Hefce chief warns of ‘worst-case’ £4.4bn budget deficit for universities

English universities could face a £4.4 billion budget deficit within two years in the face of a “concatenation” of financial pressures, the chief executive of the Higher Education Funding Council for England warned.

Madeleine Atkins told Hefce’s annual meeting that a “worst-case scenario” of rising staff costs, falling public subsidy and disappointing recruitment could leave institutions battling deficits which averaged 17 per cent of their annual income by 2017-18, rather than the 3.3 per cent (£1 billion) surplus that is currently predicted.

The worst-case scenario outlined at the annual meeting included a 5 per cent fall in international student fee income, and Professor Atkins highlighted that this could be “very serious indeed”. She said that universities’ forecasts of international recruitment had been “very optimistic and bullish”, and had been missed at undergraduate and postgraduate level for 2014-15 and, possibly, 2015-16.

The projection also included a 2 per cent per annum increase in staff costs, and annual reductions of 5 per cent in both government funding and fee income from home and European Union students.

“Each one of those factors, I’m sure, institutions can deal with perfectly robustly on the basis of the surpluses and the reserves which we see in the forecasts,” Professor Atkins said. “The problem comes when there is a concatenation of these factors.”

Professor Atkins emphasised that the modelling did not include any further mitigation that might be undertaken, but argued that the projected trends could “more than conceivably” happen.

To eliminate the projected shortfall, universities would have to find savings running to five times the value of the £1 billion in efficiencies which had been found over the past three years.

Professor Atkins acknowledged that Hefce was set to become part of a new Office for Students under the higher education Green Paper, but she argued that its work would go on.

“Whether we are called Hefce or whether we have translated into a new body really is irrelevant,” she said. “We will still be holding those functions and we stand ready as always to assist and support governing bodies.”

chris.havergal@tesglobal.com