Cutting the Cloth to Suit the Purse – the OfS Teaching Grant

The fourth ‘ministerial guidance letter’ to the Office for Students within a year sets out the Teaching Grant budget for the 2020/21 governmental financial year. The total grant available is £1,479m. This includes a rise of £50m in capital teaching grant, returning it to its 2018/19 level. However, the recurrent figure of £1,429m represents a £58m funding cut on the previous year, and affects the funding available for distribution to higher education providers for both this current and next academic year.

There is no indication what funding may be available for 2021/22.

The overall cut to the teaching grant across recurrent and capital funding is 0.5%. Allowing for £19m of this being hypothecated for expanding the number of student places in health disciplines, the OfS calculates this figure rises to 5% in cash terms.

Without stating explicitly that a cut is being made, the letter from the Minister of State provides some ‘specific steers’ to the OfS on which areas of teaching grant provision should be protected. Of the current set of targeted allocations, high cost subjects, ‘world leading’ small and specialist institutions, the student premium and London weighting (particularly for those institutions offering high cost subjects in central London) all get shout outs.

More generally, OfS is asked to protect those areas where the evidence base for need is strongest, and where, working with the DfE, priority areas have been identified.

This gives the OfS limited latitude, reflected in the brevity of the consultation issued on their proposals (closing 17 February). Since OfS allocates recurrent funding according to universities’ financial years, four months’ worth of the cuts (around £26m) fall within the 2019/20 financial year. OfS propose to achieve this cut against as yet uncommitted funds, aiming to avoid adjusting allocations to providers ‘as far as possible’.

£70m is sought from the 2020/21 financial year, since there is no indication that the previous funding level will be restored. OfS propose to save £15-£20m of this through reduced funding for challenge competitions and by reducing ‘as far as possible’ funding for national facilities, singling out Jisc.

Protection of NCOP funding and the specialist institution targeted allocation, plus the need to make provision for additional students in high-cost areas (medicine, nursing, midwifery and allied health provisions) leaves the OfS with around £59-£67m still to find. It is proposed to achieve this through a 6% cut to nearly all other elements of the recurrent teaching grant.

Summarised, the elements of the Teaching Grant look like this:

Grant Element	Proposed cut	Notes
High cost subject funding	<6%	6% cut per FTE. Because pre-registration medicine numbers are rising, the overall cut to the grant element is estimated to be around 3%
Targeted Allocations
Premium to support successful student outcomes	6%	Main element is calculated in proportion to student FTEs, weighted according to age and entry qualifications. Supplement allocated to providers with students from underrepresented areas.
Disabled students’ premium	6%	Calculated in proportion to students who are in receipt of DSA or declare a disability.
Erasmus+	6%	Per student allocation for study abroad (Erasmus+ or other scheme)
Nursing, midwifery and AHP	<6%	6% cut per FTE. Because numbers in health disciplines are rising, the overall cut to the grant element is estimated to be around 3%.
PGT supplement	6%	Per FTE. Differential funding level between those courses which are eligible for the Masters Loan and for those which are not.
Intensive PGT provision	6%	Per FTE for students studying 45 weeks or more.
Accelerated UG provision	6%	Per FTE for students studying 45 weeks or more.
Students attending courses in London	6%	Currently allocated per FTE to all students across all price groups. Separate rates for inner and outer London. Cited as an element for review in the next T grant consultation.
Very high cost STEM subjects	6%	Supplement to Price Group B funding for chemistry; physics; chemical engineering; and mineral, metallurgy and materials engineering
Specialist institutions	0%	Due for review in 2020.
Costs relating to medical and dental staff	6%	Allocation for costs associated with NHS staff pay and pensions. No indication in consultation that it won’t be subject to the same cuts as other allocations.

The OfS’ explicit aim in spreading the cuts as widely as possible across the grant elements is to minimise disproportionate hits on particular areas. This mitigates the risk of destabilising effects prior to a fuller shake up of the funding method for 2021-22.

There are moving parts within the grant methodology. The unit of resource depends upon the total number of students studying at Approved (fee cap) Providers. Institutional allocations depend in turn upon their own student numbers within the categories listed above. Well into the 2020 recruitment cycle, institutions’ ability to mitigate the funding shortfall through recruitment may be limited.

All other things being equal, the biggest losers are institutions with the largest proportion of disadvantaged students, and of high cost subjects. In the longer term, the potential ‘change of focus’ for London Weighting will be of concern to institutions delivering predominately Price Group C and D subjects in inner or outer London.

The OfS will be conducting a full consultation on its funding method from April 2020, to inform allocations for the 2021-22 academic year.

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