Governing in a Downturn London 30 September 2010 Alison Johns Head of Leadership, Governance and Managment The political context as seen from a funding council’s perspective and what questions we would like to see governors addressing Appendix A(ii)

Context (1) _______________________________________________________________________________________________________________________  The Independent Review of Higher Education and Student Finance  The coalition Government’s first spending review

Context (2) _______________________________________________________________________________________________________________________  increasing student demand  international competition  cost pressures  the shift to a new business model  technological advances

Public concerns _______________________________________________________________________________________________________________________  Unmet demand  Graduate unemployment  High personal debts

The World as we know it

Financial flows chart _______________________________________________________________________________________________________________________

HE Business models – from HE workforce framework  Six main income streams for English HE: o Publicly-funded research o Privately-funded research o Publicly-funded teaching o Privately-funded teaching o Academic enterprise o Other services

Illustrative examples of institutional strategic profiles based on income Type B Type A Type C Type D

Imagine a world….

Key propositions in Sunday Times article – 26 Sept 2010 Fees up to £10k pa Public funding for teaching reduced by 2/3rds A cut of £3bn or 64% of £4.7bn T funding With effect from2012 Degrees paid for by students mainly paid by them from their future earnings Overall reduction in state funding for HEIs circa 37% (incl £1bn off £6bn for research) Subsidies on student loans gone > 2% rise

Stronger market dynamic _______________________________________________________________________________________________________________________  Improved information for students  Greater student choice  Continuous quality improvement  Supply side reform? Lowering of entry barriers for private providers?  Students numbers?

HEI pressures _______________________________________________________________________________________________________________________  Decreasing public spending  International competition in teaching and research  Increasing requirements for quality improvement

HEI pressures _______________________________________________________________________________________________________________________ Discussion  What are the pressures you are facing in the current and future political and fiscal environment?  What are the risks you should be thinking about and discussing at your GB?

What can we glean from USA? Regulation Increased oversight and compliance arrangements Greater transparency for students and parents Growing need to improve and demonstrate quality Governance to show a moral compass: ‘doing the right thing’ Efficiency and greater use of IT internet tuition

Key issues _______________________________________________________________________________________________________________________  changes in multiple income streams  a new balance of public, student, employer funding  new business models at institutional level  ensuring clear lines of accountability, effective governance of financial control at a time of change  maintaining market confidence through orderly transition

Market confidence at a time of change _______________________________________________________________________________________________________________________ “Press reports discuss the UK university system as facing profound changes. Whether the change evolves smoothly or not may depend on the consistent and historically effective regulatory framework provided by HEFCE, the regulator and main funding vehicle for the sector and on the ability of universities to forecast and plan for change. HEFCE’s tight regulation and oversight of the sector, as well as a historical record of strong extraordinary support for distressed institutions, offer the promise that change will be orderly”.

Opportunities _______________________________________________________________________________________________________________________  Imperative to differentiate  Get the price right o what will the market bear? o cover costs and reinvestment? o what if price wrong? o net price : gross price – what is your offer? bursaries and freebies  Others?

Questions governors should be asking? _______________________________________________________________________________________________________________________  Does our strategy… o focus on strengths? o widen the funding base? o articulate the brand? o focus on appropriate risks? ...and seek to where appropriate… o disinvest? o develop strategic partnerships

Questions governors should be asking? _______________________________________________________________________________________________________________________  To what extent are our resource strategies fit for purpose?  Where do we need to build capacity and capability? o change management? o human resources? o estates o finance? o other?

Questions governors should be asking? _______________________________________________________________________________________________________________________  How efficient are we? o new business models? o cost management? o culture change? o short and medium term plans?

Strategic issues _______________________________________________________________________________________________________________________  Direction  Alignment  Efficiency

Role of Governing Bodies Set Strategy Monitor Performance Protect Autonomy Stakeholder Confidence

Public Confidence (FM) Risk management, control and corporate governance Information systems Financial sustainability No surprises – material adverse change requirement Regularity, propriety, value for money Audit systems

Self-regulation Risk-based intervention Respected governance Institutional Autonomy

HEFCE Support Communications Training via LFHE Benchmarking Good Practice (via CUC)

Communications Risk letter Grant letter alert - Annual meeting - 26 November 2010 Institutional visits

HEFCE Governance Alert bin/webadmin?SUBED1=governance-hefce&A=1 bin/webadmin?SUBED1=governance-hefce&A=1

Thank you for listening