Many universities and colleges have for many years sought to generate income from non-governmental sources. Such sources of income include student accommodation, catering, consultancy, the use of sports facilities – and for some of the older institutions substantial endowments, sometimes on the form of property, and donations from alumni.
Mike Shattock in his book Managing Successful Universities (OU Press – 2003) reminds us that the generation of non-state funding has a long tradition in the UK, pointing out that in the 1930’s about one third of universities’ income was from student fees, one third from other private sources (mostly endowments and investments) and one third from the state (through the University Grants Committee). In 1980 the government permitted institutions to charge overseas students (those from outside the EU) full cost fees, which led to a greater awareness of the market in many institutions.
The importance of generating more commercial income was brought to the fore in the 1990’s, when there was a significant fall in funding per student, the “unit of resource.” Between 1989 and 1997 there was a drop of some 36% in the public funding of teaching in England, and it has been estimated that the unit of resource has fallen by 45% since the late 1980’s. This has led both to institutions themselves seeking to generate more income from non-governmental sources, known as “third steam” or “third leg” funding (in addition to the primary sources for teaching and research), and to policy initiatives from the Government and the funding councils to support such strategies.
The Higher Education Funding Council for England (HEFCE) began this third stream funding in 1999, with the launch of funds specifically to support institutions to increase their capability to respond to the needs of business and the wider community, where this would lead to wealth creation. The first such funding stream was the Higher Education Reach out to Business and the Community initiative (HEROBAC) – sponsored by the DfES and DTI,, and this was followed by successive rounds of the Higher Education Innovation Fund (HEIF), principally provided by the Science Budget.
In Wales third mission activities are supported by the HEFCW Third Mission Fund and the Welsh Development Agency Knowledge Exploitation Fund. HEFCW has published an Evaluation of the Fund and in late 2009 consulted about the support of its third mission activities from 2010.
In Northern Ireland the Department for Employment and Learning provides core funding for third stream activities through the Northern Ireland Higher Education Innovation Fund, supplemented by the Higher and Further Education Collaboration Fund "Connected."
In Scotland some of the key priorities in the Horizon Fund for Universities are knowledge transfer and innovation; employability and skills development; and widening access. There are also useful resources on the SFC web site.
The 2003 White Paper The Future of Higher Education had as one of the two principal areas in which the Secretary of State felt that universities “had to improve” the need for better progress in harnessing knowledge to wealth creation and helping to turn ideas into successful businesses. This confirmed the strong political steer to generate new sources of income.
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