting from the RAE.
Professor Fender says the council may want to pay particular attention to what happens at the top and lower ends of the RAE scale. There is a clear intention to fund 5-star departments at a premium rate, but the council also hopes to be able to support new research, and institutions which are trying to get a foot on the RAE ladder. A new collaborative research initiative, to replace the old Dev-R, may be introduced to this end, taking a slice of the Pounds 308 million non-formula funding pot. Departments which received a 2 RAE rating may be able to bid for a share of this money.
Plans to add a "policy weighting" to research funding based on national needs and the international standing of particular research, spelled out in the council's consultation paper on its new research funding method, have been put on hold.