Universities face steep cuts in teaching budgets

English universities face an immediate cut of £150 million (US$233 million) in the money they receive from central government for teaching in their share of the £3 billion reductions in government spending announced by Chancellor of the Exchequer George Osborne on June 4.

The government has ring-fenced spending on research but, despite the sharp 10% cut in the money for teaching announced in March this year, it still wants universities to focus on science, technology, engineering and mathematics, or STEM subjects and increase the numbers of disadvantaged students by 2020.

The saving represents a third of the savings made by the Department for Business, Innovation and Skills, which is responsible for universities.

It relates to the 2015-16 financial year and this means that some savings will have to be made from the current (2014-15) academic year which is on the point of ending, as well as in the 2015-16 academic year.

But deft footwork by the Higher Education Funding Council for England, or HEFCE, has avoided the axe falling on specific projects that had been the subject of speculation. This week HEFCE outlined precisely how it intends to put the cut into effect, making clear its intention to “ensure that the short-term viability of institutions is not put at risk”.

Professor Madeleine Atkins, HEFCE’s chief executive, said: “The reductions to teaching grants, which affect this and the next academic year, will be challenging for the sector.

“HEFCE is doing all that we can to minimise the impact on institutions' financial viability in the short term. In implementing the reductions, we will also seek to protect the priority areas identified by the secretary of state for Business, Innovation and Skills.

“We will continue to work closely with the sector and students to support excellence in research, learning and teaching, and a high-quality student experience.”

Initially, HEFCE is making £60 million of the savings from funds it has yet to allocate, in an effort to minimise the impact on already-announced recurrent teaching grants.

It will save £37 million from the sum set aside to help universities cope with an expected increase in student numbers in 2015-16. This one-off allocation will put pressure on universities which will have to meet additional demands solely from tuition fee income.

A further £13 million will be cut from its national initiatives including £10 million from the Catalyst Fund which enables HEFCE to meet its strategic aims.

And HEFCE confirmed to universities that it would save a further £10 million by reducing its grants to institutions which over-recruited when there were controls on student numbers.

But the largest amount (£52 million) of savings will be achieved by ending the “transitional” funding for postgraduate and STEM subjects in the aftermath of the research excellence framework.

Most controversially, HEFCE is implementing a further 2.4% cut in its teaching grants to universities for the current academic year. A saving of £38 million is to be made by an across-the-board cut of 2.4% for 2014-15 on top of a previously announced reduction of 5.85%. Universities will be told in October how much the grants they were told of in March this year will be further cut.

And HEFCE warned that more cuts may be on the way for 2015-16 when the government announces the overall grant for the 2016-17 financial year.

Sajid Javid, the secretary of state for business, innovation and skills, told HEFCE that “education remains a priority for the government, for the benefits it brings to our economy and to the prospects of individuals”.

But, in a letter to the council, he added that sound public finances and a strong economy were vital for the long-term sustainability of the higher education sector and would underpin the prospects for graduates entering the job market.

“Our overriding priority is to eliminate the deficit and it is right that higher education delivers a fair share of the savings necessary to achieve this.”

He said that savings were made against a background of an overall rise in institutional income from tuition fees.

“I estimate that institutions could earn over £8 billion from students subject to regulated fees in 2015-16 and some £9 billion in 2016-17.”

In informing HEFCE of the cuts, he said that they should be delivered in ways that protect “as far as possible” high-cost subjects (including STEM), widening participation, and small and specialist institutions.

“I look to the council to support the sector to achieve the goals set by the prime minister to double the proportion of people from disadvantaged backgrounds and to increase the proportion of students from black and ethnic minorities entering higher education by the end of this parliament,” Javid wrote.