Just this afternoon HEFCE have published their response to the grant letter, putting flesh on the bones of the funding agreement. On teaching funding they say that "the overall level of government support for teaching in universities and colleges is set to increase over the next few years as a result of higher tuition fee loans under the Government’s new finance arrangements for higher education. HEFCE’s grant will reduce accordingly, but our commitment to supporting high-cost and strategically important subjects, widening participation and smaller specialist institutions will be maintained".
In addition to the Teaching grant and the ring-fenced research settlement, there will be £150million for knowledge exchange, £265million for capital funding, and £125 million for special national facility programmes such as museums and JISC. Regarding student number controlls, the announcement says that HEFCE will "adjust grants to HEIs at a rate of £3,800 per full-time undergraduate where there has been over-recruitment in 2011-12. The rate for over-recruitment in 2012-13 has not yet been announced, but universities and colleges should expect this to be at a level that represents a financial disincentive to over-recruit".
Simon Baker has produced a quick-analysis of the announcement on the THE website.