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No 6221

Thursday 28 April 2011

Vol cxli No 25

pp. 685–720


Report of the Council on undergraduate UK/EU fees, funding, and student finance

The Council begs leave to report to the University as follows:

1. In its Notice dated 14 March 2011 (Reporter, 2010–11, p. 611), the Council stated that it wished to publish a comprehensive Report about the questions facing the University on the topic of UK/EU undergraduate fees, funding, and student finance. In making this proposal, the Council was mindful that the Registrary had received (and subsequently published in the Reporter) three Graces submitted under the terms of Statute A, VIII, 7 relevant to these matters. There was also a Discussion on 8 March 2011 on a Topic of Concern: ‘The failure to allow Discussion of the Council’s case for charging the maximum undergraduate tuition fee from 2012/13’. This Report will provide further background to the decision now made by the Regent House on the Composition Fee to be charged to undergraduate students from the UK and EU with effect from 1 September 2012, the Council’s response to the remarks made in the Discussion on 8 March, and proposals for taking forward the Graces submitted under Statute A, VIII, 7.

2. The Council published two Notices on 23 February and 16 March 2011. The first Notice (Reporter, 2010–11, p. 526) set out the financial background and the case for recommending that the Regent House approve a Grace so that existing legislation (Regulation 12 of the regulations on Composition Fees, Statutes and Ordinances, p. 160) would have continuing force to authorize the submission of an Access Agreement to the Office for Fair Access (OFFA), such that a Composition Fee of £9,000 would be charged for all UK/EU undergraduate students with effect from 1 September 2012 regardless of course or College. The second Notice (Reporter, 2010–11, p. 611) provided the Council’s determination of the financial support to be provided to students (subject to the detailed rules from the National Scholarship Programme, not then available), the commitment to outreach work, and the targets for access that the University would seek to meet. The Regent House approved Grace 1 of 23 February by ballot on 25 March 2011. The result of the ballot was that 1,387 members of the Regent House voted placet and 416 non placet. An Access Agreement has subsequently been drawn up based on the Council’s Notice of 16 March. It was submitted to OFFA by its deadline of 19 April and is attached as an Annex to this Report (p. 702).

3. The rules of the National Scholarship Programme have now been published1 and the University has been given an indicative allocation of £408,000 for 2012/13. In order to comply with the rules of the Scheme, £6,000 fee waivers will be offered to first-year students only. The number of such awards will be greater than anticipated in the Council’s Notice of 16 March (about 400 awards at any one time).

4. In its Notice published on 23 February, the Council provided information about the current average annual costs of educating an undergraduate divided between the Colleges and the University. It was shown that the University can only expect to receive around 50% of these costs by charging a Composition Fee of £9,000 given the Government’s decision to transfer funding from the HEFCE’s Teaching Grant (T Grant) to support a subsidized tuition fee loan scheme for students. Further information on the calculation of the costs of an undergraduate education at Cambridge and other contextual information were published on the University’s website in the form of an explanatory note from the senior Pro-Vice-Chancellor on 24 February, a set of slides on 4 March, and an update from the senior Pro-Vice-Chancellor on the University’s financial position on 23 March following receipt of its grant letter from the HEFCE.2 The Vice-Chancellor also sent a letter on fees and funding to all members of staff, following the vote on 25 March (also published on the website at the same address referred to in footnote 2).

5. The Council has also been kept informed of progress with the planning round for 2011/12 and will consider and approve an Allocations Report for publication in the usual way at its meeting on 16 May. As the update on the University’s financial position from the senior Pro-Vice-Chancellor referred to in the preceding paragraph indicates, the Allocations Report will be recommending a deficit budget on the Chest for each of the years in the planning period, amounting cumulatively to more than £30m. The Finance Committee authorized an overall cumulative deficit of no more than £40m on condition that this would be accompanied by a recovery plan for the Chest to come back into balance. The University’s finances remain under considerable pressure and there are significant risks in the budget, including pension costs, pay inflation, and the under-recovery of research overheads. However, the Council is of the view that the current financial position can be managed within the constraints imposed by the Finance Committee. But in making its recommendation about the Composition Fee to be charged and the total sum to be set aside for student financial support and outreach, the Council was aware that it had to exercise fiscal responsibility in not committing the University to more expenditure on student financial support and outreach than the limits it indicated in its Notices. To do so would inevitably have meant reductions elsewhere in Chest expenditure to the potential damage of the University’s teaching and research base. The Council expects that prudent and necessarily strict financial management now will create the conditions for a return to growth later as the overall financial picture improves. It is also optimistic that the extraordinary generosity and commitment of our alumni will continue to provide much needed funds for a variety of strategic purposes, including increased student support in the future.

Reply to remarks made in the Discussion of 8 March 2011

6. In the Discussion of 8 March, there were contributions from eight speakers (Reporter, 2010–11, p. 624). Concern was expressed by several about the timetable in which the Council had to bring forward its proposals. The Council expressed its regret about this in its Notice of 23 February and, despite the Government’s own timetable for the publication of a White Paper on Higher Education seemingly having slipped beyond May, it was still necessary that a decision was reached on the level of Composition Fee and the content of an Access Agreement to meet a fixed deadline of 19 April imposed by OFFA. The Council is very mindful of its responsibilities with regard to the Regent House – which is why it chose to call for a ballot rather than relying on Regulation 12 – in such an important matter. It continues to regret that the timetable which it faced made it impractical to have consecutively a further Discussion on this matter, followed by a Notice in reply and the submission of a Grace. It does however note that four hours were allocated to the Topic of Concern relevant to these matters on 18 and 25 January 2011 and the Registrary arranged the timing of the second Topic of Concern on 8 March to ensure that publication of the remarks would be within the period for voting on Grace 1 of 23 February.

7. The Council’s Statement on the funding of Higher Education and student finance of 8 December 2010 contains principles by which the Council still stands. It fully understands why Mr Holland is concerned in his remarks about the dangers of higher education being viewed by Government solely as a commodity and has no doubt that these concerns will be shared by many in the University and on the Council. The Council’s duty however is to propose a way forward for the University in the context of decisions taken by the Government that will – in its opinion – best protect the University’s ability to fulfil its purposes and compete at the highest levels of international excellence in teaching and research.

8. Mr Beckles poses a question and makes several points about the financial position presented by the Council in its Notice of 23 February. He asks whether the Council received a summary or copies of the comments made online about the Planning and Resources Committee’s Working Group’s proposals for student financial support and outreach before its meeting on 14 February. Members of the Council had access to the forum – which was being added to shortly before the time of the meeting. It was more appropriate that they could view the forum online rather than rely on a summary or copies of the comments which would necessarily have been incomplete.

9. Mr Beckles says that:

‘the wording of the Notice [of 23 February] (para. 30 and Chart 1) suggests that we should be returning to the level of funding in 2006/07 to make up for lost income, and such a suggestion is at best misleading. Regardless of whether or not we could put additional teaching funds to good use, there has been no recent drop in public funding for undergraduate teaching, and it is unfortunate that Council’s Notice could be read as suggesting otherwise.’

Mr Beckles makes reference to the fact that the combined tuition fee for undergraduates and teaching grant total has been growing in line with or faster than the Treasury’s GDP deflator series data between 2005/06 and 2009/10, with the first year in which the University suffered a real terms cut compared to those data being in 2010/11. The Chart in the Notice acknowledges that under the funding regime introduced in 2006–07 the total of fee and T Grant funding has risen, but it was projected to rise still further in line with inflation and as a result of a small annual increase in student numbers. The increase in funding is now curtailed and there is a new cap on admissions. The Chart therefore drew attention to the growing difference between what was once expected and what is now projected. In fact, despite cash increases in T Grant funding, the University’s share of the sector total has been steadily falling, from 1.47% in 2005/06 to 1.28% in 2010/11.3

10. Mr Beckles also challenged whether it was appropriate to use the full value of the HEFCE T Grant in the calculations presented since a proportion is used in support of taught postgraduate (M.Phil.) courses and the T Grant also included an allocation for historic buildings until 2009/10, which he felt was not an appropriate source of funding for undergraduate education. The proportion of the T Grant received by Cambridge for taught postgraduate courses is <0.5%. The supplementary funding or premium (latterly Targeted Allocation) for Historic Buildings was a specific addition to T Grant in 1999–2000 as part of the College Fee settlement under which a number of additions were made to compensate for the ending of the separate fee paid direct to the Colleges by LEAs for publicly-fundable undergraduate students. The difference in income caused by the reduction in this funding is therefore wholly attributable to the cost of an undergraduate education.

11. Mr Beckles makes a further point about the Time Allocation Survey. He says that:

‘Professor Young, Pro-Vice-Chancellor for Planning and Resources, has subsequently said that the main source of error in the cost of teaching an under­graduate is from the Time Allocation Survey (TAS) data, and suggested the error in the TAS data is of the order of 1%. However, the University’s TAS website tells us “the rate of return to the survey is falling, and has fallen below the benchmark. The consequences could be serious for the University’s funding.” In light of this, an error of 1% seems wildly optimistic, and that’s before we consider whether or not there are sound statistical or methodological reasons for expecting the error to be higher.’

The annual TAS return has consistently provided comparable figures in a narrow range.4 The concern about the benchmark is not that the rate could be markedly different but that as a result of the technical infringement of falling below the benchmark the Research Councils could substitute their much lower default indirect cost rates.

12. Mr Beckles believes it to be ‘alarmist nonsense’ that the loss of £1m in income by, for example, setting a Composition Fee £100 below the maximum permitted, would undermine the University’s efforts to maintain the quality of its education, given that the consolidated income of the University is greater than £1bn. He fails to recognize that much of the University’s income is to support expenditure on the purposes for which that income is generated or received (e.g. research grants and contracts or the 40% of the University’s consolidated income attributable to CUP and Cambridge Assessment). A loss of £1m on general income for educational purposes, on the other hand, is substantial. The same is true of the £1bn raised through the 800th Anniversary Campaign. Very little of that total was for discretionary or general recurrent expenditure; much of it was to endow posts in perpetuity or for capital purposes. The University will be able to balance its income against its expenditure in most circumstances as represented in its published annual accounts. What those accounts do not show is the lost investment, unfilled posts, and general reductions in allocations (as in the current planning round) that lie behind those figures.

13. Mr Beckles suggests that the University should have made a decision to charge £6,000 for 2012/13 since that would ‘only’ cost the University £6m, which it could easily afford when set against annual turnover, endowment, and the success of the 800th Anniversary Campaign. It will be evident, however, that the financial effect of charging a single cohort £6,000 for each year of their course is greater than this. The difference in the first year of charging a cohort of 3,000 students £6,000 rather than £9,000 is an opportunity cost of c. £8m (when bursary costs are taken into account) but this rises to £28m when compounded over the period of study of that cohort – which for some will be six years.

The Graces initiated for submission to the Regent House

14. The Council’s Notice of 16 March on the Graces received by the Registrary for submission to the Regent House referred to the publication of these in the Reporter of 9 March and of 16 March (Reporter, 2010–11, pp. 589–91 and 614–15). Graces 1 and 2 of ‘Preserving Bursaries and Widening Participation’ (p. 589) and Grace 2 of ‘Graces to improve fee arrangements for 2012/13’ (p. 614) require expenditure from University funds additional to that already authorized. The Council therefore intends to refer these Graces to the Finance Committee and the General Board for their advice as it is required to do by Statute A, VIII, 7(b). Once it has that advice, it will report further to the Regent House. It is at least possible that the intention of Grace 2 of ‘Graces to improve fee arrangements for 2012/13’ has been met by the decisions taken by the Council in formulating its proposals for student financial support. Bursaries (that may be taken as either tuition fee waivers or for maintenance purposes) will be protected by inflation and are at least at present levels with analogous eligibility criteria as currently obtain. However, for the avoidance of doubt, there will be consultation with the proposers of this Grace to ensure that this interpretation of their Grace is correct.

15. Grace 4 of ‘Preserving Bursaries and Widening Participation’ (p. 590) would require the University to set a higher internal figure for the proportion of students it aspires to admit from state schools or colleges subject to an annual Report to the Regent House on progress towards this. The advice that the Council received from the Undergraduate Admissions Committee, the Admissions Forum, and the Senior Tutors’ Committee was that the target proposed in the University’s Access Agreement with OFFA was appropriate based on analysis of the evidence that was presented with the Council’s Notice of 23 February. That advice suggested that any higher figure could not be achieved without structural alteration to the way in which the admissions process is managed in Cambridge, for example by the introduction of quotas, and might be undesirable in as much as it could lead to a lowering of entry standards. The Council intends therefore specifically to request the bodies responsible for overseeing admissions to provide it with advice on this Grace so that it can in turn advise the Regent House when reporting further on how it proposes taking the Grace forward.

16. Grace 3 of ‘Preserving Bursaries and Widening Participation’ (p. 590) does not require additional expenditure from University funds since it proposes that the balance to be struck between fee waivers, maintenance bursaries, and widening participation activities within the total resource limit set should be determined by Grace of the Regent House. However a non placet of such a Grace could presumably compel the University to renege on commitments made with students in receipt of bursaries, or staff employed in WP activities, or agreements made with OFFA. Thus it raises similar matters of principle as ‘Grace to change Regulation 12 for University Composition Fees’ (p. 591) and Grace 1 of ‘Graces to improve fee arrangements for 2012/13’ (p. 614). These both propose that the fee to be charged will be determined by Grace of the Regent House following a Report from the Council ‘explaining in detail the financial case for the level of fee it believes appropriate making clear its assumptions and providing all relevant data (including the data on which any graphs are based)’ (this wording is drawn from Grace 2 of ‘Graces to improve fee arrangements for 2012/13’ but is similar in intent to the different wording of ‘Grace to change Regulation 12 for University Composition Fees’).

17. These Graces reflect some concern over the drafting of Regulation 12 of the regulations for Composition Fees and its implementation. The three differently worded proposals represented by the ‘Grace to change Regulation 12 for University Composition Fees’, Grace 1 of ‘Graces to improve fee arrangements for 2012/13’ and Grace 3 of ‘Preserving Bursaries and Widening Participation’ would all, if passed, impact on the process for determining fees. The Council believes that simply to allow these several initiated Graces, prepared separately but in relation to the same subject matter, to be put to the Regent House, will be unhelpful to the Regent House and will not produce the best legislative result. Proposals arrived at by consensus are more likely to achieve the most practical and rational outcome. To this end, the Council wishes to consult with representatives of those who have signed these three proposals. This consultation has not been possible during the vacation but meetings will be arranged as soon as possible. The Council would also wish to hear the views of those who may wish to speak about the proposals in the Discussion on this Report. The Council has also asked the Registrary to consider the advice he would wish to give about how best to respond to the proposals. It will take what emerges from these consultations and his advice into account and will propose a way forward in a second Report to be published later in the Easter Term.

18 April 2011

L. K. Borysiewicz, Vice-Chancellor

M. J. Daunton

Christopher Hum

David Abulafia

R. J. Dowling

F. P. Kelly

Anthony Andrews

I. M. Le M. Du Quesnay

Vanessa V. Lawrence

N. Bampos

Nicholas Gay

Mavis McDonald

Richard Barnes

David Good

Rachael Padman

D. J. A. Casserley

Andy Hopper

John Shakeshaft

Stephen J. Cowley


Access Agreement with the Office for Fair Access (OFFA)

Table 1: Fee limits and predicted student numbers

Table 2: Predicted number of students and fee income

Table 3: Predicted expenditure

Table 4: Estimate of part-time fees (optional)

Table 5a: Statistical milestones and targets

Table 5b: Other milestones and targets

Annex C: Checklist