CVU annual conference, 19 September 2014 Public spending on higher education and the implications for partnership activity Julian Gravatt, Assistant Chief Executive, AoC

What I’ll talk about Higher vocational education Public spending on higher education Some suggestions

English College HE Characteristics 100,000 students in 280 colleges (range 100 to 3,500) Local, employer-led, technical, some niche c50% apply for one course/one institution (UCAS) 70% live within 25 miles of campus Student cohort more disadvantaged than HE average Partnerships with Universities long-standing & important

Source: AoC summary of HEFCE’s combined HESA/ILR statistics S English College HE trends Full TimeDirect Indirect Full TimeSub-total Part TimeDirect Indirect Part TimeSub-total % Direct47%50%60%

The English HE system – not a normal market Supply Inertia (heritage, three-year degrees etc) Longish lead-times to respond to demand but shortening Full-time UG fees close to the £9,000 cap Universities compete to be higher up league tables Demand Applicants need to be qualified to make a choice Degrees are positional goods Higher fees are paid after completion (no fees upfront) Living costs loom larger than fees to many students

“Breaking the mould” Analysis English post-secondary higher-level skills system weak and small Policy & history biased towards full-time residential three-year degree model Proposals Re-balance the system Different approaches to validation Colleges/universities to work on progression

Government plans Deficit reduction Spending cuts Spending review in 2015 Unprotected departments 9.1% of GDP ( ) 7.8% of GDP ( ) 5.4% of GDP ( ) Loans may be a safe haven The bigger spending picture

The HE budget – up 26% in 4 years TeachingStudent Support ResearchTotalRAB charge Grants Loans Total TeachingStudent Support ResearchTotalRAB charge Grants Loans Total Source: AoC summary of HEFCE grant letters for 2010 & 2014, BIS annual accounts

BIS revenue budget £13.2 billion in (£8 billion HE) Spending plans imply 31% cuts to unprotected depts ( ) IFS scenarios for UUK to cut RDEL (back in October 2013) 1. Breach the science/research ringfence (£4.6 bil budget) 2. Cut Medicine & STEM funding (involves raising fee cap) 3. Switch from HE maintenance grants to HE loans 4. Reduce number of FT HE students 5. Cut 19+ FE/Skills budget further (on top of 35% cuts ) Revenue spending in HE after 2015

Some options to reduce net loan outlays or RAB charge Tuition fee loans to cover less than 100% of tuition fees Graduates to repay loans faster, earlier or for longer (ie a tax) Tighter conditions for maintenance loans than fee loans Limit loan access to prime borrowers (eg via entry qualifications) Wait and see (what happens with the recovery & repayments) HE student loans after Outlays Repayments RAB 45%

The timetable The spending decisions HEFE grant letter (by January 2015) HEFCE policy on quality thresholds in uncapped market General election (May 2015) Spending review after the election Quick BIS decisions needed to change things for Recruitment for September 2015 is uncapped Any reform won’t really bite until Result You have time to think and plan

Suggestions Where we are and may be Changes to public spending permanent These are long-term trends which take time to implement Loans have been a financial safety net for HE Demand exists for HE but it is evolving Technology and working lives are changing faster Current HE system may not be financially sustainable University roots into local communities and economies matter