Transcript Document
Engineering Professors’
Council Congress: March 2005
University Finances:
What will the next five years bring?
Dr Jonathan Nicholls
Registrar and Secretary
University of Birmingham
The current state of university finances
Latest HEFCE forecasts:
0.5% surplus on £16.36bn income in 07/08
(HEFCE recommends 3% surpluses for HEIs)
Sector expects 9.6% increase in home students
Sector expects 26.7% increase in overseas students
Public funding at 60% of total income
Staff costs rising well above inflation
Borrowings increasing from £1159m to £3591m by 2008
Risks = student numbers, salaries, capital programme
management (£7896m by 2008)
Postcards from the edge
HEFCE monitoring 12 HEIs on a monthly basis
A £120m HEI forecasting break even but developing
a £4m deficit in one month
An £80m HEI forecasting total illiquidity in nine months
A £30m HEI with internal auditors whistleblowing on ineffective governance
A £40m HEI with £140m of redevelopment and new debt of £50m
An £8m HEI with £47m of redevelopment and a funding gap > £8m
A £120m HEI with a deficit of £6m to be recovered from overseas
student growth but no other strategy
Publicly planned HE funding 1989/90–2003/4
pa Funding per
Student
8000
7500
Without Fees
7000
With Fees
6500
6000
5500
5000
4500
4000
89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04
Year
HEFCE settlement for 2005/2006
Headline cash increase of 5.6% over 04/05 (5.4% T and 10.8% R)
But underlying real increase for T is 0.98%
And R increase hides volume measure changes
and further differential for top performers
PGR new monies welcome but HEPI research implies
higher costs than income
Gershon efficiency savings to come
Rewards for research excellence
Greater investment £1.25bn increase from 02/03 to 05/06
Greater selectivity – 6* departments, less funding for grade 4s
Research Councils moving to full cost model (FEC)
Emphasis on financially sustainable research
More funding for RAE outcomes
Capital stream of £500m pa to 2008 (SRIF and Project Capital)
£50m pa by 05/06 for collaborative research
Improved pay for researchers
Arts and Humanities Research Council
Higher Education Innovation Fund £90m pa by 05/06
Higher education and business
Lambert Report did not reach the Government’s expected conclusion
that universities were the problem in inhibiting the exploitation of research
Quite the reverse – the problem is on the demand side rather
than the supply side
Research Councils have played a key role in that success with
the IPR assignment changes nearly 20 years ago
Much more incentive for universities and individuals to exploit IPR
Emphasis has been on Spin Out companies, but now shifting to licensing
Inevitable tensions in universities in transition phase between research
and commercialisation
RDA approach is not yet as mature as Research Councils –
they seek to have all IPR but have no mechanisms to exploit it
Elements of volatility and opportunity
Variable tuition fees
Full economic costing
Introduction of HR reforms and pensions
RAE 2008
A changing overseas student market
Diversity of income streams
Variable tuition fees
A significant
transfer of risk for little immediate financial gain
and more regulation
After bursaries, investment in facilities, cost of salaries
[and pension deficits?], little left for new staff or to redress
the chronic underfunding of last 20 years
The key factor is the principle of payment by the student
for part of the cost
Students’ key reasons considered for going to
university, grouped by subject
Can live at home and study
Engineering
Overall
Didn't know what to do
Live away from home
All friends went
Didn't want to get job
Specialise in an area
Expected by parents to go
Experience way of life
Obtain additional qualification
Having fun/social life
Given next step
Essential for profession
Improve salary prospects
Improve employment prospects
0
Source: The University Lifestyle Survey 2004
10
20
30
40
50
60
70
% 80
Full economic costing
Will require more selectivity and judgement about what
research to support
Will eventually replace SRIF – may have impact on RAMs
and devolution
Must result in better pricing of HE services and demonstration
of value-added
Could be a more dynamic change than variable fees
HR reforms
The Framework Agreement and – for some – Revised Model Statute
Job evaluation and new Framework will add costs to pay bills
Pay inflation at c.3.5% greatly ahead of real increases
in government grants
RAE 2008
Is creating turbulence in recruitment and retention markets
May be the last to be held in the current format
May be the beginning of the end of dual support
Will see a further distribution of resources from
the weak to the strong
Overseas students
Significant value to UK plc: £4bn per annum (>210,000 overseas
students in sector in 03/04 + >100,000 from EU)
PMI has had an impact in promoting UK as a destination
However, recent data shows worrying signs of maturing
markets (eg. China), revived competition from other countries
and in-country and over-reliance on overseas students as a cash
cow for universities
Diversity of income streams
Autonomy
comes from reduced dependence on state funding
but ‘privatisation’ not a realistic option
HEIs must diversify their funding base: unregulated markets for
students; range of research partners; commercial income; fund-raising
But this comes with the price of high performance, responsiveness,
new structures to exploit opportunity
Conclusions
Most significant period of change in 40 years
Clear financial risks but opportunities for the best prepared
Stratification of HE in the UK will rapidly develop
(some closures and further mergers are inevitable)
HEIs must play to their strengths and adopt clear identities
Engineering Professors’
Council Congress: March 2005
University finances:
What will the next five years bring?
Dr Jonathan Nicholls
Registrar and Secretary
University of Birmingham