Whitehall seeks £1.5bn 'savings' from sector budget

Savings of £1.5 billion to be found from Whitehall's universities, innovation and skills budget include £700 million that has not yet been accounted for.

The Government pledged to significantly increase investment in higher education in October's Comprehensive Spending Review, but it said the investment was dependent on "value for money" savings of more than £1.5 billion being made by the Department of Innovation, Universities and Skills by 2010-11.

A report from the board of the Higher Education Funding Council for England, just released online, outlines some of the savings to be made. This includes £100 million to be saved by removing funding for students who are studying for second degrees at equivalent or lower level qualifications (ELQ).

The Hefce document also identifies £243 million to be saved by the research councils and £9 million from innovation funding.

But the report, from a November 2007 board meeting, also notes: "There is nothing to indicate where the remaining £1,191 million a year in savings will come from."

Hefce declined to comment further.

A report on DIUS's value-for-money delivery agreement published last month suggests the department has yet to confirm where £700 million of the savings will come from.

It says: "At this stage we are still finalising details, but we expect the balance of savings, in the region of £700 million, to come from further education and skills, higher education and science and innovation additional value-for-money activity, and £12 million from the department's administrative costs."

The report highlights a 2.2 per cent annual real-terms rise in spending following the CSR, from £18 billion to £20.8 billion between 2007-08 and 2010-11. It says the £1.5 billion savings will be achieved through a range of strategies, including the "reprioritising" of spending and "improving procurement".

It says: "Key areas being targeted are in higher education institutions, including procurement savings, shared services, better use of information and communications technology and of accommodation space."

The report says procurement savings within higher education should hit £75 million by 2010-11, with Hefce working with procurement experts to deliver the improvements.

It says another £75 million will be saved across the sector through greater use of shared services by 2010-11. But it also identifies potential threats to its forecasts. It says: "The key risk lies in lack of buy-in from what are relatively autonomous institutions and their existing collaborative bodies."

A DIUS spokesman said: "The balance includes a lot of smaller items that have been identified, but does include some areas still being considered, developed and quantified at this stage."

Bahram Bekhradnia, director of the Higher Education Policy Institute, said: "The Government is giving with one hand and taking away with another." But he added: "It appears to be giving considerably more than it is taking away, hence the 2.2 per cent average real-term annual increase in the DIUS budget."

David Willetts, the Shadow Universities Secretary, said that value-for-money savings had to be "credible and properly worked out".

He said: "Until the sector knows where the savings are coming from, there will be a corrosive uncertainty about their financial plans."

A spokesman for Universities UK said: "We're keeping a close eye on where savings will be made. We are also awaiting the Secretary of State's imminent grant letter, which we hope will clarify the situation."

john.gill@tsleducation.com.