Source: Alamy

Keeping control: the funding council is developing a new regulatory system

England¡¯s funding council is set to consult the sector on plans for a new contract aimed at wielding control over universities and their multibillion-pound injection of publicly backed student loans funding.

The Higher Education Funding Council for England has also warned that attempts to regulate the new system without a higher education bill - shelved indefinitely by the government - mean that current legislation is being ¡°pushed to the limit¡±.

Under the old funding system of Hefce-allocated direct teaching grant, the funding council was able to attach terms and conditions to grants in the guise of the financial memorandum.

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This allowed fines to be imposed on universities recruiting too many students, required sound systems of financial management and placed limits on the disposal of assets and on borrowing.

The switch to a different system - in which Hefce-allocated grant is replaced by funding routed via the Student Loans Company - means that Hefce must be given new powers if it is to exercise control over universities and their loans funding, backed by the taxpayer.

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However, the government¡¯s failure to introduce a higher education bill has put paid to its original plan to grant Hefce new powers under legislation. Instead, the funding council is undertaking its own work on a replacement financial memorandum.

Minutes of the March meeting of the Hefce-SLC Regulatory Partnership Group, published recently, say that a consultation on the new memorandum is expected to take place in the summer.

But an update on progress attributed in the minutes to Steve Egan, Hefce deputy chief executive, states: ¡°The requirement to develop a new regulatory system¡­by administrative means rather than through legislation means that the provisions of existing legislation are being pushed to the limits.¡±

Dennis Farrington, co-author of The Law of Higher Education and visiting fellow at the Oxford Centre for Higher Education Policy Studies, said the discussion illustrated the major changes since 1992 when the Further and Higher Education Act established Hefce¡¯s powers, ¡°notably the rise of providers who do not receive public funding¡±.

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He added: ¡°The act envisaged Hefce being a body to administer a formula and be accountable for public funds, so [it] specifically prohibits it from imposing any conditions on funds which it does not provide.¡±

Dr Farrington continued: ¡°Quite clearly, the legislation of 21 years ago is in need of overhaul, and this is what we [originally] expected.

¡°My opinion is that it would be a good opportunity to rationalise all the many laws which relate to higher education and create one framework within which all the institutions and agencies can operate effectively.¡±

john.morgan@tsleducation.com