V-cs: surplus puts false gloss on university finances

Vice-chancellors have warned that new figures showing an improvement in higher education's finances mask the reality of a continuing cash crisis.

Figures released by the Higher Education Statistics Agency indicate that the UK's academic sector turned an overall deficit of £50.5 million in 2000-01 into a £210 million surplus by 2002-03.

Over the same period, the number of institutions recording a deficit dropped from 75 to 48, and the biggest deficit held by any single institution fell from £18.3 million to £6.2 million. (The names of individual institutions are not identified in the report.) Total income climbed to just over £15.5 billion from £13.5 billion, while spending went up to just under £15.4 billion from £13.5 billion.

Universities UK said this week that the headline figures failed to take account of a variety of financial constraints and demands that institutions were now operating under.

A UUK spokeswoman said: "As ever, the detail is the key: the high-level nature of these figures masks issues such as the fact that a lot of income is earmarked for expenditure on specific projects and/or has very specific restrictions regarding its use."

UUK also pointed out that while overall finances appeared to have improved significantly, the sector was a long way short of achieving financial health as defined by the Higher Education Funding Council for England.

The spokeswoman said: "In our spending review submission, we noted Hefce's estimates that the sector needs an operating surplus of 3 to 4 per cent of income per annum to provide a positive cash flow for reinvestment and to fund future developments.

"Against the headline figure of £15.5 billion income published by Hesa, 3 per cent would amount to £465 million - in other words, more than twice the Hesa quoted surplus of £210 million."

The figures were based on returns from 171 institutions in 2002-03 and 167 in 2000-01. Hesa plans to publish a more detailed breakdown of the data in June.