'Squeezed middle' feels pinch as grant and numbers decline

Post-92s hardest hit by AAB and core-and-margin plans, Hefce projections show. John Morgan writes

March 29, 2012

Credit: Alamy
Counting the cost: some large post-1992 universities will see a big drop in student numbers under the new funding regime

The first year of the government's new fees and funding regime is expected to cost some post-1992 universities almost 13 per cent of their undergraduate intake and up to 46 per cent of their direct grant.

The Higher Education Funding Council for England published its 2012-13 funding allocations for universities and colleges on 29 March, with government policy yielding divergent fortunes for different types of institution.

The total recurrent grant allocation for higher education - consisting of funding for teaching, research and third-stream activities in higher and further education institutions - falls 18.6 per cent to £4.9 billion.

This reflects the fact that 2012-13 is the first year the academy will derive income from "new regime" undergraduates, who will be charged tuition fees of up to £9,000. Teaching grants will end for new regime students in all but high-cost subjects.

The allocation also shows for the first time the impact on individual universities of the AAB and "core-and-margin" systems - moves by the government to introduce managed competition for places. The core-and-margin system takes a slice of each institution's non-AAB undergraduate places to create a 20,000-strong pool allocated to universities and further education colleges charging average fees of £7,500 or less.

Hefce's figures show that the system is expected to lead to big losses in full-time undergraduate numbers for several large post-1992s in the "squeezed middle": lacking large numbers of AAB students they have been exposed to the margin deduction, but as they charge more than £7,500 they have been unable to recoup places.

The University of East London is hit by the biggest projected fall, with its 2012-13 intake down 12.6 per cent (or 622 places) on 2011-12 (see box below). Manchester Metropolitan University is projected to lose 900 places (11.1 per cent of its intake), the biggest decline in terms of overall numbers. The loss of places will be higher if universities fail to maintain their current AAB numbers.

The loss of the 10,000 extra places created under the University Modernisation Fund at the tail end of the Labour government exacerbates the decreases at post-1992s. By contrast, the AAB system - which allows universities unlimited recruitment of the highest-achieving students - leaves many Russell Group members with the bulk of their students outside the numbers cap.

'Very frustrating'

Libby Hackett, director of the University Alliance, which includes Manchester Met, said its members were "the squeezed middle in this environment".

Given that the group's universities were "doing all the things the government asked of them" in terms of high graduate employment rates and links with industry, it was "very frustrating" for them to have their places cut, she said.

Ms Hackett reiterated calls for AAB to be extended downwards to lower grades to create a more open market; for the size of the margin of contestable places to be reduced; and for the £7,500 threshold on bids for margin places to be removed.

The government has yet to state whether the AAB threshold will be lowered and whether - and at what level - the margin system will be repeated in 2013 and beyond.

Further losses of student places at 2012-13 levels could rapidly shrink some institutions.

In terms of grant allocation, the percentage changes from 2011-12 vary hugely according to factors including the type and length of courses universities run. Hefce did not release year-on-year comparisons, but calculations by Times Higher Education show that the University of Bolton is the biggest loser, with its grant falling by 45.7 per cent to £11.4 million, mainly due to its low research funding.

By contrast, there are small falls in grant for universities with high levels of research funding, large numbers of students in medicine and other high-cost subject areas (where a reduced element of teaching grant will remain), and more students on longer courses (making the transition to the new regime less sharp).

These include Imperial College London (down 2.6 per cent to £148.2 million), the University of Cambridge (down 4.1 per cent to £169.2 million), University College London (down 4.1 per cent to £174.3 million) and the University of Oxford (down 4.9 per cent to £177.8 million).

In reality, Cambridge and Oxford are likely to receive smaller teaching grants than those provisionally allocated by Hefce. The allocation lists them as increasing their undergraduate intake by 13.2 per cent and 14.1 per cent respectively.

This is principally because Hefce allowed the most selective institutions to retain a 20 per cent slice of their overall student numbers to be used, if they wish, on non-AAB students for fair-access purposes.

However, Cambridge and Oxford have said that they do not intend to use AAB to boost student numbers, making it unlikely they will expand overall.

In the document summarising the allocations, Hefce says that the data are "highly provisional" and that grants "will be recalculated later to reflect actual student numbers". It says it is "maintaining our commitment to funding high-cost and strategically important subjects, widening participation, and small and specialist institutions". Specialists receive targeted support and so their grants have declined only slightly.

An extra £39 million of grant funding for new-regime taught postgraduates studying higher-cost subjects has also been introduced, leading to more funding stability for institutions with large numbers of master's students.



Conflict resolution: Hefce aims to smooth the path of reform

The assignment of the sector's funding and student numbers for next year by England's funding council was done in part to stop "contradictory" coalition policies from causing problems, according to its chief executive.

Sir Alan Langlands made the comments at a press conference on March as he explained the rationale behind the Higher Education Funding Council for England's response to the government's AAB policy, which critics claim could damage social mobility.

The most selective institutions have been assigned by Hefce a 20 per cent slice of their overall numbers to use for non-AAB students in 2012-13 to help them meet their pledges on fair access.

Sir Alan highlighted the government's commitment to fair access and said that across several policy areas, Hefce's aim had been to "try and make sure we didn't have contradictory government policies working against each other".

Following Hefce's announcement earlier this year of extra grant funding for postgraduates, Sir Alan also suggested that there could be "slight shifts away from undergraduate education towards postgraduate education in future...One or two [universities] are talking about that."

Meanwhile, on the "squeezed middle" of universities that will lose a relatively large number of their undergraduate places, Sir Alan said that their income would grow from higher fees, alongside continued grants from Hefce.

"That doesn't tip any of these institutions, we believe, into significant financial trouble," he said.

He noted that the universities in question had turned down the chance to lower their average fees to £7,500 or below to compete for margin places.

"All of them made a calculation about their fee level," he added.

Sir Alan stressed that reductions in Hefce grant should be seen alongside extra income from publicly subsidised loans, which the government has said will increase overall funding.

But he added: "I don't think we should underestimate the effect on [students] and their families. There is behind this story [of rising overall funding] a switch in the balance of public and private funding."

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