Funding Formulae where Costs Legitimately Differ: The Case of Higher Education in England

The institutional framework for the funding of higher education in the United Kingdom is discussed. In England, much of the financial support for teaching and learning, especially of 'home and European Union' undergraduates, is channelled through the Higher Education Funding Council for England (HEFCE). The HEFCE operates a formula funding mechanism, although in the wake of recent policy reforms—which include the introduction of differential tuition fees—this is likely to change. Some simple economic models of funding mechanisms that may be suitable for application in this context are constructed and evaluated. Implications for the design of future policies are discussed.

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