Our focus must be on aiming for the best, not preparing for the worst

The Higher Education Funding Council for England recently published clear evidence showing that over the past five years there has been a 30 per cent increase in the proportion of young people from the most disadvantaged communities entering higher education.

We have also reported 389,000 new full-time undergraduate home and European Union entrants to higher education in 2009-10 in England, bringing the total number of students in this group to just over a million.

And we have shown that since 2005-06, the number of undergraduates studying physics, chemistry and mathematics has risen by 6.8 per cent, exceeding the average growth across all disciplines and restoring the flow of well-qualified graduates in science, technology, engineering and maths-related subjects.

I recently visited the University of Warwick and saw its superb new teaching facilities in arts, humanities and chemistry, and a research platform in solid-state nuclear magnetic resonance that is unrivalled worldwide.

These are tangible examples of the close to £20 billion investment by universities and colleges in capital for teaching and research over the past 10 years, which will inspire students and enable important advances in interdisciplinary research.

I have visited more than 50 universities and colleges since I joined Hefce less than a year ago and this sense of achievement and progress is palpable in all, whether large or small, multi-faculty or specialist, pre- or post-1992, including the conservatoires, colleges of art and design, and the land-based centres.

In these tough times, UK higher education has maintained its reputation for academic excellence, delivering 12 per cent of the world's scientific citations and supporting a well-respected arts and humanities community.

But it has also delivered for the economy: providing well-qualified graduates; generating £59 billion in economic activity with a return of £3 for every pound of public investment and up to £7 for every pound spent through the Higher Education Innovation Fund (Heif).

Rapid support through the Economic Challenge Investment Fund has helped 50,000 people and 12,000 businesses. The UK share of international trade in higher education is 11 per cent, second only to the US and with the capacity to grow further.

With demand from students at a historic high, the need to reduce public borrowing and the clear understanding that universities and colleges are vital to the economy and society, it seems that all political parties are committed to redistributing the responsibility for funding higher education between taxpayers, students, graduates and employers.

Lord Browne and his expert team conducting the Independent Review of Higher Education Funding and Student Finance are charged with the politically and technically complex task of answering two key questions.

The first: is it possible to compensate for significant reductions in public funding for higher education from these other sources, while providing a sustainable system of student support?

The second: how will any changes alter the character and dynamic of a diverse network of institutions that is envied around the world?

Meanwhile, the financial challenges gather pace, including reductions in spending and restrictions in growth totalling £449 million in 2010-11; the requirement for additional savings of £600 million by 2012-13 from the higher education, science and research budgets and student support; and the prospect of a Budget on 24 March and a tough Comprehensive Spending Review later this year.

It is against this background that Hefce is publishing its provisional recurrent grants for 2010-11 to 253 universities, higher education colleges and directly funded further education colleges - distributing a sum of £7.356 billion in a way that continues to support high-quality learning and teaching, world-class research and effective knowledge transfer.

Compared with the 2009-10 academic year, the final allocations for 2010-11 will mean cash increases for teaching, research and Heif, but decreases for capital and special funding programmes.

We have taken care to protect the unit of funding for teaching as far as possible, respect the science and research ring-fence, build on the success of Heif and limit the effects of capital spending reductions.

We aim to provide as much flexibility as possible for universities and colleges to pursue their own priorities while staying true to national priorities on widening participation, higher-level skills, promoting strategically important subjects and enhancing funding for 4* (world-leading) research in all subjects.

Substantial public investment in higher education has delivered on many levels but this is challenged by the process of fiscal consolidation. Hefce's approach to resource allocation in 2010-11 provides breathing space but we must now work to ensure that the Browne review gives students, the academic community and government a sustainable basis for building on excellence and diversity.

Our focus must be on aiming for the best, not preparing for the worst.