University infrastructure ready to weather tuition fees storm

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With the announcement of the Browne Review, a series of student protests and the Government voting to raise the cap on tuition fees to £6,000 at the end of last year, it is not easy to avoid the issue of university funding.

As yet, the full implications are unclear, for Lancaster or any other university. It isn’t known how much funding Lancaster might lose, how high fees will become or how courses and departments will change – if indeed they do. However, the figures suggest that Lancaster University is entering a period of turbulence – “the biggest change any of us in this room will ever see to Higher Education,” as Lancaster’s Vice Chancellor Professor Paul Wellings described it to staff – in a strong financial position.

In November 2010, just after the Browne Review was completed, Wellings gave a presentation to University staff, to reassure and inform them about Lancaster’s financial security given the proposals in the Browne Review and the Comprehensive Spending Review. Speaking to a packed Great Hall, Wellings paid tribute to the University’s financial strategy in recent years.  

“We’ve had over the last decade a pretty sharp finance strategy here […] It’s been about making the right sorts of investments,” Wellings said during his presentation. “If we’re in trouble 85% of the sector is in trouble.”

The most frequently quoted measure of success is the University’s surplus – that is, the surplus of income over expenditure. For the financial year 2009-10 it was 4.4% (in real terms a surplus of £4.5m on an income of £177.9m) and has been over 4% for several years, compared to a sector average of 1.7%.

The Vice Chancellor was not the only one to pay testament to Lancaster’s situation. A Universities and Colleges Union (UCU) report, Universities at risk, put Lancaster at low risk of impact from the Browne proposals.

The biggest potential effect of these  proposals is an 80% cut in the undergraduate teaching budget. The remaining 20% – around £0.7bn – would be focused on priority subjects: those relating to science, technology, engineering and mathematics (STEM). The gap will be filled by higher tuition fees, as can be seen in the graph below. The flip side is that there are likely to be fewer cuts to research funding than expected, something which will benefit Lancaster.

“As a university we’re very research intensive […] So we’re in a slightly buffered position here because of the research intensity that we have,” Wellings told staff.

Research income at Lancaster has increased by 68% over the last seven years and dependence on HEFCE funding – one of the indicators of a low-risk university in the UCU report – has fallen to 28%. Alongside HEFCE funding, tuition fees make up 28% of income, research grants 16% and ‘other operating income’ 27%. This last figure includes, amongst other things, colleges and residences income and commercial services.

On an operational level, staff costs are by far the largest area of expenditure – £99.9m in 2009-10. As with the surplus, the University has a target covering this: to keep payroll costs at less than 60% of total expenditure. (For last year they were 58.4%.) Broken down by activity, the biggest expenditures are on academic departments (£95.4m), Central Services (£30.7m) and Facilities (£15.1m).

In terms of the effect of income and expenditure on students, SCAN’s survey suggests some students feel that University management are primarily concerned with keeping up appearances. There have been significant cuts to student services recently, the most prominent being the closure of the Nurse Unit and the SLDC (see below).

In a statement on behalf of senior management and the Finance Department Professor Wellings said: “In the first part of 2011 individual universities will hear about the resource allocations.  Once Lancaster University has its grant letter we will trigger the cycle of events relating to fee setting.  There are no proposed changes to our normal processes.”

With regards to possible increased investment in student services following increased fees, he added: “The finance strategy is well established and already sets aside recurrent resources for a broad range of activities, including many relating to the student experience.  The capital programme has also prioritised many aspects of student life on-campus.”