Thursday, 7 July 2011

Yet another post on core and margin: HEFCE's salami problem

Can there possibly be more to say about core/margin? I'm afraid there is. The good news is that at least I have moved on from the AAB element to the 20,000 low-cost places.

The White Paper establishes that in 2012, 20,000 places will be withdrawn from existing providers pro-rata to their existing student number cap (this will be roughly an 8% cut) and will be redistributed via bids to HEFCE. Only institutions charging less than £7500 (net of discounts) can apply. As there are only about 20 HEIs in this category, and some of those are rather small, the majority of these numbers will have to go to FE colleges. None can go to private providers because the legislation to allow HEFCE to deal with private providers is not yet in place.

Now the White Paper is too cautious to commit to any numbers or commitments about the size of a further round of numbers like these, but further rounds will be necessary as from 2013 the private providers come into the HEFCE system and are subject to the student number control. It is these further rounds that give HEFCE a salami problem.

Pro-rata cuts to numbers are all very well as a one-off but universities are low-margin businesses, so continuous salami-slices will quickly land almost all of them in financial trouble. This is obviously not a good policy outcome: to let one or two universities fail would be a positive sign of the tough new world we live in, but to let most of them fail would be too much of a good thing.

However if salami slices are not very attractive, there aren't many other options. HEFCE have already admitted in their consultation that there is no available measure of quality which could be used for a formula allocation of numbers, so that's a dead end. Ministers have threatened to remove unfilled numbers from universities that under-recruit. This seems attractive because it would look as if the market - student choice - were having an effect. Nevertheless there are two problems. Firstly, almost all institutions will have a few unfilled places simply because they will want a margin of error between their cap and their actual numbers. A typical university will have about 4,000 places within the student number cap, and it isn't possible to control those numbers without any margin for error. Secondly, the total level of the cap is so far below the total level of demand that it is likely that no provider, no matter how unattractive, will have more unfilled places than that margin for error. If you look at the institutions HEFCE has recently fined for over-recruitment, they have tended not to be the most prestigious. So taking away unfilled places is likely to amount to salami slicing by another name.

My best guess is that HEFCE will be obliged to make significant further salami slices, and then in many cases to award most or all of the numbers concerned back to the institutions that lost them. This in turn means that the simple price criterion for allocating those numbers cannot remain in place, and a wide range of criteria will have to be introduced (strategic subjects, widening participation, etc.) to allow most universities most of their numbers back. It also means that future slices will have to be chunky. All of this will place HEFCE, and especially the exercise of HEFCE's discretion, even more front-and-centre of the new HE landscape. It will mean that HEFCE essentially choose which institutions they will want to shrink or fail, to enable their numbers to be transferred to the new providers.

This will be a challenge to HEFCE's existing, rather self-effacing, organisational culture and I am sure they will be searching eagerly for any alternative. They are just as bright as I am, and outnumber me, so there is hope that they will succeed.

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