John Denham, Secretary of State for Innovation, Universities and Skills, spoke positively of the role higher education  played in supporting ‘industrial activism’ in different parts of the country, when he addressed delegates as the G20 summit was also concluding in London.

“It means a new thrust in government policy,” he told delegates at HEFCE’s conference. “Not a return to picking winners, but of consciously organising ourselves for success in the areas of our greatest strength. And this means being coherent across public policy. From what Government buys, and whether it encourages innovative solutions and new companies, to where we invest in fundamental research. From how and what we regulate, to the finance for start-ups.”

Denham recalled his visit last week to four different regions to explore some of these areas of potential strength; research into ageing and vitality in the North East; nuclear power and materials chemistry in the North West; advanced manufacturing in the West Midlands; and creative industries in London.

“Universities were at the heart of every discussion, intimately involved in developing our current strengths and potential in each of these areas,” he said. But the universities secretary said that the sector faced similar challenges to other aspects of the public sector in the recession.

“Many parts of public policy will need to change to make the most of our national strengths and potential, and higher education will also need to respond, ” he added.

“They will affect both teaching and research. Not only whether we produce sufficient graduates, and graduates with the right level of education and employability but, crucially, whether we can ensure we have the right people in the right place at the right time to make the most of our potential.”

Mr Denham identified areas where the pressure for change would be greatest – many of which reflected the debates at the conference. They were: general graduate employability; expectations of vocational subjects and professionally accredited degrees (of which more would be said in next week’s Higher Education Skills Strategy, he said); more non-traditional degree delivery; greater competitive strength in postgraduate provision; more science, technology, engineering and mathematics students; and better prioritisation of research budgets.

Resp0nding to a question from Professor Elaine Thomas, Vice-Chancellor of the University for the Creative Arts, Mr Denham provided reassurance that creative industries were seen as important by Government, despite special strategies to promote science.

Mr Denham delivered an important message to delegates after a busy couple of days considering the impact of the recession on the sector.  It offered a reminder of government priorities and set the scene for discussions on funding.

Universities secretary John Denham said that Government was keen to avoid short-term funding decisions in the light of the recession. Ministers would – both in the run-up to the Budget and afterwards – want to consider funding for the sector in broad terms over a five-year period and would want to work with the sector to develop this.

Funding would not just come from Government, but also from fees and other private sources. But society also had to be convinced of the value of higher education.

Mr Denham’s comments came in response to a question from Universities UK President Rick Trainor in the Q&A session after the Secretary of State’s address to the conference.

In his speech, Mr Denham gave a strong reassurance about the autonomy of universities and the need to avoid attaching too many strings to funding, but he urged universities to benchmark potential efficiencies with each other.

“I do not want a funding system that creates fixed groups within the higher education world,” he said. “We should not centrally prescribe roles for individual universities. But I want to provide more incentives for dynamism, innovation and entrepreneurial activism.”

He suggested that there might be fewer centrally held funds in future, though some strategic funding remained important. But there might also be more contested funding like the Economic Challenge Investment Fund.

Universities and colleges needed to play their part in a public sector drive for greater efficiency. “We do not attempt to determine the operating practices of higher education institutions,” he said. ”But as the spotlight shines on other parts of the public sector, you should be making best use of the benchmarking data available to you on cost effectiveness and efficiencies.”

Mr Denham also touched on pay in the sector. ”The higher education sector needs to be sensitive to what is going on in the wider world,” he said. “When the fees review comes, it is bound to ask how effective has been the use of the monies raised to date.”

Delegates responded warmly to the Secretary of State’s speech. His message that Government wanted to develop a longer-term funding strategy would have been welcome to many.

But it also implied a need for the sector to ensure it was doing all it could to be responsive and efficient. And that was something of which delegates had seemed particularly aware in discussions over the previous couple of days. It left them to go home on an optimistic note, but also in little doubt about the challenges they faced.

The second day of the conference brought out a number of interesting points. Firstly is that higher education has significantly expanded in the past 30 years – both in terms of numbers of students and institutions. But perhaps the most striking difference is not the change in size but the way in which HE has changed.

Whether it is the increasing prevalence of knowledge transfer and business links, delivery of continuing professional development and other work-based learning, the internationalisation of higher education, higher education delivered in further education colleges and the increase in part-time student numbers, the changes have been massive.

But yet the public are rarely aware of these and still think that university is how it was ‘in their day’. It was commented that the local media and MPs know their local university but rarely know the impact of the sector as a whole and that this is something that needs to be addressed.

It is probably this lack of understanding of the higher education sector that plays into the discussions about quality and standards. If people do not understand the differences between different universities and different missions then they will not understand the arguments that a 2:1 from one university is different from a 2:1 from another university. This is especially true when the public are so interested in shoe-horning universities into league table rankings of which university is ‘better’ than the next.

One cannot just say that the whole quality and standards debate will be sorted out simply by better understanding of the system. There are some real areas for improvement, whether the external examiners system or the information and reassurance about the periodic review system, but we are starting from a strong place with generally high quality and standards across the sector.

The other issue was that the economy coming out of the recession is unlikely to be the same as one going in. Higher education therefore has a key role in delivering the graduates, skills and knowledge for this and Secretary of State John Denham hinted at some of the areas that could form a new knowledge economy including the life sciences, digital or creative industries.

In his plenary on ‘Cross-cutting themes and Leadership, Governance and Management’, HEFCE Chair Tim Melville-Ross had the unenviable task of pulling out the cross-cutting themes from all the – lively and varied – conference discussions. He identified these as follows:

- Communication, i.e. how we as a sector get our message across. Later, he rather bravely asked the Secretary of State whether he thought the sector was good at communicating itself and its value – the minister had to concede that it was indeed something the sector could work on. The message from the keynote speech by David Ward, Past President of the American Council on Education and former Chancellor of the University of Wisconsin-Madison, had been that as a sector we have to communicate in language that is understood by those with whom we are trying to communicate.

- Institutional differentiation, positioning and priorities, i.e. what sort of a university/college are we? And what are the organisational consequences of this? Some people ask the question ‘is a way into the differentiation theme a top-down strategy – should we control this?’ Tim rather sensibly declined to answer the question there and then!

- Funding consequences of the answers to the first two points, and in discussions the point was made that the funding model needed to reflect the changing pattern of students, the minority of which are the classic 18-21 year-old undergraduate. What is the role of HEFCE? If we talk about a differentiated sector then do we need a differentiated funding model? Is the current model sufficient? Would it, for example, allow for a multi-university research funding model?

- Risk identification and management – how well is the sector prepared to face these? Tim ventured to ask: not as well it could be? How could it be in such uncharted times? He suggested that HEFCE needs to be asking higher education institutions to be clear about scenario planning and the possible futures that they could face.

- Technology: the influence and impact of technology on both the student experience and business processes.

All of these add up to the need for top quality leadership, governance and management.

Governance which constructively challenges; the view in the room was that governing bodies, being made up in large part by people from the private sector, may well be feeling nervous and ultra-risk-averse at this time.

Leadership – Tim’s view, and based on the literature, has two key characteristics – drive and humility; humility in the sense of an open mind and a willingness to really listen – at this point he did a promotional for the Leadership Foundation for Higher Education (LFHE).

Management – here he made the link between the need for effective management in higher education institutions to the need for effective management in business and the need for higher education institutions to teach management in the curriculum, Tim saw the core attributes of management skill as being experience, intelligence and interestingly ‘emotional intelligence’!

Comments and questions from the floor ranged widely:

Professor Geoff Crossick, Warden of Goldsmiths, University of London, highlighted the number of references to the ‘public good’ during the conference and the debate around ‘If it doesn’t make a profit why do it?’ ‘Not good enough’ was the answer in the room. The point was made that higher education needs to argue that higher education institutions are public good institutions.

Professor Paul Wellings, Vice-Chancellor of Lancaster University, counselled against a utilitarian approach to preparing students for jobs – it was pointed out that 75% of the jobs today didn’t exist 20 years ago. He made the case to avoid short-termism and raised the challenge of knowledge versus utility/skills. Universities UK President Rick Trainor added that high-powered employers were looking for high-powered graduates/employees and recognised that some training would be needed.

Alice Hynes, Chief Executive of GuildHE, invited Tim to reflect from his commercial perspective on the question of de-mergers as well as mergers in a differentiated and restructured HE sector. To which the answer was: why not?

Professor Leni Ogelsby, Senior Deputy Vice-Chancellor of the University of Teesside, asked what was being done to support and capacity-build in governance and governing bodies in the light of recent senior appointment changes. The LFHE’s governor development programme was cited.

Overall a strong case was made for world-class skills in the leadership, governance and management of institutions to sustain higher education’s world-class reputation. And this presented both an exciting and challenging agenda!

Are university staff ready to take a 3am call from a student who wants help with their essay? This was one of the interesting issues raised by HEFCE Chair Tim Melville Ross at a plenary session of the conference this morning.

He said he had heard a lot of talk about employment contracts over the past 24 hours. “If students want to be online at 3am, should staff be too?” asked Melville-Ross, echoing a campaign commercial made by Hillary Clinton during the US presidential race that asked who voters would want to answer a 3am phone call in the White House.

Dealing with such a demand in UK higher education would lead to institutional change and could require a more differentiated funding model, the HEFCE Chair said.

He was identifying four major issues that he had heard discussed during the conference. Another was communication, a complex issue that had come up regularly. David Ward, Past President of the American Council on Education and former Chancellor of the University of Wisconsin-Madison, had said that we must communicate in a language appropriate to those we want to influence. You must differentiate in the way you communicate, he said. A related issue was whether there needed to be some national drive to deliver differentiation, collaboration and prioritisation, and to avoid the process becoming anarchic.

The third issue identified by Mr Melville-Ross was risk, and whether the sector was well prepared to deal with risks. His sense from talking to vice-chancellors was that universities were not as well prepared as they could be, despite an awareness of risks. The financial health of the sector looks good now but vice-chancellors fear uncertainty ahead. Universities need to plan for different scenarios, including seemingly outlandish ones, he warned.

Finally, Mr Melville-Ross turned to a subject close to his heart: governance, leadership and management. There was huge value in constructive challenge and support from a well-selected, well-run board, he said, adding that leaders needed two key characteristics, drive and humility, with a willingness to listen and an open mind. He promoted the work of the Leadership Foundation, particularly in developing the complex management skills needed in today’s climate.

In the discussion, delegates identified some other key themes. Professor Geoffrey Crossick, Warden of Goldsmiths, University of London, said that universities needed to reclaim the importance of the ‘public good’ that they delivered and to argue that this is a key part of their role, including through support for widening participation.

Professor Brenda Gourley, Vice-Chancellor of the Open University, said that she was disappointed that there had not been enough recognition of the importance of technology, both in the storage and delivery of knowledge.

Prof Paul Wellings, Vice-Chancellor of Lancaster University, said that it was important that employers recognised that 75% of today’s job categories did not exist 20 years ago, and that universities were good at delivering ‘knowledge workers’ with skills to adapt to change. Professor Rick Trainor, President of Universities UK, said that employers still expected graduates with a greater range of transferable skills.

All in all, this was a conference designed to deal with and respond to change. Delegates had a greater sense, perhaps, of the challenges and opportunities they faced in these difficult times.

New thinking about students will be needed from universities in a period of constrained public funding. But there is also an important challenge in explaining to the public both the expectations that are placed on students and the contribution that widening participation programmes make to social mobility.

In the presentations from the strategic HEFCE committes that opened the second morning of the conference, Professor Tim Wilson, Chair of HEFCE’s Teaching, Quality and Student Experience Committee, pointed out that pressure for expansion would continue but funding for additional student numbers would continue to be constrained.

At the same time, he continued, there were increasingly diverse expectations from a body of students where the majority was now different from the traditional 18-21 year-old undergraduate.

But students were more than consumers, he insisted. We needed to educate students, parents and the public more effectively that higher education is a partnership between students and providers. This was essential in an environment where higher education was expanding.

Professor Dianne Wilcocks, Chair of HEFCE’s Widening Access and Participation committee, mentioned a recent Million+ report which showed that when students from poorer backgrounds were supported to succeed at university, they did well afterwards.

But she also said there were problems of public perception in the agenda designed to increase participation by such students. She suggested widening participation would be better expressed as an agenda with important social goals including mobility and cohesion, which had wider public understanding.

In the discussion, several delegates said that there was a need for clearer messages about the student experience today. Others said that the way teaching was delivered may need to change to reflect a potential resource squeeze, drawing on podcasts and other technological innovations to avoid reinventing the wheel. 

One potential innovation that might help to widen participation could involve breaking degree programmes into manageable chunks for professional development, without losing the quality or demand of the overall programme.

Changes in the nature of students and learning will be a big challenge for the sector. But they also present a real opportunity for innovation – provided the public understands the changes and why they are happening.

Universities face significant challenges when it comes to delivering research and engaging with employers in the next few decades. Delegates brought their insights on these challenges to the conference this morning.

Professor Paul Wellings, Vice-Chancellor of Lancaster University, set out the short- and medium-term challenges facing research over the next 15 years. In the short term, the recession may bring new demands from Government, including for more market-oriented research. Research may need to respond to the emerging economic trends during the recovery.

At the same time, there are real international challenges, particularly from the so-called BRIC economies – Brazil, Russia, India and China – which will become particularly pronounced over the next 15 years.

Alastair Balls, HEFCE Board member and Chair of its Enterprise and Skills advisory committee, identified several ways in which higher education might need to adapt to the needs of individual students and employers in the coming years.

Co-funding of courses by employers would be tested over the next five years, and had greater potential in a recession. Students may come to be seen as outputs – with the skills employers want – as much as customers. And employer engagement would become more embedded in higher education.

Universities are also likely to face a dilemma, as much innovative research is for the public good rather than being itself profitable. But there will be a greater appetite for commissioned research, consultancy and professional development from business.

There was recognition, too, that behind this changing environment there is also the pressure and opportunity presented by new technologies. And this is perhaps the area that needs greatest exploration. For it is technology that will help the competitiveness of the BRIC economies; equally it is technology that may enable courses to be delivered in ways that more closely meet the needs of employers and learners.

In the discussion, there were worries among some that research might become too utilitarian and there was some scepticism about whether employers would co-fund courses. Others felt the incentives for knowledge transfer were not sufficiently strong.

But other participants felt it was more important to say what higher education was for – promoting what universities do best – rather than just what it is against, particularly in these times. There was also a view that universities should try to play to their strengths, which may mean funding that recognised diversity more effectively.

The challenges of the next two decades are likely to demand fresh thinking and new approaches from universities, particularly as the BRIC countries get their act together. This will mean playing not only to the strengths of individual universities but also those of UK higher education, but doing so in a way that both embraces and leads these changes.

Professor Geoff Crossick’s presentation to the conference on autonomy raised some fundamental issues about the relationship between universities and the state, and the role of the funding council.

There is no doubt that the historic strength of UK universities has been founded on their autonomy in several key areas including student admissions, staff appointments, the curriculum and research spending. This conclusion has been supported by recent empirical research, which demonstrated positive correlations between autonomy in budget setting, staff hiring and wage determination with research performance in European universities. The research also concluded that having budget autonomy also ‘doubled the effect of additional money on university performance’.

The UK’s success contrasts with that of most centrally managed systems, where performance has been less than optimum. The European Commission’s modernisation agenda recognises the need for a more autonomous approach as the only way in which Europe’s universities can remain competitive.

A key issue raised by Professor Crossick’s speech is how institutions’ autonomy can be preserved and extended. In the longer term this raises fundamental questions about the appropriate accountability and regulatory arrangements for the sector as a more market-based system, which is less dependent on public funding, emerges. In the shorter term, there are other actions that can be considered.

One option to which Professor Crossick rightly gave low priority in this context is the impact of the accountability burden. As he pointed out, the progressive reduction in the burden as a result of better regulation – although beneficial in itself – has not led to any perception of increased autonomy.

More important in defining the relationship between universities and the state is the principle of providing public funding through the block grant. Although initiative funding has produced some benefits for the sector it is important that an appropriate balance is maintained so that universities are free to set their own agendas and respond to the markets in which they operate.

It is also important that public policy interventions should be based on hard evidence and informed by consultation with experts in the sector. Success is most likely to be achieved if universities and policy makers see themselves as partners. Universities look to policy makers to create the right circumstances for them to thrive, but also to allow them to make proper judgements about their own strategic direction. Universities recognise the importance of transparency and accountability, but regulation should be enough, and no more than is necessary, to ensure public confidence.

The debate on public confidence in the quality of higher education started before the official ‘challenge debate’ with questions at the first plenary on quality. A number of vice-chancellors had been on the receiving end of a grilling by the innovation, universities and skills select committee hearings on quality and standards.

Professor Colin Riordan, Vice-Chancellor of the University of Essex, led the debate which started with a round of discussions on the difference between quality and standards. Professor Riordan chairs a HEFCE sub-committee looking at concerns about quality: are they justified,and if they are, how can HEFCE and the sector address them, and how should quality arrangements be changed?

As with most complex debates, no firm conclusions were reached, but there was a consensus that we all – HEFCE, the HE sector and the Quality Assurance Agency for Higher Education - have a stake in this important issue, and finding the evidence and communicating the outcomes to all stakeholders including parents and students is vital. We need careful and thoughtful discussion leading to changes to the quality system which will be implemented in 2012.

The breakout session on autonomy was highly entertaining, though not exactly mould-breaking – nor even, in the words of Geoff Crossick, Warden of Goldsmiths, who presented – very important. He didn’t mean that the topic wasn’t important, but that the discussion wasn’t going to lead anywhere nor add to our insights. But it was fun.

General agreement that academic freedom was quite distinct from institutional autonomy, that academics cared more about having their autonomy impinged on by university management than by HEFCE and Government, and that regulation was not a particularly important issue.

Thinking back on it all I realise of course that we did not even address the exam question, which was what we had to do to preserve autonomy. Geoff did not pose the question, and no-one from among the 30-odd (very distinguished) participants was inclined to address that either.

Geoff did set three exam questions, but they actually concerned the definition of autonomy and whether it was really at risk. He concluded – and most participants agreed – that in no real sense was it at risk, and in particular that regulatory burden did not equate to a threat to autonomy. There was some doubt even as to whether reliance on multiple rather than a single source of funds would lead to more or less autonomy.