The Political Context – a Funding Council Perspective Mark Allanson The Leadership Foundation for Higher Education 6th October 2011

Issues Why invest in HE? Economic context Political Context The White Paper Financial Overview HEFCE strategic response System Uncertainties - Risks

Why invest in HE? £59 billion economic impact and…… …development of our professions… …cultural and social impact …contribution to sustainable development 3

October 2010 ‘ The UK’s Conservative led coalition has announced the most dramatic cuts in living memory…’ 4

2010 National debt £830bn (60% GDP) Public sector borrowing 5

6

Coalition budget October 2010 - £89bn over 4 years (PSBR) - 490,000 public sector jobs Departmental Budgets: 30% cut in local government 16% cut in police service 8% cut & 42,000 jobs in defence - £7bn welfare Economic growth forecasts: 2.3% in 2011 (current 2.8% in 2012 2.9% in 2013 7

The White Paper Sustainable sector funding Improving student experience Increasing social mobility A diverse and responsive sector A new regulatory framework

Current financial health   2008-09 2009-10 10 year average Operating surplus as % of Total Income (TI) 1.3 3.2 1.4 Historical cost surplus as % of TI 2.5 3.6 2.7 Operating cash flow as % of TI 6.8 8.3 5.9 Liquidity days 83 98 73 External borrowing as % of TI 20.9 21.1 19.9 Discretionary reserves exc. FRS17 as % of TI 43.7 46.0 41.6 Staff costs as % of TI 55.4 54.3 56.5

HEFCE’s strategic statement “Higher education changes lives. It is enriching and inspiring for students and it is vital to social mobility, future economic growth and our international standing.” 10

Tackling higher education reform

HEFCE approach Smooth transition Partnership working Respecting Autonomy Monitoring Impact

Risks to not achieving forecasts Examples include: Student recruitment/participation (Demand) Student number control (Supply) Public funding changes/economic factors Pay & Pension costs Management decisions

In summary….. The overriding context is the economy and the public purse The Politics and policies of coalition are not easy Student interest, choice and market belief are core Significant funding change (higher income?) Regulation Opportunity, choice and excellence Higher education matters 14

Thank you for listening m.allanson@hefce.ac.uk