CVU annual conference, 19 September 2014

Public spending on higher education

and the implications for partnership activity

Julian Gravatt, Assistant Chief Executive, AoC

Julian_Gravatt@aoc.co.uk

What I’ll talk about

Higher vocational education

Public spending on higher education

Some suggestions

English College HE

Characteristics

100,000 students in 280 colleges (range 100 to 3,500)

Local, employer-led, technical, some niche

c50% apply for one course/one institution (UCAS)

70% live within 25 miles of campus

Student cohort more disadvantaged than HE average

Partnerships with Universities long-standing & important

English College HE trends

2008-9 2011-2 2012-3

Full Time Direct 31 37 44

Indirect 28 30 24

Full Time Sub-total 59 66 68

Part Time Direct 24 21 20

Indirect 33 27 18

Part Time Sub-total 56 48 38

117 116 106

% Direct 47% 50% 60%

The English HE system – not a normal market

Supply

Inertia (heritage, three-year degrees etc)

Longish lead-times to respond to demand but shortening

Full-time UG fees close to the £9,000 cap

Universities compete to be higher up league tables

Demand

Applicants need to be qualified to make a choice

Degrees are positional goods

Higher fees are paid after completion (no fees upfront)

Living costs loom larger than fees to many students

“Breaking the mould”

Analysis

English post-secondary higher-level skills system weak and small

Policy & history biased towards full-time

residential three-year degree model

Proposals

Re-balance the system

Different approaches to validation

Colleges/universities to work on progression

Government plans

Deficit reduction

Spending cuts 2009-18

Spending review in 2015

Unprotected departments

9.1% of GDP (2013-14)

7.8% of GDP (2015-16)

5.4% of GDP (2018-19)

Loans may be a safe haven

The bigger spending picture

The HE budget – up 26% in 4 years

2011-12 Teaching Student Support

Research Total RAB charge

Grants 4.6 1.3 4.6 10.5 2.1

Loans 2.6 4.4 - 7.0

Total 7.2 5.7 4.6 17.7

2013-14 Teaching Student Support

Research Total RAB charge

Grants 1.7 1.6 4.6 7.9 6.4

Loans 8.2 6.2 - 14.4

Total 9.9 7.8 4.6 22.3

Source: AoC summary of HEFCE grant letters for 2010 & 2014, BIS annual accounts

BIS revenue budget £13.2 billion in 2015-16 (£8 billion HE)Spending plans imply 31% cuts to unprotected depts (2015-18)

IFS scenarios for UUK to cut RDEL (back in October 2013)1. Breach the science/research ringfence (£4.6 bil budget)2. Cut Medicine & STEM funding (involves raising fee cap)3. Switch from HE maintenance grants to HE loans4. Reduce number of FT HE students 5. Cut 19+ FE/Skills budget further (on top of 35% cuts 2009-15)

Revenue spending in HE after 2015

Some options to reduce net loan outlays or RAB charge

Tuition fee loans to cover less than 100% of tuition fees

Graduates to repay loans faster, earlier or for longer (ie a tax)

Tighter conditions for maintenance loans than fee loans

Limit loan access to prime borrowers (eg via entry qualifications)

Wait and see (what happens with the recovery & repayments)

HE student loans after 2015

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Outlays 10.3 12.7 14.4 15.6 16.7 17.4

Repayments 1.8 2.1 2.3 2.5 2.5 2.6RAB charge@ 45% 4.6 5.7 6.5 7.0 7.5 7.8

The timetable

The spending decisionsHEFE grant letter (by January 2015)HEFCE policy on quality thresholds in uncapped marketGeneral election (May 2015)Spending review after the electionQuick BIS decisions needed to change things for 2016-17Recruitment for September 2015 is uncappedAny reform won’t really bite until 2017-18

ResultYou have time to think and plan

Suggestions

Where we are and may be

Changes to public spending permanent

These are long-term trends which take time to implement

Loans have been a financial safety net for HE

Demand exists for HE but it is evolving

Technology and working lives are changing faster

Current HE system may not be financially sustainable

University roots into local communities and economies matter