The future of OfS funding: Help us shape our approach to using our funding powers

Making every penny count 

As the higher education landscape changes, so should the OfS’s approach to distributing the funding that underpins the teaching students receive, the courses they study and the facilities in which they learn.

At present, the OfS distributes, each year, around £1.4 billion, granted to us by government through the Strategic Priorities Grant (SPG). We do this work as the latest in a long line of intermediate bodies between higher education providers and the government, starting with the University Grants Committee (UGC) way back in 1919. The UGC supported all aspects of higher education, but when OfS was formed, research funding became the responsibility of UKRI and we kept the role of funding agency with regard to teaching and related activities at universities and colleges registered in the Approved (fee cap) category with the OfS. We also distribute capital funding to support the building and renovation of facilities, including laboratories, specialist teaching suites and lecture halls, to support students’ education. We recently allocated £450 million of capital funding for the 2022-23 to 2024-25 financial years. 

These are substantial sums of public money. The cash is provided to the OfS by government, to support strategically important work in higher education. It is important this investment is distributed and used in the most effective and efficient way to ensure universities and colleges are providing students with a high quality educational experience.

Since the establishment of the OfS, there have been several significant changes that impact our approach to funding higher education, which include:

• Introduction of the Teaching Excellence Framework, and the fee uplift received by universities and colleges with a Gold, Silver or Bronze rating
• Supporting the expansion of medical and allied health training and education in response to the NHS Long Term Workforce Plan
• Introduction of the Lifelong Learning Entitlement
• Changes to how student data is collected through Data Futures, a programme managed by Jisc that collects and disseminates data on all students studying in higher education.

In light of these changes, and wider economic factors affecting higher education, we consider it timely to review our current approach to the application of the OfS’s funding powers. We want to determine how our decisions around allocation and distribution of this investment can best support providers to deliver a high quality education experience for students while representing good value for money for taxpayers.

It is important to be clear what OfS does and doesn’t decide about this money. Each year, we receive guidance from the government on the amount of funding that the OfS will receive and the priorities it has identified for England. Our founding legislation requires that we give appropriate regard to this guidance, alongside our other duties, and we are clear that we put particular weight on that guidance with regard to this funding, because we recognise the elected government as an appropriate route for the state to set out strategic priorities.

Those of you who have seen the most recent guidance sent to us, will see that the government has, this year, placed a significant number of terms and conditions on our funding – these are stronger than guidance, and require us to use funding in the ways specified, without weighing up decisions against other priorities.

So, what we are asking about in this call for evidence is what else we need to take into account when weighing up government guidance, and what we need to know to ensure that we are providing government with accurate, constructive and timely advice on what this money is being spent on, and how the process works for making decisions and ensuring accountability.

Penny for your thoughts 

We currently use formulas that are based on student numbers data to determine and allocate the majority of this funding to universities or colleges. 

We want to understand the thinking of universities and colleges about current and future funding approaches, so we can weigh this up as we consider how our principles and processes for the application of the OfS’s funding powers might potentially develop. We are interested in your views on which factors may be considered in determining a future funding method. Are there alternative approaches we could explore that would better suit higher education providers’ needs or provide greater value for money for taxpayers?

Our current approach to the application of the OfS’s funding powers covers the following areas:

• course-based funding
• student-based funding
• funding for national facilities and regulatory initiatives, specialist providers, and capital funding
• the principles that underpin our allocation models.

Within responses on the principles and approach we take to funding, we are keen to hear views and comments on:

• the general policy aims for the OfS’s funding
• how courses deemed strategically important could be determined
• what activities should be supported by the OfS’s funding
• the most effective uses of the OfS’s funding.

Responses to the call for evidence will help us identify and consider recommendations and options for a reformed OfS funding model, and help inform what our next steps may be to develop this.

The bigger financial picture 

This call for evidence is your opportunity to share your views on the OfS’s current approach and the decision-making process for distributing funding we receive. At this stage we are not requesting views on how our current formulas are calculated, including determining the price groups or strategic importance of specific subjects.

I should also be clear that this is not a review of the whole funding approach to higher education; that would be a matter for the government and Parliament. The OfS does not determine the full range of higher education finance arrangements, and therefore views on the following areas lie outside the scope of our call for evidence:

• regulation relating to course fee
• student finance from the Student Loans Company
• other public funding
• annual amount of the Strategic Priorities Grant.

The call for evidence closes on Thursday 23 May 2024.

We will carefully consider views and feedback shared with us as we develop our approach, and plan to publish the outcomes in the coming months.