Survey shows real-terms cut

One in five higher education institutions will suffer a real-terms cut in funding next year, a survey by Universities UK has found, writes Alan Thomson.

It means that about 20 universities and higher education colleges will receive increases for teaching and research of less than inflation in 2002-03. A further 15 institutions will receive 1 per cent or less above inflation.

The news came as the annual transparency review of higher education costs identified a £1 billion shortfall between the money UK higher education institutions spent on teaching and research last year and the amount they ought to have spent.

The UUK survey highlights the effects of the Higher Education Funding Council for England allocations for teaching and research in March. Hefce said there would be a 3.7 per cent rise in total funding for teaching in 2002-03 and a 5.9 per cent rise in research cash.

But vice-chancellors claim that it is more like a real-terms cut of 1 per cent for teaching. They argue that Hefce is including a number of funds that are earmarked for specific purposes, such as widening participation. Universities strip these out of core teaching budgets.

Universities have been stung by the government's failure to fund the improvement in research ratings in the recent research assessment exercise, a shortfall put at £140 million next year.

Tony Bruce, director of policy at UUK, said that the government had led the sector to believe that funding would stabilise between 2000 and 2003 with a small rise in funding per student this year.

Dr Bruce said: "There were expectations that we were entering a period of stability... but the (funding) outcome has not supported that expectation. The sector is not in good shape given the functions and objectives government expects from it."

Another problem is staff pay. Demands are running way above inflation, and the problem of low pay identified by the Bett report of 1999 remains unresolved.

Chancellor Gordon Brown's budget contained more bad news - a 1 per cent rise in employers' National Insurance contributions that will cost universities about £70 million more next year, equivalent to roughly 3,000 staff posts.

The joint UK funding councils' review of costs - the transparency review - showed that institutions spent nearly £13.5 billion on teaching and research infrastructure in 2000-01. The transparency review adjusts these costs by 7.5 per cent to take account of the full costs of maintaining the infrastructure in a safe and productive state, which takes the total adjusted cost to almost £14.5 billion.

The shortfall has grown since the first transparency review last year, which looked at costs in 1999-2000. Then the gap between the expenditure and adjusted costs was just over £916 million, representing an adjustment of 7.3 per cent.

UUK chief executive Baroness Warwick said: "What is of concern to all universities is ensuring that our students have a high-quality experience. That requires university teaching to be informed by research, provided by high-quality and motivated staff, in buildings fit for purpose and using modern equipment."

David Westbury, chairman of the transparency review, said this week that about a fifth of the £1 billion shortfall was down to institutions failing to charge a proper market rate for their services.

Professor Westbury, pro vice-chancellor of the University of Birmingham, said institutions as well as the government had to act to address the shortfall.

While most of the extra money would have to come from the state, about 20 per cent could be found by universities increasing their fees for commercial research, professional development courses and consultancy.