My favourite part of the HEFCE teaching funding method, and how screwed we are if we lose it

This post represents my personal opinions only, and not those of my employer, or of programmes or projects I am responsible for. It is made available under a CC0 (Public Domain) license.

The current HEFCE funding model has a number of quite marvellous features which I would be happy to expound upon at great length, but my personal favourite must be the “tolerance band”.

This is technically defined as an allowance for the difference between the standard resource (the funding available for the number of students enrolled on particular courses that the institution has indicated to HEFCE each year) and the assumed resource (which is the funding available for the students that have actually enrolled on particular courses each year). Because HEFCE is wise and noble it allows a 5% difference either way between these amounts before it starts either clawing back funds or reducing student numbers for the following year.

This 10% band of tolerance is the thing that keeps institutions stable. It allows for fluctuations in student numbers, and permits an institution to receive an expected amount of funding every year, allowing for an accurate budget and long term planning.


Under the new funding model, the majority of the financial support (80%+) that used to come from HEFCE will come from a new organisation, Student Finance. This allocates funds based directly on student choice, and – crucially – does not include a compensatory function. So the stability of funding levels, year-on-year, is lost.


The graph above shows what would happen if the fluctuations in student number are uncompensated, assuming the rate of fluctuation linked to student choice remains similar to what we see currently. Already, you can see that a reliable level of funding is not possible, and that an institution must take a lower level of funding as it’s basis for budgeting.

But, of course, other factors come in to play in a purer market, the most significant of these being the enhanced importance of marketing and communications for institutions. Though marketing can offer great recruitment gains if done well, it must be remembered that there are multiple actors in the market, all of which will be engineering their own enhancements. You could imagine one-year-only cut-price deals, collusion and horse-trading, marketing “blitzes” on priority areas. (There’s a whole other post coming on how cool it is going to be to work in university marketing over the next few years.)


So something with much higher peaks and deeper troughs would be expected, meaning that the “base” level of institutional resource is substantially lower, and that the institution must be capable of quickly scaling particular courses substantially up or down depending on recruitment.

This is a similar scenario to seasonal changes for demand in manufacturing, and manufacturing companies have responded to these pressures in one main way.

The casualisation of labour.

Rather than keep enough staff permanently on their books to meet peak demand, it is more likely that a factory would keep only the staff that they would need for periods of low demand, and draw on a pool of casualised (short-term contract, hourly pay, semi-skilled or unskilled) labour to cope with peaks.

Universities are already starting to do the same thing. Staff on “atypical contracts” (a lovely HESA euphemism) already make up more than a third of university staff – and return accuracy for this category of staff is notably poor – it is likely to be far, far higher.


The new model of funding only makes this situation for staff more likely. It may be that the age of the “career academic”, of tenure and of teaching plus research contracts is dead.

It is possible that this is simply an unintended consequence of a policy that has been notoriously poorly conceived and understood. But (and I am moving into tin foil hat territory here) we have already seen how the new model costs the taxpayer more than it saves, adds a significant extra burden to students, and (at best) offers institutions a similar amount of funding to what they get currently. So what is it for?

Is it this? A straight-ahead attack on the academic profession? A new world of casual, teaching-only, HE tutors, juggling multiple short-term contracts just to stay afloat? I dunno. But if it quacks like a duck…



An open letter to David Cameron.

The views expressed below are either my own, or exaggerated for the purpose of my argument. They are not the views of my employer, or of any projects or programmes I have responsibility for. This text is available under a CC0 (Public Domain) license.


>Dear David, 

You may wonder why I’m writing to you, why I’m not bothering Nick Clegg like every other student and academic in the country seems to be. Surely I don’t think I can appeal to your better nature, or sense of social justice? 

Well the thing is, I can kind of understand where you are coming from. Primarily, you want to save money to reduce the deficit. It’s likely you also want to bribe the vice-chancellors of famous universities to take the fee increase and not care about anything else, and let the private sector compete directly with publicly funded provision. You pretty obviously couldn’t care less about lecturers or students – I comprehend that position, even though I (obviously) disagree with you. 

>With Nick – bless him and his little hangdog face and the dead eyes – I don’t know what he wants, other than (apparently) to lose his seat in 2015. So I can’t make a cogent argument to him and have any idea of how he’ll respond to it. He’s not making any sense at the moment, so I can’t use sense to argue with him. 

Anyway, David, this reform of the funding of Higher Education thing. You’ve always been keen to link it to deficit and debt reduction. On 11 November 2010, in China, you said (during an interview on student fees where you condemned students doing to CCHQ what the Bullingdon Club have done to countless Oxfordshire restaurants): 

I think the will of the public was expressed at the time of the election when they rejected debt and deficit and putting off these difficult decisions under Labour, and they chose a new approach and we’ve got to be true to that and stick to that“ 

I want to hold you to that promise. To work to reduce the deficit. I’d like you to comment on my new proposal for higher education funding that will save you at least £5bn within this parliament on what you are currently proposing. Remembering the commitment of your Chancellor to “eliminate the bulk of the structural current budget deficit over a parliament” (24 Feb 2010). 

The proposal is this: leave things exactly how they are. Don’t change anything.

And that’s at least an extra £5bn in the coffers, helping you hit your deficit target. It also has the pleasing side effects of keeping students and academic staff happy, making the university sector more sustainable, offering them fiancial stability and ending nearly a month of civil unrest. But forget about all that hoodie-hugging liberal stuff (you already have? excellent.) – it saves the country money. Keep hold of that idea. 

You’ve linked the new proposals to the deficit so often you may be in danger of starting to believe your own spin. But in retreating from your policy you would be following the advice of the independent Office for Budgetary Responsibility, who note:


“For the November forecast the OBR has scrutinised and certified estimates of the additional loans [the loans in respect of increased student fees] that have been produced by the Department for Business, Innovation and Skills (BIS) for England. As the table shows, the impact on the CGNCR [Central Government Net Cash Requirement] is estimated to reach £5.6 billion by 2015-16, cumulatively adding £13 billion to PSND [Public Sector Net Debt] over the forecast period.” (pp123-124, in “Box 4.3”)