The government has announced that it will be cutting £946 million from its annual grant to English Higher Education Institutions. In the latest its grant letter to the Higher Education Funding Council for England (HEFCE) the Department for Business, Innovation & Skills announced that its final recurrent grant to the sector for the 2014-2015 academic year will be £3.6 billion. This is some £125 million less than the estimate 2014-2015 funding that was announced in last year’s grant letter.

In a letter to HEFCE, Business Secretary Vince Cable and Universities Minister David Willetts wrote that “in the context of stretched public finances, it has been necessary to make reductions to the indicative recurrent teaching budget for 14-15” and confirmed that “further recurrent savings will be required in 15-16”. Ministers have not dictated in which specific areas these cuts should be made, indicating that it should be up to HEFCE “to take decisions on how you allocate [their] budgets”. They have, however, indicated that savings should be made “in ways that protect as far as possible high cost subjects (including STEM), widening participation and small and specialist institutions”. Cable and Willets have also indicated that cuts should be made to the salaries of senior University management figures, saying that they “want to see leaders in the sector exercise much greater restraint as part of continuing to hold down increases”.

While the government forecasts that their cuts will be more than compensated by increased tuition fee income and while research funding has been protected there are concerns that the changes will affect the poorest students the worst. In addition to the cuts in the Higher Education grant the Government will be scrapping the Access to Learning Fund and halving the budget for the National Scholarship Programme to £50 million. The Government has indicated that “the new funding system places greater responsibility on institutions to fund access and retention activities, including supporting students in cases of hardship.”

Responding to the changes, Shadow Universities Minister Liam Byrne said: “Today’s announcement lays bare the black hole ministers have created in student funding. … The fact that cuts are being targeted at support for the poorest students at university and the skills budget tells you everything you need to know about this government’s values and their ambitions for Britain’s future.

“I’m glad that months of campaigning and pressure by Labour and others have prevented the government axing the student opportunity fund – but cuts to the lifeline that keeps the poorest students at work and a huge 20% cut to the skills budget risk throwing social mobility in our country into reverse at the very time we need to earn our way out of the cost of living crisis.”

Other responses also voiced similar concerns. Professor Michael Gunn, Chair of the think tank million+ expressed relief that the cuts were not as bad as had been expected. In a statement he said, “This is a victory for common sense although it is still disappointing that the overall grant is being cut. Higher education should be seen as an investment in the future and not a cost to be constantly trimmed. The balance of responsibility for the funding of higher education has already shifted substantially to graduates and there are very good arguments for Britain to emulate our competitors and invest more in both higher education teaching and research.”

Professor Sir Christopher Snowden, President of Universities UK – a body representing the leaders of 133 UK Higher Education institutions – indicated that he believed that the Government was undervaluing British universities saying, “Universities are good for the economy, society and individuals. They drive economic growth and innovation, support social mobility and are finding solutions to the major challenges facing our society. Other major economies are investing in their universities, and the UK should be investing to support research and teaching if we want to increase growth and stay globally competitive.”

He added, “We are pleased that, as far as possible, high cost subjects (including STEM), widening participation and small and specialist institutions are to be protected but we fail to see how the projected cuts for 2014-15, and the more substantial projected cuts for 2015-16, can be delivered without reducing allocations in these areas. Universities have already shouldered substantial reductions in public funding for both teaching and research in recent years and have made £1.38 billion in efficiency savings already. … It is right that Government has maintained the science and research ring fence. However, we need a long-term plan to increase research funding above inflation if we are to remain competitive. We already invest too little in research compared with other developed nations.”

The grant letter was received more positively by the Russell Group of elite, research intensive universities, with Director General Dr Wendy Piatt saying: “We are pleased that ministers have maintained their commitment to university research, which is so critically important. HEFCE’s funding underpins research excellence in the UK. We also welcome the confirmation of the Government’s stated promise to increase funding to universities for teaching high cost science courses, as well as essential funding for teaching capital.”

The terms of the grant letter do not apply to Wales, Scotland and Northern Ireland, which have devolved responsibilities for University funding.