The first budget of the new Government was delivered on Wednesday. Overall a quieter week as most focussed on the nation’s health. We can do no better than refer you to the BU website and for staff, the BU intranet pages.
There was very little specifically relating to HE in the budget. Of most relevance is the increase in the research and development investment:
1.220 The Budget sets out ambitious plans to increase public R&D investment to £22 billion per year by 2024-25. This landmark investment is the largest and fastest ever expansion of support for basic research and innovation, taking direct support for R&D to 0.8% of GDP and placing the UK among the top quarter of OECD nations – ahead of the USA, Japan, France and China. This unprecedented increase in investment will support a range of objectives, including:
- supporting world-leading research in all regions and nations of the UK, including by cutting bureaucracy, experimenting with new funding models, and establishing a new funding agency to focus on high-risk, high-reward research
- meeting the great challenges facing society, including climate change and an ageing population, and providing funding to pursue ‘moonshot’ scientific missions
- investing in the government’s own strategic science capability and improving public services
- backing businesses to invest and innovate so that they can compete in the global technology-driven economy
1.221 Details of how this funding will support these and other objectives will be set out at the forthcoming CSR, but the Budget announces a set of measures that will have an immediate impact.
- The government is providing an immediate funding boost of up to £400 million in 2020-21 for world-leading research, infrastructure and equipment. This will help build excellence in research institutes and universities right across the UK, particularly in basic research and physical sciences. The government will also provide £300 million for experimental mathematical research to attract the very best global talent over the next five years. This will double funding for new PhDs and boost the number of maths fellowships and research projects.
- The government will invest at least £800 million in a new blue-skies funding agency here in the UK, modelled on the extraordinary ‘ARPA’ in the US.65 This agency will fund high-risk, high-reward science.
- In recognition of their excellence and global reach, the government will increase funding for the UK’s foremost specialist institutions by £80 million over the next five years. This will support world-leading organisations such as the London School of Hygiene and Tropical Medicine, the Royal College of Art and the Institute of Cancer Research among others. At the CSR, the government will examine how R&D funding as a whole can best be distributed across the country to help level up every region and nation of the country.
- The government is committed to ensuring that the UK’s fast-growing and innovative businesses continue to have access to the finance they need to invest and grow. The Life Sciences Investment Programme will provide the British Business Bank with additional resources to make up to £200 million in equity commitments to support the UK’s most innovative health and life sciences firms over the next five years. Invested alongside private sector capital, this is expected to enable £600 million of finance to create high-quality jobs and help UK patients benefit from more ground-breaking treatments and care. This funding will build on the £350 million of finance to life sciences firms currently supported by the British Business Bank by supporting large-scale venture growth funds. The programme will launch within a year.
Other HE matters
- Freezing the maximum fee cap – As announced in July 2019, the government has frozen the maximum fee cap in England for the 2020-21 academic year at £9,250 for regular full-time undergraduate courses and at £11,100 for accelerated degree courses.
- Removing the student finance three-year residence requirement for victims of domestic abuse – From academic year 2020-21, the government is removing the three-year ordinary residence requirement for student finance for those granted Indefinite Leave to Remain as victims of domestic abuse.
- Entitlement to part-time Maintenance Loans – The Budget takes into account the fiscal impacts of part-time Maintenance Loans not being extended to sub-degree (level 4/5 courses) and distance learners, as announced in June 2019 and March 2019 respectively.
- Institutes of Technology – The government will provide £120 million to bring further education and higher education providers in England together with employers to open up to eight new Institutes of Technology. These institutions will be used to deliver high-quality higher level technical education and to help close skills gaps in their local areas.
- Further education capital funding – The government will provide £1.5 billion over five years (£1.8 billion inclusive of indicative Barnett consequentials), supported by funding from further education colleges themselves, to bring the facilities of colleges everywhere in England up to a good level, and to support improvements to colleges to raise the quality and efficiency of vocational education provision.
- Facilities and equipment to support T levels – The government will provide £95 million for providers in England to invest in high quality facilities and industry-standard equipment to support the rollout of T levels. Funding will support T level routes being delivered from autumn 2021, including construction, digital, and health and science.
- National Skills Fund – The government will consult widely in the spring on how to use the new National Skills Fund.
- Apprenticeship Levy – The government will look at how to improve the working of the Apprenticeship Levy, to support large and small employers in meeting the long-term skills needs of the economy.
- Apprenticeships – The government will ensure that sufficient funding is made available in 2020-21 to support an increase in the number of new high-quality apprenticeships in small-and medium-sized businesses.
Dods summarise and speculate on the main educational elements within the budget:
- The spending review could represent a more pivotal moment for education funding generally, with the government set to issue their response to the Augar Review. In the interim, debates about value in HE could predominate, with the outcomes of the TEF review anticipated. The Government’s R&D ambitions and commitment on “world leading, research infrastructure and support” are interesting in this context. HEPI have urged the Government to recognise the interdependence of teaching and research, as well as prevent Augar and TEF conclusions circumscribing universities role in underpinning R&D objectives.
- Augar will also have major implications for an FE sector desperate for investment to match the rhetoric in both 16-19 and adult education. A spring consultation on the £3bn National Skills Fund will likely elicit contrasting responses across the sector, with some demanding devolution to elected mayors and LEPs and others advocating providers be allowed to compete for funds. Colleges may also query whether today’s commitments can ensure preparedness for forthcoming T-level qualifications.
- It was arguably education funding pledges that introduced “levelling up” to parliamentary parlance last September, with steps to harden the formula for per-pupil funding allocations presented as emblematic of government resolve to tackle regional disparities. As a result, the budget contained few surprises for compulsory education, with school budgets set to increase by £4.3bn in real terms by 2022/23. From 2010, this represents an historically unprecedented funding squeeze (IfS), with schools also required to absorb a government increases to teaching salaries.
A series of regional factsheets have been published on the 2020 budget. Here is the one for the South West, it includes:
- £79 million for Bournemouth, Christchurch and Poole including funding for new cycle freeways and bus priority schemes through the Transforming Cities Fund.
- The South West will benefit from a share of the next £5.2 billion flood and coastal defence investment programme starting in 2021. These locations will benefit from at least the following levels of funding as a result of this programme: £114 million for Bridgwater, £34 million for Poole, and £1.4 million for Gloucester to better protect over 7,000 properties.
- The Government will support the Western Gateway, a strategic economic partnership across south Wales and the West of England, to oversee an independent economic review to identify long-term economic opportunities and challenges for the region.
And sharing the national pot to access:
- £100 million of seed funding for 21 schemes from the Health Infrastructure Plan, seven of which are in the South West.
- £640 million as part of the Nature for Climate Fund.
- Over £500 million to cement our world-leading position in cutting edge technologies including space, electric vehicles and life sciences
The budget also launched the long-awaited Comprehensive Spending Review (2020). This will conclude in July when the Chancellor will set out the detailed spending plans for public services and investment, including the resource budgets from 2021-22 to 2023-24 and capital budgets up to 2024-25. It will be a key time for HE as many of the delayed big decisions such as Augar Review, student fee levels, and TEF are set to be tackled as part of the CSR.
Cross subsidisation – Teaching & Research
Cross subsidisation – whereby HE institutions fund aspects of research activity from student fee income – has been a contentious point which bothered Government in the recent past. It was overshadowed as the value for money discussion rose; however, quiet rumblings about whether cross subsidisation is ‘right’ have continued in the background. On Monday, prior to the budget, HEPI published a report on cross subsidisation within the post-Augar context and exploring the Government’s 2.4% R&D target.
The report argues that the debate about value for money in higher education alongside parts of the Augar Review (the £7,500 tuition fee recommendation) fails to acknowledge the interdependence between teaching and research. It argues that adopting the Augar recommendations would circumscribe university investment in new programmes such as artificial intelligence and machine learning – contradictory to the Government aim to strengthen research in these areas.
- University research is underfunded against its true costs – the latest figures show a gap amounting to £4.3 billion across the UK and £3.7 billion in England and Northern Ireland.
- The shortfall in research funding has been partially filled by cross-subsidies from international students’ fees – each international student in the UK pays an average of £5,100 more than it costs to educate them.
- Depending on how the Government opt to respond to the Augar review’s recommendations on tuition fees, then the shortfall on teaching home undergraduates could increase by between £0.7 billion and £2.3 billion above its current level of £0.2 billion.
- A larger gap will need to be covered by increases in productivity, a lower quality student experience, or redirecting the cross-subsidy arising from international student fee income.
- If international student fees are used to fill in – or merely reduce – a bigger gap in the funding of home students, they will no longer be available to cross-subsidise research, meaning the annual research deficit in England and Northern Ireland alone could rise to £4.9 billion. Teaching and research could suffer; and:
- This will make it very challenging to reach the Government’s R&D spend target .
- The splitting of teaching from research in Whitehall – a different Minister and Department for each hampers the joined-up approach to the two activities undertaken by HEIs.
- An increase in overseas students could relieve some of the financial pressures but is not inevitable, given international competition, changing geopolitics and the Home Office’s general approach in recent years to international students. Dare I also mention COVID-19?!
- If policymakers want to hold down – or reduce – tuition fees, preside over further improvements to the student experience and ensure much greater R&D spending, they are likely to need to spend more than planned.
The paper concludes:
- The Government want to see an increase in education export earnings to £35 billion a year by 2030, up from £20 billion in 2016, with 600,000 students hosted in the UK, up from 470,000 in 2017/18. If such targets are to be achieved then it might be possible to continue cross subsidising research from international student fees while also substantially increasing the cross-subsidies for teaching home students.
- However, this would make the university sector even more reliant on other countries at a time when there are already fears of over-exposure to fluctuations in geopolitics. Moreover, relying more on international student fees to bolster the teaching of home students will always make it harder to realise the R&D target than if all the available cross-subsidies were spent on research
Nick Hillman, the Director of HEPI and the author of the report, said:
- If the UK university sector is to continue thriving, then it is crucial that the Chancellor recognises the interdependencies between teaching and research in the budget and subsequent spending review.
- Universities roughly break even on teaching home students but make a big loss on research. They fill in part of that gap from the surplus on teaching international students. But they now face a looming large loss on teaching home students, for example because of tweaks to tuition fees in England. If that happens, they will have to use international student fees to subsidise home students and there will be less money for covering gaps in research funding.
- We need to redouble our efforts to ensure a better understanding of the interdependencies between teaching and research in the face of the latest Whitehall changes, which mean we now have one Minister for Universities and a different Minister for Science.
A change of heart from the OfS
Nicola Dandridge has set out her plans to improve the relationship that the OfS has with HE providers in an interesting blog on Wonkhe.
It sets out plans such as:
- …a review that will help us assess the impact of our regulatory activity on individual providers.
- …new guidance on an area that I know has caused frustration to some universities and colleges – reportable events. The guidance will set out in clear terms the things providers need to tell the OfS about, and explain how we will deal with those reports.
- We are improving how we correspond with universities and colleges in response to their feedback. Some providers have found our engagement with them too impersonal. In future, letters and emails will normally be sent from named individuals so it is clear who has dealt with individual queries. We have added specific contact details to our website, so that providers can quickly reach the most relevant teams with questions, with a dedicated phone number for regulation and monitoring queries. We also plan to move to two release dates per month for letters and consultations we send to vice chancellors and principals, when possible, so that the pace of communications feels more ordered.
- We have taken steps internally to improve the clarity and tone of our communications to individual providers, and to make them feel less bureaucratic. We have started to share calendars of key activities, updating them regularly on our website. We will also improve our communications on data requirements, ensuring clearer understanding of how to use our templates, making sure our deadlines allow sufficient time for engagement with both management and with governing bodies/councils where that is expected. We will actively seek feedback as we develop our processes for data collection and presentation
- Later this spring, we will be hosting both a national event and a number of regional events for universities and colleges on our approach to regulation…
In the meantime the requirement to make daily reports to the OfS of numbers of staff or students with the corona virus appear to have been bypassed by advice to stay at home and not seek to get tested if you are showing symptoms – making the numbers essentially meaningless. Universities up and down the country will be hoping that this particular requirement will be relaxed.
The graduate premium
HESA have issued a report that says that “Research shows decline in ‘graduate premium’ less pronounced for 1st and 2:1 degrees”.
From the HESA website;
- Researchers from HESA and the Department of Economics at Warwick University compared the pay of graduates with non-graduates. Given the growth in the proportion of graduates with a first or upper second class award, they looked for changes in the returns to a first or upper second class degree compared with lower grades. They found graduates born in 1970 who had a first or upper second class degree earned 20% more than non-graduates at age 26, compared to a graduate premium of 14% for those with a lower second class degree or below.
- The researchers had previously found that the graduate premium has reduced over time. The same comparison for people born in 1990 found that graduates with a first or 2:1 earned 14% more than non-graduates at age 26, while the return to a 2:2 or lower class degree was only 3%.
- The study found that the overall reduction in the return to a degree was largely explained by stronger pay growth in non-professional occupations than in professional jobs. They suggest that the accompanying increase in the gap between the returns to higher and lower degree classifications, from 6 percentage points to 11 percentage points, may relate to workplace recruitment focussing on graduates with at least an upper second class degree.
- The research also compared the returns to a first with the returns to a 2:1, and the returns to a 2:1 compared to a 2:2. The tentative results, based on a small number of first-class degree holders born in 1970, found that the relative benefit of having a first over having a 2:1 has decreased by up to 3 percentage points. The study’s authors note that this may be due the long-term trend of more graduates being awarded a first class degree. Meanwhile the relative benefit of a 2:1 over a 2:2 has increased by up to 8 percentage points.
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