LA/7120    December 2001


Egmont House, 25-31 Tavistock Place, London, WC1H 9UT                                       %    020-7670 9700

fax: 020-7670 9799      email:    www:                                                           /



TO:                            Local Association Secretaries

TOPIC:                     Recent funding announcements

ACTION:                  for information

SUMMARY:            summary of recent announcements about public funding of higher education

HQ CONTACT:       Stephen Court, senior research officer



Dear Colleague


Recent funding announcements


The circular summarises recent announcements about public funding for higher education, including the results of the 2001 RAE, and assesses their impact on funding and pay levels in 2002-03.


Recurrent funding for higher education 2002-03


The overall decisions on the level of recurrent funding for higher education in Britain for 2002-03 were announced in late 2000/early 2001 following the government’s 2000 spending review. So the guidance letters from the education secretary Estelle Morris to the chairman of the Higher Education Funding Council for England of 29 November 2001[1], and from the Scottish lifelong learning minister Wendy Alexander to the chairman of the Scottish Higher Education Funding Council of December 2001 do not contain much that is new about the overall levels of funding or student numbers.  The detailed allocations to institutions will be announced in February/March next year.


Public funding in 2002-03 for recurrent grant and tuition fees (including private student contributions) will increase in England by 1.8% above inflation, in Scotland it will be level with inflation, and in Wales it is planned to be cut in real terms by 0.7%. The Welsh higher education funding letter is expected in the new year. 




In England in 2002-03, the government is making £110 million available in additional funding for “academic and support staff pay”, to recruit and retain “high quality academic staff” and to “help modernise the management processes in the sector”. Judging by the plans institutions have submitted to the HEFCE, it is likely that much of this additional funding will be spent on human resource management, particularly on job evaluation schemes. No additional funding for pay is planned for the rest of the UK. It is worth noting that the funding guidance letter from the department for education and skills did not, for the first time in the past decade or so, contain the customary phrase that institutions should “follow public sector pay policy”. So whether this means that the government will sanction above inflation pay rises in higher education in 2002 – as have just been announced for doctors and nurses[2] – remains to be seen.


The Research Assessment Exercise


The results of the 2001 RAE were announced in December 2001, showing a marked increase in the proportion of departments whose research is judged to be of international excellence. However, the increase in highly rated research without a corresponding increase in the level of funding for research, means there is a recurrent funding shortfall of £200 million for research in the UK. The government has said additional funding would not be available to pay for the improved results. The HEFCE has announced that it will allocate funding on the basis of the 2001 results, but only top-rated (5*) research will be fully funded. Research with a 3b, 3a, 4 and 5 rating may not be fully funded (subject to further announcements in the new year). This could well mean cuts in recurrent grant for 2002-03, although the funding council has said it will use safety caps and nets to moderate the impact of any cuts.


Spending review


Funding levels for 2003-04 – although initially announced in 2000 – are subject to the outcome of the government’s 2002 spending review, since 2003-04 is also the first year affected by next summer’s review. The review will also determine funding levels for 2004-05 and, conditionally, 2005-06.


The AUT, in its submission to the 2002 review, Reaching for 50% participation: sustainable growth in higher education[3], said £2.1 billion in additional public funding for higher education in the UK was needed in 2003-04, with further amounts for the following two years. About £800 million was needed to implement the recommendations of the Bett report on pay relativities and equal pay for work of equal value; £1 billion was needed to fully fund the increases in student numbers planned by the government, as well as overhaul the student finance system and support wider participation; and nearly £500 million was needed for additional infrastructure for teaching and research. The AUT submission estimated that meeting the government’s target of 50% of people aged 18-30 participating in higher education by 2010 would require an additional 670,000 student places by the end of the decade. The outcome of the 2002 spending review will be announced next summer.



Paul Cottrell

Acting General Secretary





[1] See, then ‘news & events’.

[2] D. Charter (2001), Pay hike gamble for NHS, The Times, 18 December, p.1.

[3] see, then ‘policy & publications’, then ‘reports’.