Funding mechanisms will be adjusted to align universities¡¯ activities more closely with emerging government priorities, the Universities Secretary has said.

Speaking at the annual conference of the Higher Education Funding Council for England on 2 April, John Denham said he wanted more incentives introduced to ensure that universities were doing all they could to support the economy as it emerges from recession.

¡°What we do to respond to the downturn must take us towards our vision for a world-class higher education system in 10 to 15 years,¡± he said.

¡°We will need to ensure that government policy is coherently organised to make the most of this potential.¡±

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Indicating that the funding system would be rejigged to ensure that the Government¡¯s ambitions were achieved, Mr Denham said he wanted greater incentives to encourage ¡°dynamism, innovation and entrepreneurial activism¡± in the university sector.

He said: ¡°I will want to discuss with the funding council how we might evolve our current funding model to enable the higher education system to become more responsive.

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¡°It is relatively easy to create new pots of money to incentivise change, but at the expense of reducing the size and flexibility of the core grant.

¡°So although we could consider a slight rebalancing ¨C relatively less funding in the core block grants and relatively more to support and drive change ¨C the temptation to proliferate ever more initiatives could be strong.

¡°So in developing the framework for higher education, which we will be publishing in the summer, I¡¯ll be discussing with Hefce what steers we should give. Perhaps we should clearly limit the amount that could be withheld centrally at any one time.¡±

Mr Denham highlighted international capacity and collaboration, e-learning and business engagement as among the areas that he was particularly keen to promote.

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He acknowledged that re-emphasising these areas in the funding model might require areas currently supported by special funding streams to take a back seat.

¡°The Higher Education Innovation Fund [which supports third-stream activities] has already moved from competition funding to allocated grant; and as such activities prove their worth, [they] may at some point no longer need to be separately identified,¡± he said.

¡°I would be disappointed if we had to spend as high a proportion of our funding on widening participation as we do today.

¡°Within this approach, we may see the fastest change and the greatest innovation where funding is distributed through contestable processes rather than allocation.¡±

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Responding to Mr Denham¡¯s comments, Rick Trainor, president of Universities UK, said that core grant was crucial to providing universities the stability required for long-term planning. Any redirection of this money could have adverse effects, he said.

¡°New money for targeted initiatives, in addition to the stability of the core grant, is the way to ensure that universities can respond to specific strategic demands,¡± he said.

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john.gill@tsleducation.com