'Squeezed middle' feels pinch as grant and numbers decline

The first year of the government's new fees and funding regime is expected to cost some post-1992 universities almost 13 per cent of their undergraduate intake and up to 46 per cent of their direct grant.

The Higher Education Funding Council for England published its 2012-13 funding allocations for universities and colleges on 29 March, with government policy yielding divergent fortunes for different types of institution.

The total recurrent grant allocation for higher education - consisting of funding for teaching, research and third-stream activities in higher and further education institutions - falls 18.6 per cent to £4.9 billion.

This reflects the fact that 2012-13 is the first year the academy will derive income from "new regime" undergraduates, who will be charged tuition fees of up to £9,000. Teaching grants will end for new regime students in all but high-cost subjects.

The allocation also shows for the first time the impact on individual universities of the AAB and "core-and-margin" systems - moves by the government to introduce managed competition for places. The core-and-margin system takes a slice of each institution's non-AAB undergraduate places to create a 20,000-strong pool allocated to universities and further education colleges charging average fees of £7,500 or less.

Hefce's figures show that the system is expected to lead to big losses in full-time undergraduate numbers for several large post-1992s in the "squeezed middle": lacking large numbers of AAB students they have been exposed to the margin deduction, but as they charge more than £7,500 they have been unable to recoup places.

The University of East London is hit by the biggest projected fall, with its 2012-13 intake down 12.6 per cent (or 622 places) on 2011-12 (see box below). Manchester Metropolitan University is projected to lose 900 places (11.1 per cent of its intake), the biggest decline in terms of overall numbers. The loss of places will be higher if universities fail to maintain their current AAB numbers.

The loss of the 10,000 extra places created under the University Modernisation Fund at the tail end of the Labour government exacerbates the decreases at post-1992s. By contrast, the AAB system - which allows universities unlimited recruitment of the highest-achieving students - leaves many Russell Group members with the bulk of their students outside the numbers cap.

'Very frustrating'

Libby Hackett, director of the University Alliance, which includes Manchester Met, said its members were "the squeezed middle in this environment".

Given that the group's universities were "doing all the things the government asked of them" in terms of high graduate employment rates and links with industry, it was "very frustrating" for them to have their places cut, she said.

Ms Hackett reiterated calls for AAB to be extended downwards to lower grades to create a more open market; for the size of the margin of contestable places to be reduced; and for the £7,500 threshold on bids for margin places to be removed.

The government has yet to state whether the AAB threshold will be lowered and whether - and at what level - the margin system will be repeated in 2013 and beyond.

Further losses of student places at 2012-13 levels could rapidly shrink some institutions.

In terms of grant allocation, the percentage changes from 2011-12 vary hugely according to factors including the type and length of courses universities run. Hefce did not release year-on-year comparisons, but calculations by Times Higher Education show that the University of Bolton is the biggest loser, with its grant falling by 45.7 per cent to £11.4 million, mainly due to its low research funding.

By contrast, there are small falls in grant for universities with high levels of research funding, large numbers of students in medicine and other high-cost subject areas (where a reduced element of teaching grant will remain), and more students on longer courses (making the transition to the new regime less sharp).

These include Imperial College London (down 2.6 per cent to £148.2 million), the University of Cambridge (down 4.1 per cent to £169.2 million), University College London (down 4.1 per cent to £174.3 million) and the University of Oxford (down 4.9 per cent to £177.8 million).

In reality, Cambridge and Oxford are likely to receive smaller teaching grants than those provisionally allocated by Hefce. The allocation lists them as increasing their undergraduate intake by 13.2 per cent and 14.1 per cent respectively.

This is principally because Hefce allowed the most selective institutions to retain a 20 per cent slice of their overall student numbers to be used, if they wish, on non-AAB students for fair-access purposes.

However, Cambridge and Oxford have said that they do not intend to use AAB to boost student numbers, making it unlikely they will expand overall.

In the document summarising the allocations, Hefce says that the data are "highly provisional" and that grants "will be recalculated later to reflect actual student numbers". It says it is "maintaining our commitment to funding high-cost and strategically important subjects, widening participation, and small and specialist institutions". Specialists receive targeted support and so their grants have declined only slightly.

An extra £39 million of grant funding for new-regime taught postgraduates studying higher-cost subjects has also been introduced, leading to more funding stability for institutions with large numbers of master's students.

john.morgan@tsleducation.com