Departmental Expenditure (Hansard, 6 November 1986)

§ Mr. Kenneth Baker

1. As my right hon. Friend the Chancellor of the Exchequer announced in his statement today, provision for education and science in 1987–88 will be £16,599 million. This total is £2,280 million higher than the plans for 1986–87 published in the 1986 Public Expenditure White Paper (Cmnd. 9702).

LOCAL AUTHORITY CURRENT EXPENDITURE

2. The Total provided for local authority current expenditure on education in 1987–88 in the Government's plans is £12,850 million, 18.8 per cent. more in cash than the plans for 1986–87 set out in Cmnd. 9702. These figures include the sum of £460 million for England which the Government are ready to add to planned expenditure in 1987–88 in return for a salary structure and a definition of duties for school teachers which meet the requirements set out in my statement of 30 October. This total represents what local education authorities are expected to spend if they maintain their present policies and keep increases in their costs, other than school teacher pay, to the level of cost increases in the economy as a whole.

3. There remain many opportunities to raise the efficiency of the service. The Government believe that, if these were seized, LEAs could make good progress with national and local policies for improving the quality of education at a lower level of expenditure. The total used for determining the education component of the grant 488W related expenditure (GRE) has therefore been set at £500 million lower than the total for expenditure provision. The margin between the two totals is allocated to education in the Government's plans, but is not carried through to the control totals for the GRE.

4. With the inclusion of the planned additions for teacher pay, the Government is planning for an increase of 1.5 per cent. in real terms in local authority spending on education in 1988–89, and broadly level funding in 1989–90. Within the totals planned for local authority expenditure as a whole in each year, the Government will in 1987 review the distribution of expenditure between services (including education) in the light of local authorities' budgets for 1987–88, the Government's priorities and other factors.

Schools

5. Overall, school rolls continue to fall. Local education authorities are on course to achieve the target of removing 1,125,000 surplus school places by March 1987. The next few years offer a unique opportunity to rationalise and improve the pattern of secondary schools. The Government expect authorities to remove just over half a million surplus places in the three years 1987–88 to 1989–90, mainly from the secondary sector. My Department will issue towards the end of the year fresh guidance on the opportunities for further improving the quality of provision.

6. The plans assume that authorities will secure a further reduction in the number of school teachers they employ, but that the overall pupil-teacher ratio, currently at its best ever level, will continue to improve each year.

7. The Government attach importance to an improvement in the condition of school buildings and to a better supply of books and equipment in the classroom. Accordingly, the plans allow for a higher programme of repairs and maintenance, and increased expenditure on the purchase of books and equipment. The task of equipping schools for the new examination for the General Certificate of Secondary Education has been fully allowed for. As a contribution to greater efficiency, the Government expect authorities to cut the net costs of the school meals service and the costs of caretaking and cleaning, and to moderate the cost of their own administration.

Non-advanced further education

8. The Government's plans should enable authorities to respond to changes in demand for NAFE provision and in the nature of the student population. There are uncertainties about future student numbers, particularly in later years, but the plans allow for a higher proportion of 16 to 19-year-olds, in particular, to attend college.

9. The overall student-staff ration (SSR) for NA FE tightened slightly between 1984–85 and 1985–86, from 8.6:1 to 8.8:1, something over 2 per cent. I look for further tightening in the interests of greater efficiency; the plans imply that the SSR figure will be raised by around a further 3 per cent. between 1985–86 and 1987–88, reaching 9:1 in the 1987–88 academic year. The Government's expenditure plans assume that the number of lecturers in NAFE will continue to reduce by 3 per cent. annually, to reach an SSR of 9.4:1 or 9.5:1 in 1989–90, depending on student numbers. SSR targets for the longer term are, however, under review in a joint study with the local authority associations.

In-service training

10. Following the passage of the Education (No. 2) Act 489W 1986, the plans provide for a new scheme for in-service training of teachers and lecturers to support expenditure of up to £200 million in 1987–88. The scheme will support national and local priorities. Included in the former is training for the GCSE. The new arrangements should help to promote expansion and more systematic and purposeful planning of in-service training. They will be evaluated to ascertain how far training programmes contribute to the more effective and efficient delivery of the education service.

Education Support Grants (ESGs)

11. The education support grants programme enters its third year in 1987–88. In that year there will be a programme of 20 activities of national priority at a cost of £92 million, to be supported by grant of £64 million. This year, as last, all LEAs have accepted to invitation to bid and I hope to announce allocations for individual LEAs in December. The programme includes support for schemes for the supervision of school pupils at midday (£39 million of expenditure) and for the provision of books and equipment for the GCSE (£10 million).

Advanced Further Education

12. Following consultation with the local authority associations I intend to determine the basic quantum of advanced further education (AFE) expenditure within the predetermined pool in 1987–88 at £701.5 million, including £1.5 million for recurrent expenditure by local authority institutions taking part in the engineering and technology programme. This figure has been set so as to sustain access to AFE at its present level. I have made available a further £15 million for selective allocation in support of initiatives of high priority, including measures to improve the supply of teachers in mathematics, physics and technology. With this addition the total represents an increase of £55.5 million over the 1986–87 quantum.

13. The plans for 1987–88 assume the achievement of a student to staff ratio of 12:1 and allow for some increase in provision for non-teaching costs compared to 1986–87.

14. The National Advisory Body is considering how the basic quantum should be distributed between authorities and how the £15 million addition should be deployed. I shall decide on the allocation of both elements of the quantum later in the year, in the light of the NAB's advice.

VOTE EXPENDITURE

15. Vote expenditure in 1987–88 is planned to be £3,749 million, £245 million higher than the plans for 1986–87 published in Cmnd. 9702. Within this total, recurrent grant to the universities will increase by £95 million and the science budget by £39 million between 1986–87 and 1987–88. The Government's plans also include increases in provision for local authority and voluntary school capital expenditure, for the assisted places scheme as it builds up to its planned size, and for the funding of the initial costs of city technology colleges.

Universities

16. On 20 May (Official Report, c. 179–80) my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) said that the Government's willingness to provide additional funding for the universities would depend crucially on evidence of real progress in the development of the policy of selectivity, the rationalisation of small departments, better financial management and improved standards of teaching. I have now been able to agree with the University Grants Committee and the Committee of 490W Vice-Chancellors and Principals a major programme of work in these areas. Details are set out in letters from the chairmen of the two organisations which I am publishing today in the Official Report. I shall expect individual universities to co-operate fully and positively in this programme. Progress will be closely monitored, and the future funding of the universities will depend significantly upon its implementation year by year.

17. In the light of that agreement, the Government have decided to provided an additional £61 million for recurrent and equipment grant for the universities in the financial year 1987–88, compared with previously planned expenditure, and a corresponding addition of £71 million in 1988–89. Between the financial years 1986–87 and 1987–88 recurrent grant will increase in cash by £95 million or 7.2 per cent.

18. Subject to parliamentary approval, recurrent grant for the universities on the UGC list for the 1987–88 academic year will be £1,432 million. To the extent that the 1987–88 academic year falls partly in the 1988–89 financial year the grant is subject to review in the normal way. Recurrent grant for the 1986–87 academic year will be increased from £1,341 million to £1,365 million. The new level of grant for the Open University will be announced shortly.

19. General equipment grant for the universities for the academic year 1987–88 will be £111.6 million — an increase of £6.5 million over 1986–87. This now includes the separate provision of £10 million made in earlier years for the selective enhancement of research equipment, which has been consolidated into the general equipment grant.

20. Within the increased amounts of recurrent grant I expect the UGC to make provision for a number of particular improvements, including:

— redundancy and premature retirement and other costs to facilitate rationalisation and the recruitment of new, young academic staff;
— essential repairs and maintenance of plant and buildings;
—increases in library purchasing;
— special initiatives in teacher training to help deal with the teacher shortfall in mathematics, physics and technology; and
— the expansion of continuing education.

21. I have welcomed the universities' proposals for changes in the structure of academic pay. I shall be willing to provide some further additional funding for pay restructuring if structural improvements can be agreed at a cost that can be afforded, and I shall be initiating discussions to that end accordingly.

Science

22. The science budget, from which the research councils receive their grants in aid, will be £654 million in 1987–88, an increase of £39 million over provision in 1986–87. The figure is £24 million higher than the plans for 1987–88 published in cmnd 9702. The science budget in 1988–89 will be £664 million, an increase over previous plans of £20 million, and in 1989–90 £680 million. These sums will be distributed following advice from the ABRC.

Voluntary Colleges

23. Following consultations with the Voluntary Sector Consultative Council I have determined the quantum of AFE expenditure at voluntary colleges grant-aided solely by my Department at £48—85 million, an increase of £3—45 million over that for 1986–87. As with maintained AFE, 491W this will allow the voluntary colleges to participate in the initiative to establish new courses for teachers of shortage subjects. I shall decide its distribution between the colleges later this year in the light of the NAB's advice.

Student Awards

24. Provision for student awards allows for a small increase in the number of mandatory award-holders. Details of new rates of award and revised contribution scales will be announced later. Provision is also made for the basic tuition fee for courses eligible for mandatory awards to increase from £536 to £556 in line with the Government's forecast of general inflation. A comprehensive review of all aspects of financial support for students studying at first degree or equivalent level is in progress.

Local Authority and Voluntary School Capital Expenditure

25. Provision for local authority capital expenditure on education in 1987–88 will be £364 million, an increase of £56 million over the plans for 1986–87 published in Cmnd. 9702. The Department will be writing to local education authorities to inform them of their allocations for capital expenditure within the education block. In addition to those allocations, which will be in total at the same level as in 1986–87, local authorities have spending power derived from capital receipts; that spending power is increasing and will enable gross expenditure on education to be substantially greater than the level of allocations. The total available for allocations to local education authorities for 1988–89 and 1989–90 will be considered in the light of later estimates of spending power from receipts and other factors.

26. Provision for capital grants in 1987–88 to voluntary-aided and special agreement schools, which have no supplementary spending powers, has been increased by about £8.5 million compared with previous plans.

City Technology Colleges

27. My plans provide for the establishment of city technology colleges. The promoters will be expected to meet all, or a substantial part, of the capital costs but will receive a grant related to the number of pupils and sufficient to meet all items of current expenditure which would fall on an LEA for a school which it maintains.

LETTERS FROM THE CVCP AND UGC

28. The texts of the letters from the CVCP and UGC referred to above are as follows:

From the Chairman of the Committee of Vice-Chancellors and Principals 5 November 1986 Dear Secretary of State 1. The acute difficulties of the universities result from the stark fact that the recurrent grant has fallen by one fifth in real terms since 1980–81 and that if existing policies were to be continued further substantial reductions would lie ahead. My Committee therefore welcomed your predecessor's announcement on 20 May, which you later endorsed, that the Government was ready to consider with the UGC and ourselves some further financial provision for the universities in 1987–88 and the following years. Sir Keith Joseph also said that the Government's willingness to make such provision depended on evidence of progress in implementing and building on the changes which he believed were needed. Particular areas which he mentioned were selectivity, rationalisation, better financial management and improved standards of teaching. 2. After the discussions that have taken place during the summer, it has been agreed that both the Chairman of the UGC and myself as Chairman of the CVCP, should write to 492W you about action which has already been taken or is An contemplation. The division of labour in our complementary letters is a natural one, given our different roles. Consultation between the two bodies is close but some of the areas at issue are clearly the primary concern of the UGC. Others, for example, staff development and appraisal, mainly lie with the CVCP. The Committee has already taken action on most of these issues; the other matters dealt with in this letter are under consideration.

Academic Quality and Standards 3. The maintenance of high academic standards is central to the operation of all universities. The CVCP established in 1983 a group under the chairmanship of Professor Philip Reynolds which was charged with the task of offering advice and guidance to the universities on the maintenance and monitoring of academic quality and standards. The resulting paper "Academic Standards in Universities" has recently been published and commended by the CVCP to all universities. It stressed that quality and standards are best ensured when institutions carry the greatest possible responsibility themselves for these matters, a view that has been endorsed by the Government in its welcome for the report. "Accademic Standards in Universities" includes:

(i) codes of practice on

—external examining
— postgraduate training and research admissions, supervision and examinations
— appeals procedure at postgraduate research degree level

(ii) a paper on external involvement in the maintenance and monitoring of academic standards
(iii) a paper on university internal procedures for the maintenance and monitoring of academic standards.

4. The CVCP also accepts the Reynolds' conclusion that assurance about quality and standards requires close, detailed and continuous scrutiny. To this end it has already stated its intention to keep under review the implementation of the codes and papers outlined above with a view to issuing from time to time further reports and advice. The aim is to publish a report by July 1987 based on information from individual universities on the extent to which they are following practice consistent with that advice and how they intend to modify their practice if necessary, in the light of the advice offered. A further report will be published by July 1988 on the changes that have been made. If it appeared necessary, further advice on guidance identifying best practices, particularly to ensure the effective review of the standards of courses, would then be issued to universities in the course of the following year. Comparisons of teaching quality across and within institutions are not easily made. Systems of staff appraisal and development (considered below) can however help considerably in the establishment and maintenance of the high academic quality of which universities are justifiably proud.

Staff Performance and Development 5. The Committee circulated in April 1986 a draft code of practice on academic staff development and training. Comments from universities are to be collected by December 1986 with a view to revising and promulgating the code by July 1987. The Committee will ask universities, not later than the summer of 1988, about the extent to which they have implemented the code and whether they would wish to see any further development or extension of it. The findings will be published. In its further advice on academic standards the Committee will also seek to identify best practice in teaching policies, including such matters as the range of teaching and learning methods used, the arrangements for teachers to appraise and improve their teaching skills, and methods of assessment and feedback to enable policy to be monitored and reviewed. 6. The CVCP is already committed to the principle of performance appraisal for academic and academic-related staff. Discussions are taking place in the context of negotiations with the AUT on a new pay structure, and preliminary agreement has already been reached on the principles and purposes which should underlie a scheme of staff appraisal. Some universities have already introduced such schemes. It is the firm intention of the CVCP to consult universities during the coming academic year regarding draft model guidelines for staff appraisal. After the consultation, 493W guidelines will be published and commended to institutions during the course of 1987. The Committee will then ask universities during the first half of 1988 for information about the extent to which appraisal systems have been introduced by them. A report on its findings will be published by July 1988. 7. A Staff Development Policy Committee, consisting of vice-chancellors, has been established to encourage and coordinate the work which is already in hand on staff training and development, and on apppraisal.

Selectivity and Rationalisation 8. These are matters which lie predominantly in the province of the UGC and individual universities but consideration of principles and policies concerning them naturally form part of the consultations between the CVCP and the UGC. But the Committee plays no part in the implementation of these policies, above all as they affect individual universities. 9. Planning in universities is based on the assumption that the UGC will maintain a policy of selective research funding and that it will be reprting to ministers from time to time on the response of individual universities to selectivity and the extent to which they have deployed their own finances on a selective basis. 10. The UGC's prospective agenda for rationalisation seems likely to go beyond the consideration of small departments alone; the Committee would expect to be consulted. Meanwhile, some universities have already arranged for the transfer of staff and departments and other forms of rationalisation, and most are initiating such schemes.

Better Management 11. The Steering Committee for Efficiency Studies in Universities, under the chairmanship of Sir Alex Jarratt, reported to the CVCP and UGC in March 1985. The UGC has asked universities for a detailed account of the action that they have taken or intend to take on the Jarratt Report and has stated separately to you the further steps which it intends to take. 12. There was also published by the Committee in March 1985 "Guidance on Recommended Accounting Practice in UK Universities" with a view to the achievement of clear, comparable and consistent statements of university accounts. This initiative was supported by the Accounting Standards Committee which looked forward to the issuing of a "franked" statement of recommended practice after two years of practical experience with the present guidance and further studies on particular aspects of accounting practice. It is clear from replies to an enquiry made by the Committee earlier this year that universities have already changed the form of their annual accounts where necessary in order to conform to the guidance. 13. As a way of encouraging and assisting universities to improve their methods of financial management the Committee has recently established a group which includes members with experience of accountancy, banking, and the public service. It has the following terms of reference: To consider the strategic planning and financial management procedures desirable to maximise the effectiveness and efficiency of university operations, noting current best practice, and to make recommendations. The work of the group will be an important part of the Committee's activities over the coming year and it is intended to issue a report before the end of the 1986–87 session. 14. A joint working party of the Committee and the UGC has recently produced a report on the use of performance indicators relating to both inputs and outputs in teaching and research. The report has been accepted by both Committees. The objects are to aid management, to improve accountability and to provide means of making comparisons both within and between institutions. An initial range of performance indicators has already been identified. They will be implemented during the academic year 1986–87 with regular publication covering all universities beginning before the end of 1987. Representatives of the Department of Education and Science and the Advisory Board for the Research Councils 494W will be invited to attend meetings of a Technical Committee which is being established to effect the implementation of these indicators.

Tenure 15. The Government has recently confirmed to the CVCP its intention to introduce legislation to limit tenure when the Parliamentary time-table allows. Meanwhile the Committee has itself embarked on an investigation of the nature of appointments currently being made, and the nature of the grounds which universities see as relevant to the exercising of their powers of dismissal for "good cause". We will be reporting by December 1986. We have agreed with the UGC that during the first three months of 1987 we will consider with them how best to review with universities their policies for the terms of appointing new staff with the aim of ensuring that staff are not initially appointed with tenure in its strongest form where this can be avoided.

University salaries 16. You will know that universities face serious problems in recruiting, retaining and motivating staff. Proposals for restructuring and improving salaries to overcome these problems have been submitted to you separately.

Funding 17. In "The Future of the Universities" we stated that, "The universities accept that the very great support they now receive from taxation, and the key role which they have come to play in national development, impose duties and obligations upon them." Those obligations are primarily discharged by the maintenance of standards of excellence in teaching and research but, as this letter indicates, we also accept that they include ensuring and demonstrating that universities are run efficiently. But the Government, in its turn, must accept the obligation to keep a major national asset in good order. That obligation was clearly set out in the recommendations directed to the Government in the Report of the Jarratt Committee. Additional resources, and on a substantial scale, are required now if the country is to continue to enjoy the benefits of a university system of the highest quality. Yours sincerely Maurice Shock

From the Chairman of the University Grants Committee

4 November 1986

Dear Secretary of State

On 20 May your predecessor told the House of Commons that the Government was ready to consider with the UGC and the CVCP some further financial provision for the universities in 1987/88 and the following years; but that the Government's willingness to make such provision depended crucially on evidence of real progress in implementing and building upon the changes that are needed. The particular areas that he identified were selectivity, the rationalisation and, where appropriate, the closure of small departments, better financial management and improved standards of teaching. He also referred to the conditions for a new structure for academic pay. You endorsed your predecessor's statement when answering Questions in the House of Commons on 10 June. 2. You have subsequently discussed with representatives of the Committee and the CVCP the financial needs of the universities and the initiatives that are being taken. The Committee has stressed to you that both the present and the planned level of university funding as set out in this year's Public Expenditure White Paper (Cmnd. 9702) were inadequate and that restructuring and reshaping the system would involve additional costs. I am now writing to describe the action which the UGC is taking or plans to take in some of the areas mentioned above and also in regard to academic tenure. The Chairman of the CVCP is writing a complementary letter about other areas.

Academic Quality and Standards

Staff Performance and Development 3. You and your predecessor have both endorsed the conclusion in the CVCP Reynolds Report on "Academic Standards in Universities" that quality and standards depend on close, detailed and continuous scrutiny. The UGC supports the steps which the CVCP is taking to encourage improved arrangements for assessment of teaching quality, for academic staff training and development and for the introduction of staff appraisal.

495W

Selectivity in Research Funding 4. The UGC intends to maintain its selective approach to the allocation of research funding, irrespective of the level of overall public support for the universities, when it makes its distribution of grant for 1987–88 to 1989–90 early next year. Universities individually need to draw up and carry out plans for the selective distribution of the resources they devote to research. The UGC will monitor their arrangements for this and will report to Ministers annually on their implementation. During the coming year the Committee will, in conjunction with the research councils, examine further the criteria used in the selective distribution of research funding. It will aim to advise Ministers on this by the end of 1987. 5. The Committee accepts that the Government will look for evidence that selective research funding, combined with the policies of the research councils, leads to better research through greater concentration of effort in strong departments. It will consider and advise Ministers by the end of 1989 on the scope for further development of its policy of selectivity in 1990–91 and thereafter.

Rationalisation 6. The Committee argued the general case for the rationalisation of small departments in its Strategy Advice in 1984. Last year it issued a letter setting out criteria on which universities should judge the effectiveness of their small departments and giving advice on the minimum size of departments in particular areas. It will continue to urge universities to review their provision and, if need be, to rationalise it. The exercises being carried out by the University of London and now by the University of Wales are major examples of internal rationalisation already undertaken on the initiative of individual institutions. 7. The Committee for its part has identified a considerable number of subject areas where, viewed in the national perspective, there is a case for a concentration of provision to strengthen teaching and research, particularly where departments are small and vulnerable and student demand is modest; or in some cases where a reduction of provision is needed to reflect limited manpower needs. It has already completed reviews of five of these areas and specific proposals for rationalisation have been or are being implemented (Pharmacy, Agriculture, Oceanography, Italian and Scandinavian Studies). Reviews of 13 more areas have been completed recently or are now in progress (Architecture, Town and Country Planning, Celtic Studies, Oriental and African Studies, Dutch, Hispanics, Classics, Economic and Social History, Librarianship and Information Studies, Drama, Earth Sciences, Material Sciences, and Teacher Education in Wales in co-operation with the WAB). There are a further 8 specific areas in which the Committee hopes to launch new reviews in the current academic year (Veterinary Studies, History and Philosophy of Science, Dentistry, small Accountancy departments, Music, Palaeontography, Archaeology and small Physics and Chemistry departments) and it plans to extend the programme thereafter. Once the Committee has completed a review it will set a timetable for the implementation of its conclusions by the institutions concerned. The rationalisation process will normally take at least five years from start to finish, largely because even after it has been agreed that a course should be closed it has to be allowed to run on until the present students have graduated. 8. In our discussions you have made it clear that the Government fully supports the UGC's plans for rationalisation even though it recognises that these will sometimes have painful consequences for institutions and individual members of staff. You have also recognised that progress in launching reviews and implementing their recommendations will depend to a large extent on the future level of recurrent grant—because, as in business, rationalisation involves extra expenditure initially—and on the level of UGC's budget for its own staff and running costs.

Better management 9. The UGC has asked universities to give a detailed account this autumn of the action they have taken or intend to take on the Jarratt Report on "Efficiency Studies in Universities" and the associated special studies, in respect of: the roles of Councils, Senates and Vice-Chancellors management and planning structures 496W activities covered by the Jarratt special studies on, for example, purchasing and building and plant maintenance. The Committee will by July 1987 submit to Ministers a report and commentary on universities' responses and will say what action it intends to take in any cases where these appear to be unsatisfactory. It will also ask universities to submit annual reports, starting in July 1988, on the efficiency gains they have achieved. 10. The Chairman of the CVCP will be dealing with other aspects of better management in which our two bodies have been and will be working together. These include the establishment of a working party on financial management in the universities, the follow-up of the report of a joint working party on the use of performance indicators and the issue of a code of guidance on university accounting practice. The UGC will expect all universities to adhere to this code. 11. Improved financial management and accounting in universities needs to be matched by a greater capacity for financial monitoring in the UGC. Steps are being taken to ensure that the Secretariat has the necessary professional expertise for this.

Tenure 12. In our discussions you have expressed your concern that tenure continues to handicap the ability of universities to match staffing to changes in demand and to the requirements of rationalisation and research selectivity and you have confirmed that the Government plans to introduce legislation to limit tenure when the Parliamentary timetable allows. You have also explained that, although the Government recognises the difficulty which universities individually face in seeking themselves to limit tenure, it believes that, pending legislation, there is scope for more appointments to be made without grant of tenure. 13. The CVCP will be reporting by December 1986 on current practice in granting tenure university by university. When their report is available the UGC will consider with the CVCP whether and to what extent it would be appropriate to take steps to ensure that wherever possible staff are appointed without tenure and will give you its advice on this by March 1987. Yours Sincerely Peter Swinnerton-Dyer