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General

INTRODUCTION

1.1 This White Paper sets out the Government's policy on some aspects of higher education. It announces:

• changes in the funding and national planning of polytechnics and colleges in England;
• a revised policy on access to higher education;
• the Government's initial response to the review of the University Grants Committee, conducted under the chairmanship of Lord Croham (1);
• renewed emphasis on the need for quality and efficiency.

AIMS AND PURPOSES OF HIGHER EDUCATION

1.2 The Government takes a wide view of the aims and purposes of higher education. It adheres to the Robbins Committee's definition (2): instruction in skills, the promotion of the general powers of the mind, the advancement of learning, and the transmission of a common culture and common standards of citizenship. It fully recognises the value of research, and especially basic research, together with those areas of learning and scholarship which have at most an indirect relationship to the world of work. The encouragement of a high level of scholarship in the arts, humanities and social sciences is an essential feature of a civilised and cultured country. Clearly too, undergraduate education of quality in these disciplines is valued by employers, both as a basis for professional training and in its own right.

1.3 The Government believes that the British system of higher education is among the best in the world, both in the quality of its research and of its graduates. But no area of our national life can afford to rest on past achievement. To secure and develop the distinctive strengths of our system, continuing efforts are necessary, both within higher education itself and in the wider educational framework.

1.4 There is a crucial need to improve standards in our schools if we are to maintain the quality of our higher education by enabling it to draw more deeply on the talents of all children, irrespective of their social or economic backgrounds. In higher education itself there is a need to pursue reforms, both in the management and funding of the system and in the monitoring of the quality of its work, so that we can build on areas of excellence in the arts and sciences. But above all there is an urgent need, in the interests of the nation as a whole, and therefore of universities,

(1) Review of the University Grants Committee Cm 81 (HMSO 1987).

(2) Higher Education Cmnd 2154 (HMSO 1963).

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polytechnics and colleges themselves, for higher education to take increasing account of the economic requirements of the country.

1.5 Meeting the needs of the economy is not the sole purpose of higher education; nor can higher education alone achieve what is needed. But this aim, with its implications for the scale and quality of higher education, must be vigorously pursued. The achievement of greater commercial and industrial relevance in higher education activity depends much on close communication between academic staff and people in business at all levels, often but not exclusively on a local basis. These connections can lead to more suitable teaching, to research and technology transfer, and on occasions to help with equipment or finance. They also help foster the positive attitudes to enterprise which are crucial for both institutions and their students.

1.6 The Government and its central funding agencies will do all they can to encourage and reward approaches by higher education institutions which bring them closer to the world of business. The Government will correspondingly encourage industry and commerce to recognise the value, to themselves and more widely, of working closely with education. Significant advance on these fronts has been made in recent years - witness the doubling of universities' research income from industry since 1981 - but as yet links between higher education and industry in Britain remain less close than in many of our competitor countries.

1.7 The Government does not underestimate the strains of readjustment its policies have imposed on the system, or the efforts that have been made to respond to these policies. But neither does it doubt the need to carry forward the reforms it has set in train, which it firmly believes are to the ultimate benefit of all disciplines - science, engineering and medicine, or history, philosophy and the classics.

FUNDING

1.8 The multiplicity of tasks undertaken by higher education institutions calls for a range of sources and styles of funding. Some activities attract, and on any showing should attract, funding from other sources than the public purse. This is especially true of applied research, of courses intended to update skills and knowledge, and of provision for overseas students; all these activities ought to cover their full costs rigorously calculated. There is nevertheless a continuing and inevitably substantial role for public funding in higher education. The Government is confident that the arrangements for 1987-88, and prospectively for the following two years, set out in The Government's Expenditure Plans (Cm 56), provide the various sectors with the basis for fulfilling their roles to a high level of achievement.

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Access to Higher Education

THE RECORD

2.1 Since 1979 the number of full-time home students in higher education in Great Britain (3) has risen by more than 85,000 - almost three times the increase achieved during the 1970s. The size of the 18-19 year old age group peaked in 1982; the continuing increase in student numbers reflects higher rates of participation in higher education both by 18-19 year olds - for whom the Age Participation Index (4) increased from 12.4 in 1979 to an estimated 14.2 in 1986 - and by mature

Figure A: Higher Education Student Numbers 1975-85

(3) For consistency with other publications and because of the different structure of higher education in Northern Ireland, the student number statistics in this chapter are quoted on a Great Britain basis. Relevant figures for Northern Ireland are set out in Annex B.

(4) The Age Participation Index (API) is the number of young home initial entrants to full-time higher education expressed as a percentage of the relevant age group, being half the total number of 18 and 19 year olds in the population.

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Figure B: Balance of Higher Education 1979-85*

Figure C: Degrees and Higher Diplomas*

Qualifications awarded per 100 of relevant age group

*See DES Statistical Bulletin 4/87 for details of definitions, caveats and methods of calculation

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entrants (aged 21 and over) whose numbers have grown by a quarter since 1979. The increases in participation have been particularly marked for women who now account for about 44% of full-time students in higher education compared with less than 40% seven years ago.

2.2 Virtually all of this major increase in full-time student numbers has taken place in the polytechnics and colleges sector of higher education (5), more than making good the reduction in this sector in the late 1970s. The polytechnics and colleges have also accommodated over three-quarters of the 72,000 (27%) increase since 1979 in part-time student numbers. In both sectors the proportion of students on full-time science-related courses has increased - from 50% to 53% for universities and from 36% to 41% for the polytechnics and colleges.

2.3 Comparisons with higher education participation rates in other countries are not straightforward. There are differences in structures, course lengths, wastage rates and ways of counting part-time students. The best like-for-like comparison is probably of the proportion of the relevant age groups gaining degrees and higher diplomas. On that basis Britain is on a par with attainments in France and ahead of the rest of the European Community, though achievements here are not as good as those in Japan and the USA. Moreover, such comparisons take no account of quality - on which the reputation of higher education in this country is high.

THE FUTURE

Demand from Students

2.4 In November 1986 the Government published Projections of Demand for Higher Education in Great Britain 1986-2000 which displays two projections of future student numbers. Projection P, the lower of the two, is based on the assumptions that the numbers of young people entering full-time higher education will remain a constant proportion of those gaining the traditional qualifications for entry (two or more GCE A levels or three or more Scottish Highers), and that the entry rates for mature students will also remain constant. For the higher Projection Q, it is assumed that those proportions will increase - particularly amongst young women - in part to reflect the success of the Government's policies for schools and non-advanced further education.

2.5 The projections are illustrated in Figure D. In Projection P total student numbers increase by 1% after 1985 from 693,000 to 700,000 full-time equivalents (6) in 1989 followed by a decrease of 84,000 to 616,000 in 1996 and then a small increase to 633,000 by the end of the century. In Projection Q numbers increase by 5% from 693,000 in 1985 to 726,000 in 1990 followed by a much smaller decrease of 35,000 to 691,000 by 1996 and a subsequent increase to 723,000 by the year 2000. (7)

2.6 Under both projections the Age Participation Index (API) for young entrants is envisaged to increase by the end of the century: to 15.8 under Projection P and to 18.5 under Projection Q. Subsequent reports from research commissioned by the Department of Education and Science have confirmed that young people whose parents hold higher level qualifications are proportionately more likely to apply for and obtain places in higher education and that this factor is additional to the

(5) See paragraph 4.2. In Chapters II and III of this White Paper the term "polytechnics and colleges sector" is used to describe higher education provided in 30 polytechnics in England and Wales, 16 central institutions in Scotland and some 455 other colleges throughout Great Britain.

(6) Full-time equivalents are the number of students on full-time courses plus an appropriate proportion of the number on part-time courses. In the projections, the overall weighting for part·time students is 0.35.

(7) Since the Projections were published the Government has increased its funding of the Open University. This will facilitate higher admissions and, when they are next revised, the Projections will thereby need to be increased by some 6,000 students by the late 1990s.

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Figure D: Projections of Higher Education Students and Participation Rates 1985-2000

differential demand for higher education by social class which is already allowed for in the projections. (8) This may have a significant influence on demand for higher education in the 1990s when many of the children of those who benefited from the big increase in higher education opportunities in the 1960s will reach age 18. If so, the API for young entrants is likely to be nearer to that underlying Projection Q.

2.7 Both Projections P and Q assume that higher proportions of young people will gain the traditional qualifications for entry to higher education as a result of girls achieving parity with boys' A level attainments, and changes in the social/occupational mix of the population. Additionally, Projection Q assumes a further increase in the potential number of traditionally qualified entrants to higher education, dependent primarily on the success of the Government's Better Schools (Cmnd 9469) policies which imply that a significantly larger proportion of pupils at age 16 will reach the standards necessary to continue on to and to succeed in A level courses. The Government believes that by the end of the century improvements in the schools will be such that the proportion of young people in Great Britain as a whole gaining two or more A levels, or three or more Scottish Highers, will have reached 20% - the proportion already attained in Scotland .

2.8 Of potentially greater impact, however, is the assumption underlying Projection Q that there will be a significant increase in the proportion of qualified young people who enter higher education. This will depend very largely on continuing growth in the demand for higher education from young women, alongside increases in the proportion of higher education entrants with vocational and technical qualifications, for example those validated by the Business and Technician Education Council (BTEC) and the Scottish Vocational Education Council (SCOTVEC). The Government is committed to ensuring that girls have equal opportunities, throughout the education system, to develop their talents to the full. The development of the Technical and Vocational Education Initiative (TVEI) and the two-year Youth Training Scheme (YTS), and the streamlining associated with the National Council for Vocational Qualifications (NCVQ) and the

(8) The Educational Qualifications and Social Class of the Parents of Undergraduates Entering British Universities in 1984. E Rudd (Royal Statistical Society 1986). Survey of Young People's Intentions to Enter Higher Education. R Redpath & B Harvey, OPCS (to be published shortly by HMSO).

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Scottish Action Plan, should increase the proportion of young people gaining vocational qualifications and is likely to motivate more of them to seek entry to higher education.

2.9 The Government remains committed to the modified form of the Robbins Principle set out in Cmnd 9524. Places should be available for all who have the necessary intellectual competence, motivation and maturity to benefit from higher education and who wish to do so. Planning of higher education will need to take account, inter alia, of regular monitoring of actual demand for places and of the effects of the Government's policies to improve performance in schools and non-advanced further education on the numbers of potential entrants to higher education.

Requirements for Highly Qualified Manpower

2.10 Policies based on response to student demand may have provided a sufficient basis for planning and financing higher education while the numbers of young people qualified to enter higher education were growing. Demand was influenced in part by employers' requirements for highly qualified manpower and by the pay and career prospects offered, and the meeting of these requirements was not constrained by demographic factors. In a period when student numbers could decline sharply for demographic reasons the Government considers student demand alone to be an insufficient basis for the planning of higher education. A major determinant must also be the demands for highly qualified manpower, stimulated in part by the success of the Government's own economic and social policies.

2.11 Where it is clear that demand for highly qualified manpower in particular areas outstrips supply, action is already in hand. The Green Paper (Cmnd 9524) recorded the Government's and industry's concern about the need to increase the output of graduate scientists and engineers, and reported the establishment of the Engineering and Technology Programme (ETP). That Programme has successfully taken root, greatly helped by donations from industry of equipment and services worth more than £24 million. Taken together, the work of the planning and funding bodies (9) to change the subject balance within higher education, the ETP and its counterpart in: Scotland, and earlier central initiatives, should lead by 1990 to increases of 35% and 25% in the numbers of graduates in science and engineering respectively, compared to 1980. Selective action is also being taken by the Government, the University Grants Committee (UGC) and the National Advisory Body for Public Sector Higher Education (NAB) to alleviate the shortages of mathematics and physics teachers in schools. In taking these initiatives the Government in no way implies that it undervalues the contribution of the arts, humanities and social studies to the future needs of the economy as well as in the transmission and enrichment of our national culture. Employers' recruitment patterns and rewards offered show they value much that is studied in these areas, in particular the analytic, critical and communication skills which suitably broad and rigorous courses in these disciplines help develop.

2.12 It is hard to forecast the long-term demand for specific skills. Nevertheless, the Government considers it necessary to take a broad view of the nation's future requirements for highly qualified manpower. There is no reason to suppose that employers' requirements for graduates and diplomates will fall in parallel with the one-third fall in the size of the 18-19 year old age group by 1996. The current shortages of highly qualified scientists and engineers, particularly in fields related to information technology, are well documented. Graduates in those and other disciplines - especially business-related social sciences - who have the qualities necessary for management posts are also reported as being in short supply.

(9) Namely the University Grants Committee (UGC), the National Advisory Body for Public Sector Higher Education (NAB), the Scottish Education Department (SED) and the Wales Advisory Body for Local Authority Higher Education (WAB).

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Figure E: Output of First Degree Graduates 1980-90 Great Britain

Unemployment amongst new graduates is at the lowest level for seven years, and data from the Labour Force Survey indicate that graduates generally are less than half as likely as non-graduates to be unemployed. This reflects the significant increase in demand for new graduates since 1981 related both to growth within the economy as a whole and particularly to the necessary and continuing changes in Britain's industrial and occupational structure. Various studies of past trends and future demand, though not comprehensive, suggest that the increases in graduate output already planned will at best keep pace with projected increases in requirements up to 1990. (10) Thereafter, indications of demands in the economy for highly qualified manpower suggest that they may remain at or above the levels then reached. These must be taken into account, together with employers' needs for less qualified recruits, in devising a planning framework for higher education in the 1990s.

(10) Relevant studies include, for example: Employment of Graduates 1975-90. P Meadows & R Cox (Employment Gazette, April 1987); Review of the Economy and Employment 1985-86 Volume 2. Institute of Employment Research (University of Warwick 1986); UK Occupation and Employment Trends to 1990. Occupations Study Group (Institute of Manpower Studies 1986).

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2.13 For the present, the Government's best judgment is that it should plan for the student numbers envisaged in Projection Q. As paragraph 2.5 explains, this projection involves a 5% increase in student numbers between 1985 and 1990, followed by a return to current intake levels in the mid-1990s when the young entrant age group will be at its smallest, and then renewed growth. But the actual numbers will be critically dependent on:

• achievement of the necessary shift towards science, engineering and vocational courses, to produce the balance of skills which the nation requires;
• the success of schools and colleges in raising the proportion of young people who qualify for higher education;
• commitment by universities, polytechnics and colleges to opening up higher education to more mature entrants and to more who do not possess traditional entry qualifications; and
• better value for money from the public funds made available to higher education.

Widening Access

2.14 The Government has reaffirmed (paragraph 2.9) that places should be available for all with the necessary qualities to benefit from higher education. It also respects the long established policy of leaving to institutions the decisions on which individual students to admit. However, it now invites all those with relevant responsibilities to consider carefully the steps necessary to secure increased participation by both young and older people, and to act accordingly.

2.15 The changes required should not be underestimated; it will be necessary both to adjust the balance of provision to match the needs of the economy and to accommodate students with a wider range of academic and practical experience than before, many of whom will not have the traditional qualifications for entry. Not only will entry requirements and procedures have to be changed; institutions of higher education will have to adapt their teaching methods and the design of their courses to accommodate new types of student. The Government attaches no less importance than previously to its policy of maintaining and raising standards. It believes that increased participation in higher education need not be at the expense of academic excellence; indeed the stimulus of change should help to sharpen awareness of the different types of achievement that properly form part of the output of higher education.

2.16 Three routes into higher education are generally recognised:

• traditional sixth form qualifications, ie A levels, with the recent addition of AS levels, and Scottish Highers;
• vocational qualifications;
• "access courses".

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2.17 Although the majority of young students in higher education will continue to gain entrance through holding traditional sixth form qualifications, the examinations commonly taken in schools are themselves undergoing important modifications. The introduction of the GCSE and of AS levels, the review of A levels announced by the Government on 25 February, and the related developments in Scotland will affect the content and teaching of subsequent stages of education. The development of AS levels will helpfully broaden the curriculum base for entry. The Government urges higher education institutions to give due credit for AS level success to mature candidates as much as to younger entrants.

2.18 A growing number of students will enter higher education along the second route, with vocational qualifications of the kind now offered by about a sixth of candidates. As well as reflecting the changes in schools and non-advanced further education referred to in paragraph 2.8, this will also help ensure the maintenance of the recent shift in the balance of higher education provision towards subjects for which future employer demand is strongest - those with a technical, numerical or other vocational content. The Government therefore believes that positive steps must now be taken to increase the number of higher education entrants with vocational qualifications, for example those of BTEC. This route will be best for some of those who might not in the past have entered higher education, but it should not be seen as exclusively for them. The polytechnics and colleges already have substantial experience of providing for such students; the universities should move in this direction.

2.19 The Government looks to all institutions of higher education to give careful consideration to arrangements for admission of those holding existing qualifications of this kind, and, in conjunction with the National Council for Vocational Qualifications, to pay particular attention to the recognition to be given to the various levels of the proposed National Vocational Qualification.

2.20 The third recognised route into higher education - for those, mainly mature, entrants who hold neither traditional sixth form nor vocational qualifications - is through "access courses". Originally, these were established mainly to assist entry to teacher training and social work training courses. In the last few years they have developed more widely, with an increasing number in scientific and technological disciplines including courses aimed at facilitating entry to teacher training in shortage subjects. Some access courses are geared to a particular receiving institution; others are designed to offer access to higher education more widely. The Government has a preference for the latter style wherever practicable. But it accepts the place of the former also, provided that effective oversight is exercised by the appropriate validating authority so that the standards of access courses tailored to a specific higher education institution are suitable for entry to similar higher education courses elsewhere. The responsibilities of validating bodies extend, of course, to access provision in al1 styles, and the Government invites them to give attention, in consultation with the providers, to developing a comprehensive framework within which the availability of well devised access courses can be increased.

2.21 In issuing this invitation, the Government asserts the importance of this approach to increasing participation in higher education and in particular to raising the number of mature entrants. It sees no evidence in general that standards are impaired by the admission of students through this route: on the contrary, the content and delivery of higher education courses which they attend can benefit from their presence. However, if risk to quality and waste of talent are to be avoided:

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• institutions providing access courses must ensure that their content and method are well aligned to those of the higher education courses to which they lead;
• institutions receiving students from access courses must select students responsibly, taking advantage of the predictive value of their performance at access level and weighing the evidence of their commitment to learn;
• all institutions involved must put effort into counselling students and supporting their motivation.

2.23 Credit transfer schemes provide help to extend higher education opportunities. Schemes can operate within consortia of institutions, or more widely through such means as the Council for National Academic Awards' (CNAA) Credit Accumulation and Transfer Scheme (CATS). The wider range of entrants will increasingly be able to seek academic credit for prior learning, whether gained through formal qualifications or through experience, and to pursue programmes of study tailored to their particular needs but within established academic standards. The Government welcomes such initiatives, particularly attempts to work with employers to integrate their in-house training courses and development schemes into broader based programmes of professional development. The Educational Counselling and Credit Transfer Information Service (ECCTIS), which is funded by the Department of Education and Science, recently published its first handbook on credit transfer; and the NCVQ is making a priority of arrangements for earning awards by credit accumulation.

STUDENT SUPPORT

2.24 The Government acknowledges that future arrangements for student support will have a bearing on student demand, particularly perhaps on the extent to which demand from mature and part-time students might increase. Student support arrangements are being reviewed separately and the Government's conclusions from that review will be announced in due course. The review will take full account of the importance of maintaining access to higher education by students from all social and economic backgrounds.

OVERSEAS STUDENTS

2.25 Britain welcomes overseas students. The Government maintains its commitment to targeted support for them - currently some £86 million a year - to meet the needs of overseas countries and to reflect its various policy objectives. It recognises as well the educational benefits that the presence of overseas students can bring to higher education institutions. After a decline following the introduction of full cost fees in 1980, the numbers of overseas students in higher education have increased and are now again approaching the peak level of 1978.

CONTINUING EDUCATION

2.26 The importance of adult continuing education is now widely - albeit belatedly - accepted. Many individuals want or need education in middle life, sometimes because they had no earlier opportunity and sometimes to make good deficiencies in their previous education. Overlapping with them are the many who need updating, retraining or new skills - for example in business management - in

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order to remain competent members of Britain's increasingly technological workforce. The Government's intention is that both these broad categories should be well served, and it has promoted programmes on both accounts.

2.27 Particularly useful progress is being made in in-career vocational education, notably as a result of the Professional, Industrial and Commercial Updating (PICKUP) Programme, which has now been extended to Scotland. Many of the more enterprising colleges and universities have adopted, with great benefit, a new style and approach to the provision and marketing of courses for industry and commerce. For their part, increasing numbers of firms recognise that investing in updating or retraining their workforce is essential to their future competitiveness; and are ready to release employees and pay a proper price for a good product. This advance needs nevertheless to be taken much further and an additional £6 million has been provided for pump-priming this activity through the NAB, the W AB and the UGc. The Government intends to play an active part in encouraging these developments through its PICKUP programme and within its Adult Training Strategy.

2.28 The Department of Education and Science and the Welsh Office through the PICKUP Programme, the Manpower Services Commission and the Department of Trade and Industry will jointly provide pump-priming finance for a national network of Technology Centres. These will encourage greater collaboration between industry and education and provide a flexible response to the training and related processes of technology transfer. Whilst enabling business to capitalise on

Figure F: PICKUP Courses: England

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the opportunities created by new research developments, the close ties with education should foster a closer relationship between undergraduate, diploma and continuing education courses and the world of work.

2.29 As for other forms of adult higher education, the current projections of student numbers show a growth during the next decade both in the numbers of mature entrants to full-time courses and in the numbers on part-time courses. If these expectations are to be realised, institutions will need to maintain, and in some cases much increase, their efforts to provide appropriately for the particular needs which such students will often have. The rewards - to the individuals, to the student body, to society and to the institutions themselves - can be considerable.

2.30 In continuing education, though not there alone, new technology may allow a larger market to be reached, ultimately at no greater effort. Distance learning is itself not new, but new dimensions have been added in recent years with the spread of video-recording and playback facilities and the development of interactive video instruction technologies. The Government sees great potential here and will facilitate the extension and development of distance learning provision across a wide range of institutions, covering both learning materials and delivery systems, and building on the excellent foundations laid by the Open University and the newly developing Open College.

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3.1 Higher education is expensive. In 1986-87 total public expenditure on higher education in the United Kingdom amounted to £3.7 billion including student maintenance but not research council spending. It accounted for 2.6% of public expenditure and 1 % of GDP. In real terms, expenditure on higher education other than student maintenance has grown by 3.2% since 1979. Higher education in the United Kingdom is more expensive per student than in most other developed countries, mainly because of high student support costs.

Figure G: Higher Education Expenditure 1979-87 (1986-87 prices)

3.2 The Government's Expenditure Plans (Cm 56) (11) provide for a continuing increase in higher education expenditure to £3.8 billion in 1987-88 and £4.1 billion by 1989-90.

(11) Together with the announced additions in respect of the recent university non-clinical academics' pay settlement.

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Figure H: Higher Education Expenditure 1985-90

3.3 The productivity of higher education as a whole has increased greatly since 1979. The total number of students in higher education in Great Britain has increased from 778,000 in 1979 to an estimated 934,000 in 1986, and the total number of full-time and sandwich students from 510,000 to 594,000. A fuller picture is given in Figure A in Chapter II. Average unit costs are estimated to have fallen in real terms between 1980-81 and 1986-87: by 5% in universities, by 15% in polytechnics and local authority colleges and about 25% in voluntary and other grant-aided colleges in England, and by 5% in the central institutions in Scotland.

3.4 The Government welcomes the efforts and positive achievements on the part of many institutions in seeking better value from the very large sums of public money made available for higher education. It recognises that hard and sometimes painful decisions are involved but is committed to achieving the further gains in value for money that will be needed, particularly if access to higher education is to be widened in future. This means pursuing both quality and efficiency.

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QUALITY

3.5 Quality in higher education depends primarily upon the commitment of the academic community to the maintenance and improvement of standards. This cannot be created or imposed from outside, but the Government on behalf of the public can and will seek to ensure that systems are in place to promote and give effect to that commitment and to monitor the results.

3.6 Quality can be judged by looking at:

• academic standards as reflected by the design and content of courses, their fitness for purpose, what they require of students and how they meet the needs of employers;
• the quality of teaching;
• the achievements of students - both whilst in higher education and in subsequent employment; and
• the quality of research - pre-commitment scrutiny and subsequent evaluation of achievement.

Universities

3.7 In the university sector the Committee of Vice-Chancellors and Principals (CVCP) published in 1986 Academic Standards in the Universities. This sets out codes of practice on the maintenance and monitoring of standards, covering universities' procedures, external examining and postgraduate training and research. The CVCP has undertaken to monitor the extent to which universities follow this advice, to publish reports by July 1987 and July 1988 on the changes that have been made, and to give further guidance if necessary. It will also promote the development of performance indicators (see paragraph 3.27). The Government welcomes the progress made so far but believes universities, individually or collectively, should do more to reassure the public about the ways in which they control standards. It will maintain its own concern with the preservation and enhancement of quality in teaching.

Polytechnics and Colleges

3.8 National responsibility for the academic approval of courses in the polytechnics and colleges sector (12) rests mainly with the Council for National Academic Awards (CNAA). The Lindop Report (13) found that quality in higher education was best assured when polytechnics and colleges accepted maximum responsibility for their own standards. The Government therefore asked the Council:

• to give "accreditation", and therefore the task of approving individual courses, to those institutions judged ready;
• to increase delegation to other institutions as far as practicable; and
• to pay more attention to the quality of teaching and learning and to the achievements of students in both academic and employment terms.

(12) See paragraph 4.2.

(13) Academic Validation in Public Sector Higher Education Cmnd 9501 (HMSO 1985).

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Figure I: The Council for National Academic Awards:
Organisation of Academic Validation and Monitoring

main guardian of standards in polytechnics and colleges, while reducing its own operating costs and encouraging greater self-reliance amongst institutions. The Government welcomes the CNAA's change of direction and now looks to its early implementation and to agreement on targets for reducing the Council's staffing and expenditure.

3.10 Below degree level, the Business and Technician Education Council (BTEC) has a corresponding responsibility in England, Wales and Northern Ireland for the quality of vocationally related qualifications. BTEC has recently been moving in the same broad direction as CNAA towards simplified initial course approval arrangements, improved and more rigorous checks on courses in operation, and greater autonomy for major centres. The Government looks to BTEC, in the further development of its activities, to work closely with the various industrial and professional bodies concerned with qualifications at this level, within the framework being developed by the recently established National Council for Vocational Qualifications (NCVQ).

3.11 Her Majesty's Inspectorate (HMI) will maintain its statutory role of inspecting and reporting to assist the Government in relation to the polytechnics and colleges sector. HMI will assess standards and trends and advise the Secretaries of State on the performance of the system nationally; identify and make known more widely good practice and promising developments and draw attention to weaknesses requiring attention; and provide advice and assistance to other bodies with responsibilities for higher education through its day to day contacts, its

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contribution to training and its publications. The new arrangements for funding and planning in polytechnics and colleges (see Chapter IV) will bring to an end the Inspectorate's involvement with administrative approval of individual advanced courses in England.

The Quality of Teaching

3.12 The maintenance of high standards of teaching can be helped by systematic arrangements for:

• staff training and development;
• staff appraisal;
• evaluation of the results achieved, including analysis of external examiners' reports and students' employment patterns;
• involvement of professional practitioners in vocational courses; and
• feedback from students themselves.

3.14 The CVCP plans to produce an agreed code of practice on academic staff development by July 1987, and to publish guidelines for performance appraisal for academic and academic-related staff in the course of 1987. The Government welcomes this. There has been progress in some parts of the present local authority sector of higher education towards introduction of staff appraisal, but systematic arrangements have not been generally applied. The Government will expect all polytechnics and colleges to take full advantage of the scope offered by its proposals for their future (Chapter IV) to introduce satisfactory arrangements. More progress should also be made in the centrally funded institutions in Scotland.

Achievements of Students

3.15 Academic standards and the quality of teaching in higher education need to be judged by reference mainly to students' achievements. The numbers and class distribution of degrees awarded provide some measure as, conversely, do non-completion rates. External examiners' reports offer a vital commentary, and effective scrutiny of these by institutions is essential. Standards of attainment in the specialist knowledge and competence associated with the particular subject of study are key criteria. But higher education must also build on the broad education increasingly provided by schools ensuring, for instance, further development of skills in communication and numeracy and the fostering of positive attitudes to enterprise and work generally. The subsequent employment patterns of students provide some indication of the value of higher education courses to working life. Evaluation of institutional performance also requires students' achievements to be set alongside their entry standards. Greater attention needs to be given to these questions both nationally and by institutions; and the essential data on performance in each institution should be published so that its record can be evaluated by the funding agencies, governing bodies, students and employers (see also paragraphs 3.27 and 3.30).

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Research in Higher Education

3.16 The quality of Britain's academic research is recognised worldwide. The country is rightly proud of the outstanding record of its scientists. They have won honours out of all proportion to the UK's size and wealth. The volume and influence of their work is second only to that of the USA, with its vastly superior resources. In this area Britain has a reputation and a strength which must be maintained and enhanced.

3.17 The research carried out in higher education provides the knowledge base for industry and commerce to build upon and is a major source of trained people at all levels. Basic research - concerned with the advance of knowledge - and strategic research - speculative but with clear potential for application - are just as important to industry, and therefore to the national economy, as applied research, development, production, marketing and sales. Moreover, past criticism of weakness in the activity of some higher education institutions at the applied end of the research spectrum, and of relative unwillingness to work closely with industry, is now much less deserved that it used to be. Notable successes by higher education in partnership with industry and commerce are now frequent, leading to the provision of goods and services sold at a profit; they could become much commoner, given further determination on the part of academic staff and a more positive attitude by British industry. The Government is considering what help it can give to encouraging increased investment by industry in research and development, including research in collaboration with higher education.,

Figure J: Expenditure on Research 1985-86

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3.18 The Government is committed to maintaining and enhancing the strength and quality of the science base; and accepts its responsibility to provide the main funding. But pressure on resources is inevitable with the growth of scientific opportunity and the increasing cost of undertaking world-class research. These pressures are affecting all countries. Difficult choices have to be made, with high priority to areas which are likely to lead to useful applications - so called "exploitable areas". The obligation to selectivity lies particularly on the research councils, with the Advisory Board for the Research Councils (ABRC), and on the universities guided by the University Grants Committee (UGC). In both these sectors a good start has been made, and the Government looks to all concerned to collaborate effectively in the interests of taking the process further. In the polytechnics and colleges sector the Government's aim is to provide support for work of clear relevance to the needs of industry and commerce. The research programme introduced in 1985-86 is now being extended with the expenditure of nearly £4 million a year more on activities of demonstrated quality in institutions which have proven track records of successful industrial and commercial involvement.

3.19 The international dimension of research is growing in importance. Collaboration allows the pooling of expertise and the sharing of costs and risks. The UK is fully involved in European Community programmes such as ESPRIT, BRITE, RACE and EUREKA. However, the Government fully recognises the need for balance between national and international efforts and for a strong UK academic research base.

3.20 Overall, the Government is confident that the approaches now being adopted are yielding much increased value for money. The clear prospect is a steadily better targeted effort across a balanced range of endeavour from basic science to applied work in effective relationship with industry. The improvements achieved and in train, and the policies to further them, will be set out in greater depth in future publications.

Links with Industry

3.21 The Government strongly welcomes and has done much to promote the major growth in recent years of links between higher education institutions and industry. The impetus for many of these has been in the field of research. Others reflect collaboration in the provision of courses or a range of services in which one party has expertise or facilities of value to the other. There are now many very encouraging examples of what can be done. The Government looks to higher education institutions to apply these models widely in collaboration with industry, and will foster their further development. Initiatives to this end include the LINK programme which was established last year to stimulate the transformation of basic research data into commercially exploitable ideas by support of collaboration between higher education and industry in strategic research.

3.22 In addition, the Government wishes to see all higher education students made aware of the challenges and opportunities of enterprise. Various successful schemes already operate, for example to allow students to work in companies during vacations or to develop their own enterprises after graduation. The Government proposes to carry these developments forward in consultation with higher education institutions and others concerned.

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Figure K: Expenditure on Research 1979-88 (1986-87 prices)

EFFICIENCY

3.23 The Government is concerned both with the efficiency of individual institutions and with that of the national system of higher education as a whole. The pursuit of efficiency is not just about saving money. It is about helping institutions and individuals to achieve more of what they should achieve with the money that is available. As with quality, efficiency depends primarily upon the skill and commitment of individuals at all levels, both in the conduct of their own work and in the decisions that have to be taken when acting collectively. Again, the Government has a role in seeking to ensure that suitable arrangements to promote and monitor efficiency are in place for institutions and for different parts of the whole system.

3.24 The main growth in efficiency in higher education since 1979 has been associated with the massive increase in student numbers. The rest of this chapter identifies other measures that have been taken or are in hand to promote efficiency at institutional level. Chapter IV deals with the overall management of the system.

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Universities

3.25 The UGC - and any successor body (see paragraphs 4.38ff) - has a key role in promoting the efficiency of universities, both through its own programmes and actions, and through the guidance it gives to institutions. It has carried out a root and branch review of the way in which it decides how much grant to allocate to each university for teaching and research. It has embarked on an ambitious programme of review and rationalisation of university departments in a wide range of subjects, in some cases in collaboration with the planning bodies for the other sectors of higher education.

3.26 For its part, the Government funded the work of the CVCP's Steering Committee for Efficiency Studies, under the Chairmanship of Sir Alex Jarratt, which reported in March 1985. The UGC is planning to publish by July of this year a report and commentary on individual universities' responses to the Jarratt Report, and universities are to be asked to submit annual reports on the efficiency gains they have achieved. The CVCP has established a working group on financial management which is to report this year.

3.27 The CVCP and the UGC have also adopted proposals, put forward by a joint working party on the use of performance indicators, for the regular publication from 1987 of a range of efficiency and effectiveness measures covering all universities. Initially, efficiency indicators will include student:staff ratios (SSRs) and a range of unit costs broken down by the main categories of expenditure. Effectiveness indicators will include income from research grants and contracts, the numbers of research and sponsored students, submission rates for research degrees, the first occupation of graduates and the institution's contribution to postgraduate and professional training.

3.28 The UGC has undertaken to advise the Government shortly, in the light of a survey carried out by the CVCP, on recent practice in the granting of tenure to academic staff and on the extent to which it may be appropriate to limit this. The Government reconfirms its intention to legislate to stop tenured contracts for new appointments and plans to include the necessary provisions in a Bill to be introduced as soon as Parliamentary time permits. The opportunity will also be taken to secure necessary revision of arrangements for dismissal for "good cause".

Polytechnics and Colleges

3.29 In May 1985 the Government asked the National Advisory Body for Public Sector Higher Education (NAB), in association with the Wales Advisory Body for Local Authority Higher Education (W AB), to advise it on changes needed in England and Wales to secure more efficient management in polytechnics and colleges. The NAB's Good Management Practice Study is not yet quite completed but the evidence it has collected already shows that the good management of polytechnics and colleges is inhibited by the excessive engagement in their affairs of local authorities exploiting their role as the formal employer of staff and the overseer of budgetary and purchasing matters. The way the Government intends to correct the situation is set out in Chapter IV.

3.30 In the polytechnics and colleges sector in England and Wales, unit costs and SSRs are now accepted indicators of the intensity of resource use. The NAB has accepted an average SSR target of 12: 1; this underlies its advice to the Secretary of State for Education and Science and the Government's decisions on the overall funding and planning of the sector. The Polytechnic Finance Officers Group, in conjunction with the Committee of Directors of Polytechnics (CDP), also publishes a range of expenditure data by institution. The Government is discussing with interested parties the possibility of publishing information about the first destination of students by institution, and has encouraged pilot work towards the wider use of data about students who do not complete their courses. As with the universities, much remains to be done and the Government will look to the new planning and funding body proposed in Chapter IV to take the lead in promoting performance indicators in the polytechnics and colleges.

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3.31 Meanwhile, reviews across the sector, in some cases in co-operation with the UGC, have been carried out in certain subjects including initial teacher training, architecture, town and country planning and nautical studies. Some movement towards a pattern of provision more suited to the country's longer term needs has resulted, but little progress has been made in addressing the broader need to concentrate higher education on strong institutions where this is possible without curtailing opportunities for students, particularly those wishing to study part- time.

3.32 In Scotland, efficiency and value for money are being examined in a financial management survey of the central institutions (CIs). Here too SSRs are used as performance indicators. In the CI sector as a whole, SSRs have tightened from 7.8: 1 in 1975-76 to 11.1:1 in 1985-86 and are subject to a target of 11.5:1 by 1990-91. That target takes account of the different pattern of provision in CIs as compared with polytechnics and colleges in England and Wales and differences in the methodology for calculating SSRs. Consideration is being given to the scope for using other indicators of performance.

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Changes in Structure and National Planning for Higher Education

4.1 Previous chapters have indicated the range of sound achievement in recent years; there is much to be proud of in all sectors of higher education in this country. But they also draw attention to weaknesses in the management and structure of the system. These are serious in much of the sector of higher education in England which contains the polytechnics and the maintained and grant-aided colleges, and the following paragraphs announce radical changes here. Significant development is also needed in the shape and constitutional position of the University Grants Committee (UGC), as examined in the Report of the Croham Committee's Review. This chapter covers that matter also, including particular reference to future planning and funding arrangements for the Scottish universities.

THE POLYTECHNICS AND COLLEGES SECTOR IN ENGLAND

4.2 This sector of higher education has in recent years been commonly called "the public sector of higher education". But it is misleading to imply a fundamental divide between universities and other institutions also providing higher education and also heavily dependent on public funds. The Government finds the term "public sector" used in this way unhelpful and, moreover, inconsistent with its desire to see all higher education institutions do more to attract private funding. It therefore seeks to lead a move away from use of this term to describe a part of higher education and, in its place, this White Paper speaks throughout of the "polytechnics and colleges sector".

Background

4.3 In England 405 institutions outside the universities provide higher education: 29 polytechnics and 346 other colleges under local education authority (LEA) control, plus 30 voluntary and other colleges directly funded by the Department of Education and Science (DES). Most of these institutions are provided .and maintained by LEAs and are, in effect, part of them: their land, buildings and equipment belong to the authority and their staff are its employees. Others - generally known as assisted institutions - are separately established, some as corporate bodies, but with constitutions linking them to the LEA on whose financial assistance they substantially depend.

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Figure L: Students in Polytechnics and Colleges: Level of Study and Mode of Attendance - England 1985

Figure M: Levels of Study in Universities and Polytechnics and Colleges - England 1975-85

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Figure N: Local Authority Recurrent Expenditure:
Further Education's Share 1986-87

4.4 The polytechnics and colleges playa distinctive and increasingly important part in higher education, particularly in technological and other vocational fields. They provide for over half the higher education students in England.

4.5 The resources devoted to higher education outside the universities in England in 1986-87 amounted, excluding student maintenance, to some £978 million (current) and £87 million (capital). Most of the expenditure of the local authority colleges is pooled between all authorities. The Secretary of State for Education and Science determines the total amount which can be pooled and allocates funds and places between individual colleges and areas of study in the light of advice from the National Advisory Body for Public Sector Higher Education (NAB). The local authorities have 6 out of 8 seats on the NAB Committee.

Transfer of Major Colleges from Local Government

4.6 The Government acknowledges the contribution which local government has made to the development of higher education and recognises that many local authorities handle their responsibilities for their higher education colleges

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constructively. It has, however, concluded, for the reasons set out below, that it is no longer appropriate for polytechnics and other colleges predominantly offering higher education to be controlled by individual local authorities:

Role

• Polytechnics have strong national, as well as regional and local, roles. They recruit students nationally and meet the needs of employers nationwide.
• Polytechnics offer all major subjects except medicine. After two decades they are firmly established and cater on average for a larger number of students than universities.
• They, other colleges maintained and assisted by local authorities, and the voluntary and other grant-aided colleges, are acknowledged to make a high-quality contribution to higher education, distinct from that of the universities.

*Full-time equivalents

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Planning

• The funding arrangements for higher education in the polytechnics and colleges have long recognised that it is neither desirable nor appropriate for each local authority to plan and fund its institutions in isolation. Few local authorities are able to promulgate a policy for higher education in their institutions even though they have responsibility for determining the character of educational provision in their areas.
• The existing national planning arrangements are unsatisfactory. More progress needs to be made in rationalising scattered provision and concentrating effort on strong institutions and departments.
• Progress in educational planning will be even more necessary if the polytechnics and other colleges are to meet the changing needs of industry and commerce in the 1990s and provide in new ways for the wider range of students discussed in Chapter II.
• This calls for a more effective lead from the centre and the reward of success and enterprise in meeting new national needs, in place of a system giving undue weight to local interests.
• In particular, polytechnics should be free from local constraints and encouraged to build on their individual strengths so that some at least can become recognised leaders in particular vocational and technological fields.

• It is widely acknowledged that the present relationship between local authorities and their polytechnics and colleges can and often does inhibit good institutional management. It also inhibits the desirably closer relationship between institutions and industry and commerce through consultancy and other services.
• Many local authorities apply to their higher education institutions inappropriate detailed controls, some of which are designed for much smaller institutions or other services.
• The governors, directors/principals and other senior staff of many polytechnics and colleges are prevented from managing their financial and staffing resources to best effect, and from developing to the full the maturity and responsibility appropriate to higher education institutions.

4.8 The Government therefore intends to secure the re-establishment of the polytechnics and other institutions of substantial size engaged predominantly in higher education as free-standing outside local authority control. By "of substantial size" is intended colleges with 350 or more full-time equivalent home and European Community higher education students; and by "engaged predominantly in higher

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education" is meant colleges with more than 550/0 of their activity in higher education - both measured by the latest available Further Education Statistical Record (FESR), that for 1985. The institutions which will be transferred from local government are the 57 shown in Annex C and on Map 2. Those predominantly higher education institutions with fewer than 350 students will have the choice to opt in to the new arrangements; they are listed in Annex D. Those colleges whose main concern is non-advanced further education will remain with local government.

Arrangements for the Voluntary and Grant-Aided Colleges

4.9 The Government intends that the new arrangements should also apply to the voluntary and other grant-aided colleges providing higher education, which are already free-standing institutions funded by the Department of Education and Science. These are also shown on Map 2 and are listed in Annex E. Special considerations, however, apply to two colleges - Cranfield Institute of Technology and the Royal College of Art - which provide predominantly for postgraduate students (see paragraph 4.48).

Institutions in the New Sector

4.10 The polytechnics and other colleges transferred from local authorities will each:

• be established with corporate status;
• have governing bodies with strong representation from local and regional industry, commerce and the professions, and on which dominance by local authority representatives is no longer possible;
• employ their own staff; and
• own their land, buildings and equipment, subject to the transitional arrangements described in paragraphs 4.26-27.

4.12 The Board of Governors of each institution will comprise 20-25 people, of whom about half will be local and regional employers or representatives of the professions. The initial composition of the employer/professions group will be approved by the Secretary of State on the basis of local advice; thereafter its members will select their successors after consulting relevant local bodies. Other members will be appointed by named constituencies in stated proportions or co-opted. Each Board will elect its own Chairman.

4.13 The Governors will have wide powers to determine the affairs of the institution. The Director of each institution will report only to the Governors.

4.14 The academic work of all the institutions in the new sector will continue to be validated by the Council for National Academic Awards, universities or the Business and Technician Education Council as appropriate, and will be subject to inspection by Her Majesty's Inspectorate.

4.15 The provision of public money on the appropriate scale for the colleges transferred from local government will become the responsibility of central Government. The equivalent of pooled expenditure will be transferred out of Aggregate Exchequer Grant (AEG) and capital expenditure in the transferred colleges will be deducted from provision for local authority capital expenditure.

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Certain of the transferred institutions currently receive resources from their LEAs over and above the allocations from the pool. The Government expects LEAs to phase out such subsidies before the transfer in continuation of recent trends: it will consider in the light of progress towards this objective whether to take account of the extent of any remaining subsidy either in the adjustment of AEG consequent on the transfer of these institutions or by other means.

Funding: the Government's Approach

4.16 Polytechnics and colleges are at present almost wholly dependent on public funds for their recurrent and capital expenditure. The funds they receive have usually been described as "allocations" or "grants", paid by a local authority or central Government. Payment of such grants from public funds does not imply, in the Government's view, unconditional entitlement to support from the taxpayer at any particular level. The resources made available are intended to secure delivery of educational services which are of satisfactory or better quality and which are responsive to the needs of students and employers. Institutions receiving public funds are accountable for the uses to which the funds are put and for the effectiveness and efficiency with which they are employed.

4.17 The Government therefore proposes, in place of grants, a system of contracting between institutions and the new planning and funding body described in the following paragraphs. Its intention in making this change is to:

• encourage institutions to be enterprising in attracting contracts from other sources, particularly the private sector, and thereby to lessen their present degree of dependence on public funding;
• sharpen accountability for the use of the public funds which will continue to be required; and
• strengthen the commitment of institutions to the delivery of the educational services which it is agreed with the new planning and funding body they should provide.

Funding: Polytechnics and Colleges Funding Council (PCFC)

4.18 The new polytechnics and colleges sector of higher education will comprise: the transferred colleges listed in Annex C; such small institutions from the list. in Annex D, as choose to opt in; and the voluntary and other grant-aided colleges listed in Annex E. The planning of this sector and the allocation of resources within it will require the establishment of a new body, which it is proposed to call the Polytechnics and Colleges Funding Council (PCFC). The NAB with its local authority majority will cease to be an appropriate planning body and will go out of existence. The Government will consult the voluntary colleges about whether the Voluntary Sector Consultative Council should continue and, if so, about its relationship to the PCFC.

4.19 The PCFC, like the Universities Funding Council (present UGC - on whose development see paragraphs 4.38ff), will be an independent non-departmental body appointed by the Secretary of State for Education and Science. It will have a small membership with a strong industrial and commercial element, as well as members from higher education institutions. The Secretary of State will provide general guidance to the PCFC on its work and will have reserve powers of direction. The

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Council will be expected to consult the local authorities about their residual interest in higher education and about the small amount of non-advanced further education in the transferred colleges (see paragraphs 4.24 and 4.25).

4.20 The main tasks of the PCFC will be to:

• contract with institutions, using the recurrent funds supplied by Government, for the provision of higher education including, where appropriate, the development of new courses and selective initiatives and research activities;
• make funds available for capital expenditure by institutions, from those supplied by Government and from any money available for re-cycling from disposals by institutions of property acquired with public funds (but see also paragraph 4.26);
• subject to what is said in paragraph 4.23 about initial teacher training, plan the educational provision in the sector;
• encourage institutions to co-operate in the development of good management practice; and
• have power to contract for provision of some of the higher education in colleges which remain under the control of local authorities (see paragraph 4.24).

4.21 The development of the system of contracting discussed in paragraphs 4.16-17 will be a matter for the PCFC, subject to any guidance from the Secretary of State. Before contracts are entered into, the PCFC will assess the performance of institutions. Any serious failure to meet the terms of a previous contract may result in revised terms or a failure to renew. The Government will provide the PCFC with indications of future levels of funding in the normal way through its published public expenditure plans.

4.22 The PCFC will also have an interest in the pay of staff in the transferred colleges related to its responsibilities for funding. The Government will be considering further the arrangements for determining the pay of academic staff (see also paragraph 4.47).

Teacher Training

4.23 The institutions within the ambit of the PCFC will include those providing almost all initial teacher training courses outside the universities. As in the past, the Secretary of State for Education and Science will not only approve individual courses with regard to their suitability as courses of initial training for school teachers, but also set individual course entry targets at individual institutions. He would wish to be able to base these decisions on advice from the PCFC, which would take into account both criteria provided by the Secretary of State for initial teacher training and its planning work across the new sector of higher education. But to operate in this way will require arrangements which result in delivery to the Secretary of State of advice on a timetable which meets his needs and that of the institutions. If that does not prove possible, the Secretary of State will need to rely on internal Departmental advice, developed in consultation with the PCFC. As for courses of in-service teacher training, the PCFC will contract with institutions for the provision of those leading to a recognised qualification and lasting at least a year full-time or the part-time equivalent. Shorter in-service courses will be funded entirely through fees.

Colleges and Provision Remaining with Local Authorities

4.24 The colleges listed in Annex C have nearly 80% of the full-time equivalent higher education students currently in higher education institutions maintained or

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assisted by local authorities. Much of the work in the remaining local authority colleges meets essentially local needs: professional and technical vocational education, including Higher National Certificates (HNCs), offered part-time. But some of the colleges have degree level work - some 7% of the present total - and full-time Higher National Diploma (HND) and equivalent courses. For the colleges remaining under local authority control, the Government intends that:

• for all degree and postgraduate work, full-time HND and Diploma of Higher Education (DipHE) and equivalent courses, and for courses of in-service teacher training leading to a recognised qualification and lasting at least a year full-time or the part-time equivalent: the PCFC will be responsible for planning and funding. In this situation it will, to the extent and in the locations it judges appropriate, enter into contracts with local authorities for the purchase of provision from their colleges. The adjustment of AEG in respect of the transfer of responsibilities for higher education will take account of this reduction in LEA liabilities;
• for other courses, including all part-time sub-degree provision, whether leading to BTEC, professional or other qualifications: the local authorities will no longer be guided by a central planning agency. The present pooled funding arrangements will end. LEAs will instead receive credit for students on such courses in the assessment of their Grant Related Expenditure for Rate Support Grant purposes.

4.25 As part of their continuing responsibility for non-advanced further education (NAFE), it will be open to LEAs to make contractual arrangements for it to be provided in colleges transferred from their control. The arrangements for reducing the Aggregate Exchequer Grant on account of the transfer, and for the assessment of Grant Related Expenditure, will recognise authorities' continuing responsibility for NAFE.

Transfer of Assets

4.26 A Polytechnics and Colleges Assets Board (PCAB) will be set up for a limited period. Its main tasks will be to resolve any difficulties in the apportionment of assets to transferred institutions and to assist them to make arrangements as quickly as possible for the holding of their own assets. Any assets which are not assigned to institutions when they become corporate bodies will be held transitionally by the PCAB. It will charge peppercorn rents for the use of such assets. It will also then have a duty to make available to the PCFC any surplus assets or the proceeds of any sale of assets, so that the PCFC can apply them for other purposes within the new sector of higher education, subject to a reserve power of direction by the Secretary of State for Education and Science. The Chairman and members of PCAB will be appointed by the Secretary of State.

4.27 The assets now used in local authority higher education were acquired in most cases under arrangements which shared the cost between ratepayers and taxpayers on a national basis, to form part of the national provision of higher education. They will continue to serve that purpose. Accordingly, the local education authorities will not be compensated for the transfer of the assets now in their ownership. The institutions themselves will become responsible for servicing the debt attributable to past capital expenditure once ownership has transferred to them; this obligation will be taken into account in determining the funding available to them through the PCFC. In the meantime the PCAB will meet the debt charges associated with any assets that it holds. The claims made by local education authorities on the pool out of which debt charges in respect of local authority higher education are at present serviced will provide a bench-mark for assessing the debt to be transferred.

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Figure P: Summary of New Structure

Administration and Costs of the PCFC and the PCAB

4.28 The PCFC will require a secretariat, and some of the colleges may need additional staff to taker-over financial and other management tasks currently undertaken by their LEAs. There will also be temporary costs associated with the PCAB. But these costs will be offset by consequential savings in LEAs, in DES by the transfer of the funding of the grant-aided institutions to the PCFC, and by the winding-up of the NAB. The running costs of the PCFC and the PCAB will be subject to the normal requirements for non-Departmental public bodies.

Possible Designation of Additional Polytechnics

4.29 One question to which some attention has been given recently is whether some among the existing colleges to be taken into the new sector might merit designation as additional polytechnics. The Government has decided to ask the PCFC to include amongst its early tasks an assessment of whether further

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designations would be appropriate. The PCFC will have to approach this within the resources available for the sector as a whole, but it should do so in a positive spirit, paying attention not only to candidates' attributes but also to their capacity to expand to meet national and regional needs.

Legislation

4.30 The Government intends to introduce a Bill as soon as Parliamentary time permits to secure the re-establishment of maintained colleges as free-standing corporate bodies, the consequential transfer of assets, staff and debts, the establishment of the PCFC and the PCAB and the changes in the funding and other arrangements described in this White Paper. In the meantime the Government will be consulting relevant interests about the detailed legislative provisions.

4.31 The necessity for legislation will mean some delay before the new arrangements can take effect. The Government is confident that during this period local authorities will continue to act responsibly in the funding of the institutions due for transfer and in the upkeep of their plant. The Government will monitor the position carefully with the intention of ensuring, where necessary, that the interests of present and future students are not placed in jeopardy.

Conclusions

4.32 The Government believes that the major reform just described in outline will provide a much improved setting within which the polytechnics and colleges can pursue educational effectiveness and efficiency, can develop entrepreneurial skills and attitudes, and can respond to national needs. At the same time, their regional

Figure Q: Distribution of Polytechnic and College Students* - Present and Proposed Systems

*Full-time equivalents.

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and local roles should be in no way diminished; indeed the reconstruction of their governing bodies may enhance their capability there too. As corporate bodies, no longer controlled and funded by local authorities, these colleges will be free to manage their resources flexibly and to best advantage, while being accountable through the PCFC for their use of public funds.

4.33 At the same time the PCFC itself will be constituted with the scope to operate far more effectively than the NAB has done. It will, moreover, be able to concentrate its attention on institutions which are predominantly concerned with higher education of national relevance; with the local authorities correspondingly retaining charge of institutions where primarily local needs are being served.

THE POLYTECHNIC AND COLLEGES SECTOR IN WALES

4.34 In Wales 22 institutions outside the universities provide higher education: one polytechnic, 20 other local authority maintained institutions and one voluntary college directly funded by the Welsh Office. The local authority maintained institutions are funded on the same basis as their counterparts in England. The Wales Advisory Body for Local Authority Higher Education (WAB) advises the Secretary of State for Wales on the distribution of student places and on the allocation of expenditure from the Advanced Further Education Pool. There are 14,000 full-time equivalent students on higher education courses in the polytechnic and colleges sector in Wales, compared with 21,000 full and part-time students in the University of Wales.

4.35 Only five of the local authority maintained institutions and the one voluntary college are engaged predominantly in higher education and have more than 350 full-time equivalent students. Nearly a fifth of the provision at these institutions is non-advanced further education courses.

4.36 As the polytechnic and colleges sector in Wales is small, it is capable of being planned and developed through the WAB, provided the interests of individual local authorities are subordinated to the interests of the sector as a whole. The WAB - which came into being later than the NAB - is currently reviewing courses in a number of subject areas with a view to rationalising provision where this is necessary. The results of these reviews will indicate whether the WAB is able to offer advice based on national, as opposed to local, considerations. They will also show whether the WAB, the UGC (and its successor) and the University of Wales can work successfully together to develop a coherent system of higher education across all sectors in Wales.

4.37 The Government expects the WAB to maintain its ability to operate as a national advisory body. It is not at present the Government's intention therefore to establish a Polytechnic and Colleges Funding Council for Wales. However the legislation which will be brought forward to establish a PCFC in England will provide for the same arrangements to be extended to Wales if the Government subsequently considers that to be necessary.

UNIVERSITY FUNDING: THE UNIVERSITY GRANTS COMMITTEE AND ITS SUCCESSOR

4.38 The forty-seven universities in England, Scotland, Wales and Northern Ireland have their own identity defined by Royal Charter or Statute. Except for the University of Buckingham, they are funded by central Government; and, the Open University apart, they receive the greater part of their public funding effectively by

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Figure R: Proportions of University Income by Source

*Data on sources of research funding not collected until 1981-82

decision of the UGC. Following a recommendation by the Steering Committee for Efficiency Studies in Universities, under the Chairmanship of Sir Alex Jarratt, the Government established in July 1985 a Committee chaired by Lord Croham to review the UGC's constitutional position, role and structure.

4.39 The Croham Report was published on 10 February 1987. (14) Its chief conclusions were that the UGC should be reconstituted as a University Grants Council, an independent body under the sponsorship of the Secretary of State for Education and Science, with revised terms of reference, a chairman with substantial experience outside the academic world, broadly equal numbers of academic and non-academic members, and a reserve power for the Secretary of State to issue directions to the Council. It recommended that the new Council should be formally incorporated, preferably by legislation.

4.40 The Government accepts the broad thrust of these recommendations and intends to include appropriate provision in the Bill which will give effect to its proposals on polytechnics and colleges (paragraph 4.30). However, just as in that sector of higher education, the Government proposes for the university sector that payment of grants to institutions should be replaced by a system of contracting between them and the body to succeed the UGC. That body will be named the

(14) Review of the University Grants Committee Cm 81 (HMSO 1987).

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Universities Funding Council (UFC) - which form is used in the discussion below of the Croham recommendations. The Government will be giving further consideration, in the period up to the introduction of legislation, to the precise terms of reference of the UFC, and in that process will take into account what may be said during its consultations on the Croham recommendations. It wishes to emphasise, however, that the UFC's essential responsibilities should relate to the allocation of funding between universities rather than to its overall amount, which is a matter for Government to decide after considering all the evidence.

4.41 The Government welcomes and endorses the following other recommendations of the Report. All of them build to some extent on present practice and development, and further progress in these directions should be made even before the new UFC is constituted.

• The Government should provide guidelines at appropriate intervals to set the framework for the planning process which the UFC and the universities should conduct.
• The Government should play no part in the distribution of general funding between individual universities in Great Britain.
• The UFC for its part should have the power to require that funding is or is not spent for a particular purpose.
• Financial relations between the Government and the UFC, and between the UFC and universities, should be governed by financial memoranda.
• Arrangements for the flow of management information and for accountability from the universities to the UFC and onwards to Government should be much improved.

4.43 The Croham Report makes a wide range of other recommendations. With the exception of that concerning the proposed UK Education Commission (see paragraph 4.50) and what the Report has to say on the Scottish position (see paragraphs 4.44-45), the Government is still considering these and would welcome comments on them by 30 June. These other matters concern principally the direction, structure and staffing of the new Council; the information needed for its work; the arrangements for resource allocations to universities; and specific aspects of the Council's responsibilities, including in respect of medical education. The Government will, in particular, be concerned to see that the UFC's arrangements for making funds available to universities properly reward success in developing co-operation with and meeting the needs of industry and commerce. As regards medical education, the Government is already taking steps to improve co-ordination between the universities and the National Health Service at all levels. The DES and Health Departments have issued for the first time joint guidance on provision for medical education.

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HIGHER EDUCATION IN SCOTLAND

4.44 The Scottish Tertiary Education Advisory Council (STEAC) report Future Strategy for Higher Education in Scotland (Cmnd 9676) recommended establishment of a body with responsibility for academic planning across the university and non-university sectors of higher education in Scotland and for allocation of resources within a system of funding unified under the Secretary of State for Scotland. This recommendation was subject to certain conditions, including the existence of a satisfactory UK-based peer review system for teaching and research in the Scottish universities and adequate safeguards for the Scottish universities in relation to access to research council funding. The Advisory Board for the Research Councils (ABRC) has advised the Government that no additional measures would be necessary to safeguard access by Scottish universities to research council funds. The Croham Report concluded that, if a Scottish planning and funding body of the kind proposed were to be established, it should be incumbent on both that body and the UFC to consult each other whenever a policy development might have a limiting effect on the mobility of students or staff or the pattern of UK provision in particular subjects. The Croham Report also recommended that, if such a Scottish planning and funding body were not established, the UFC should set up a Scottish Committee.

4.45 The Government agrees with STEAC's view that there is scope for improvement in the co-ordination and planning of the university and colleges sectors of higher education in Scotland. Equally, however, it is concerned to ensure that the planning and funding of the eight Scottish universities is not divorced from that of universities elsewhere in the United Kingdom. The Government has therefore decided that the remit of the new Universities Funding Council should cover all the universities currently funded on the advice of the UGc. The Council should, however, appoint a Scottish Committee after consultation with the Secretary of State for Scotland and in the development of its policies take account of advice from this Committee. The UFC would have regard to the views of the Secretary of State for Scotland on Scottish needs and plans for the colleges sector of higher education in Scotland, consistent with the national guidelines provided by the Secretary of State for Education and Science.

HIGHER EDUCATION IN NORTHERN IRELAND

4.46 The Government accepts the Croham Committee's recommendation that the UFC should advise the Department of Education for Northern Ireland on the funding of the universities in Northern Ireland. It intends that these two universities should continue to be funded on the basis of parity of provision with institutions in Great Britain. In formulating its advice, the UFC will take account of the views of a Northern Ireland Working Party which, as now, will consider and report on particular circumstances bearing on higher education provision in the Province.

OTHER ISSUES

Academic Pay in Higher Education

4.47 The Croham Report comments briefly on the arrangements for determining academic salaries in the universities. Pay levels and the pay structure 'have to be devised so as to enable the universities to recruit, retain and motivate staff within the available resources. The Report notes that the existing negotiating arrangements for academic salaries were established before the present funding arrangements were introduced, and it recommends a re-examination of the arrangements. The Government agrees, and will shortly open discussions to that end. The Government will at the same time be considering what arrangements should be adopted in the polytechnics and colleges sector.

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The Open University, Cranfield Institute of Technology and the Royal College of Art

4.48 As the Croham Report noted, these three institutions are currently planned and funded separately from the rest of higher education with direct funding from the Department of Education and Science on the advice of Visiting Committees appointed by the Secretary of State. The Government recognises that these institutions each have certain features which may continue to justify special arrangements, but will be discussing with each the possibility of its coming within the ambit of one of the proposed new planning and funding bodies.

Planning of Higher Education

4.49 The Croham Report discusses the planning of the whole of higher education as part of the context for its review of the UFC's role, and notes the statement in Cmnd 9524 that the Government saw no practical scope for a united planning body for higher education of the kind comprehended by the term "overarching body". The Government reaffirms that view. It recognises its own responsibilities for higher education planning and policy and attaches importance to those features which distinguish universities and other higher education institutions. Many of those features are valuable in their own right and continue to call for separate planning and funding arrangements.

4.50 The Croham Report goes on, however, to propose the establishment of a United Kingdom Education Commission to advise on national needs in relation to the education system. This recommendation runs well beyond advice on national needs in relation to higher education and raises a number of fundamental questions about the desirability and usefulness of purely advisory bodies and about the difficulty of manpower planning which have been long debated. The Government is not at this stage persuaded that such a Commission would be helpful and believes that the statements about future access to higher education in Chapter II contribute to the assessment of national needs for higher education which rightly concerned the Croham Committee.

4.51 Moreover, setting up the polytechnics and certain other colleges in England as free-standing institutions to be funded by central Government, no longer under local authority control, on the lines proposed in the first part of this chapter, will make it easier for the Government and its partners both to secure more collaboration at all levels across the binary line and to co-ordinate assessments of and responses to national needs. The PCFC, as well as - and sometimes in concert with - the UFC, will be in a position to consult about and reach agreed views on matters of demand and supply, and rationalisation where necessary. The development of co-operation at institutional level, despite the hopes expressed in the 1985 Green Paper, has made less progress than the Government would have hoped. The new planning structures, together with the continuing local and regional ties of the polytechnics and colleges especially, should provide a useful basis for further effort.

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List of Abbreviations Used

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Higher Education Student Numbers: Northern Ireland

1 With the exception of some advanced further education courses mounted in institutions of further education, higher education in Northern Ireland is provided by two universities: The Queen's University Belfast; and the University of Ulster, which was formed in 1984 by the merger of the New University of Ulster and the Ulster Polytechnic.

2 The number of full-time students in higher education in institutions in Northern Ireland has increased by just over 18% between 1979 and 1985. This increase is reflected in the Age Participation Index which has risen from 16.0 in 1980 to 19.6 in 1985. Increases in participation rates have been particularly marked for women, students on science-related courses and mature entrants. The proportion of women among full-time students rose from 46% in 1979 to 49% in 1985, while the proportion of students on science-related courses increased from 35% to 39% over the same period.

3 Future demand for higher education in Northern Ireland was examined in the discussion document Higher Education in Northern Ireland - Future Demand (1985). This set out two variants which projected maximum and minimum levels of student demand. For planning purposes, it also provided a five-year forecast. Against a declining 18 year old population, this envisaged demand increasing from a 1984-85 baseline of 17,290 to 18,200 in 1989-90. This will be reviewed in the light of a survey of student demand now being undertaken. In the meantime, planning figures for 1989-90 have been adjusted to allow enrolments to increase to 18,540, a 4% increase on 1985-86 levels.

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Polytechnics and Colleges to be Transferred from Local Authorities and to Come within the Ambit of the PCFC

*assisted institution; other institutions are maintained by LEAs (see paragraph 4.3)

**includes Hertfordshire CHE student numbers - merging in 1987

***joint LEA assisted/DES grant-aided institution

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Institutions with the Choice to Transfer from Local Authorities

Institutions with more than 55% higher education but fewer than 350 full-time equivalent students, having the choice to transfer from local authorities and to come within the ambit of the PCFC

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Voluntary and Other Grant-Aided Colleges to Come within the Ambit of the PCFC

a Voluntary Colleges (17)

Bishop Grosseteste College (Lincoln) Chester CHE
Christ Church College (Canterbury)
College of Ripon & York St John
College of St Mark & St John (Plymouth)
College of St Paul & St Mary (Cheltenham)
Homerton College (Cambridge)
King Alfred's College (Winchester)
La Sainte Union CHE (Southampton)
Liverpool IHE
Newman College (Birmingham)
Roehampton IHE
S Martin's College (Lancaster)
St Mary's College (Twickenham)
Trinity and All Saints College (Leeds)
Westhill College (Birmingham)
Westminster College (Oxford)

b Other Grant-Aided Colleges (8)

Goldsmiths' College*
Harper Adams Agricultural College
Royal Academy of Music
Royal College of Music
Royal College of Nursing
Seale Hayne College**
Shuttleworth Agricultural College
Trinity College of Music

*unless London University accepts Goldsmiths' as a School of the University

**merger with Plymouth Polytechnic under consideration

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Map 1: UK Universities