Our current teaching funding is allocated as part of a block grant, which institutions are free to spend according to their own priorities within our broad guidelines. Since HEIs and FECs are autonomous bodies that set their own strategic priorities, they are not expected to model their internal allocations on our funding calculations. We expect this principle to continue to apply in 2012-13.We will continue to recognise the autonomy of institutions. However, as teaching funding becomes more targeted, we will consider introducing further guidance or requirements as to how it is used, particularly taking into account any legislative changes that affect our funding powers.
That word 'recognise' is rather delicate, but clearly this indicates an intention to restrict institutional autonomy in a very straightforward way. For full details of HEFCE’s current funding methods see ‘Guide to funding: How HEFCE allocates its funds’ (HEFCE 2010/24).
The sector can be expected to be very upset by this, but at the end of the day HEFCE already has a very wide power to set conditions on its grants, and the only way to avoid coming under that power is not to take the grant.