Universities want help if national insurance extended to pensions

Any support for public sector organisations to fund the expected levying of national insurance on employers’ pension contributions must be extended to universities, UK sector leaders have said.

Chancellor Rachel Reeves was expected to use Labour’s first budget for 14 years on 30 October to increase employers’ national insurance contributions, with Universities UK estimating that a 1 per cent rise could cost the sector £130 million – and also to apply it to employers’ pension contributions.

The impact of this is harder to model, but it is feared that this proposal could cost universities about £5 million each – potentially forcing fresh rounds of job losses and raising further concerns about whether some institutions will be forced into bankruptcy.

The Times reported that Ms Reeves was expected to reimburse public sector organisations, including hospitals and schools, for the cost of applying national insurance to employers’ pension contributions, because otherwise they would have to make significant spending cuts.

The Universities and Colleges Employers Association (Ucea) told Times Higher Education that “any support or mitigation must also apply to the higher education sector”.

Raj Jethwa, Ucea’s chief executive, has written to Baroness Smith of Malvern, the skills minister, asking her to consider extending assistance to universities.

“Given the financial pressures facing higher education institutions, particularly those dealing with the substantially increased costs of the Teachers’ Pension Scheme, there is much anxiety about any increases in employer national insurance contributions in the budget,” Mr Jethwa told THE.

“Increasing the NI paid on salaries or introducing NI on employer pension contributions will only increase the acute financial pressures on HE institutions, particularly as the defined-benefit schemes offered in the sector generally require higher rates of employer contributions.

“While it is right to recognise the significant budgetary impact on public sector employers of any increase in costs, any support or mitigation must also apply to the HE sector.”

A steep rise in employer contributions to the Teachers’ Pension Scheme (TPS), from 23.68 per cent of salary to 28.68 per cent, is estimated to be costing the mainly post-92 universities that participate in the scheme about £125 million annually.

Mr Jethwa’s letter to Baroness Smith highlights that while public sector employers received subsidies to meet these increased costs, no such support has been offered to universities.

“The failure of past governments to support HE institutions over the TPS increases would only be reinforced if mitigations in respect of NI on employer pension contributions were not extended to the HE sector,” he writes.

Mr Jethwa also warns that any new levy “may also have consequences for the viability” of the Universities Superannuation Scheme, offered mainly by pre-92 universities, “risking further industrial action in the future” in the wake of several years of strikes over now-reversed increases in contributions and cuts to benefits.

Jo Grady, general secretary of the University and College Union, said that ministers must use the budget to “invest in higher education and protect the pay, terms and conditions of university staff”.

“Those with the broadest shoulders should contribute more, but increasing employers’ NI across the board could have unforeseen consequences. Reeves must carefully assess how any increase would impact universities,” Dr Grady said.

Universities remain fearful that the budget will result in flat-cash settlement for research, while also forcing the Department for Science, Innovation and Technology (DSIT) to take on the costs of the UK’s participation in Horizon Europe – estimated to stand at between £800 million and £1 billion.

Sector leaders have warned that a settlement on these terms would force “deep cuts” across the UK research landscape.

chris.havergal@timeshighereducation.com