CSR 2010: A curate’s egg

The funding settlement for the Department for Business, Innovation and Skills announced in Chancellor George Osborne’s statement on the Comprehensive Spending Review yesterday contains some very mixed messages for the academy.

On the face of it, the higher education budget has fared badly. Overall, BIS faces a 25 per cent cut to its resource budget by 2014-15, but this masks a reduction of 40 per cent for higher education: other areas will be cut by only 16 per cent on average. Universities UK has consistently opposed any cuts in public spending for our sector, particularly at a time when competitor nations are investing heavily in their academies.

However, there are some positive points. The science and research resource budget has been maintained in cash terms at £4.6 billion until 2014-15. This is a clear vote of confidence in the strength and health of the UK’s university research base, and an acknowledgement of its critical importance to the nation’s economic growth and prosperity. This announcement is particularly pleasing as we recognise the very harsh measures that are being meted out to other areas of public spending.

Preserving the science and research ring-fence has been a great policy success for UK research in recent years, and we are pleased to see that it will be maintained in some form. Of course, we wait to see the detail of how this protection will translate in terms of allocating the budget across the dual-support system. We believe it is very important to maintain the current balance between direct grants from the research councils and the quality-related research funding distributed by the Higher Education Funding Council for England – not least since this is the best way of ensuring that we maintain our world-leading position in the arts and humanities.

Nevertheless, we should be aware that protecting the research budget in cash terms in this manner still implies a real-terms reduction of about 9 per cent by the end of the CSR period. While we recognise that the current circumstances require difficult choices to be made, managing this funding reduction will pose challenges for the sector. It will need to be carefully handled if we are to avoid doing irreparable damage to the strength, diversity and dynamism of the UK’s research base as a whole.

Elsewhere, the picture is far more mixed. Our initial analyses suggest that the cuts to the non-research elements of the higher education budget broadly follow the principles set out last week in the Browne Review. There will be a substantial transfer of the responsibility for meeting the costs of undergraduate education from the taxpayer to future beneficiaries in the form of higher graduate contributions. This will be accompanied by a very substantial reduction in the Hefce teaching grant, mitigated by more generous terms for student support to make the system more progressive. The net effect of these measures is a 40 per cent reduction in the higher education budget, excluding research.

Cuts of this scale make the government’s response to the Browne Review all the more crucial. It is critical that alternative sources of funding are found to replace the money lost through the reduction in public spending. But we also need measures to provide support for students from low-income backgrounds to enter university in the first place, and help for lower-earning graduates to make their student-loan repayments affordable. Overall, we believe that Lord Browne’s proposals achieve that difficult balance, but we recognise that much remains to be discussed and worked out in detail.

We should be in no doubt that, were they to be implemented in full, the Browne proposals would represent a very significant reform of the higher education system. That is why we believe that there needs to be rigorous testing, analysis, monitoring and review of the plans and their impact, looking in particular at the potential effects on students, families and institutions.

Elsewhere, the CSR contains proposals that may not grab the short-term headlines, but which may be significant for the sector in the long term. These include the proposed reform of the Higher Education Innovation Fund, the commitment to increase spending on health research and the impact of abolishing the regional development agencies.

As the dust settles, we will be looking closely at the aggregate impact of all these announcements on the academy. It is clear that this will be a very challenging period of reform for our sector, especially if we are to retain our position as, in Osborne’s words, the “jewels in our economic crown”.