At an open meeting on 16 March 2010, I briefed colleagues on the strategic goals articulated in our new Corporate Plan and went on to outline some of the challenges confronting us as we set out to achieve these goals. Paramount amongst these challenges was the threat to our publicly-funded income.
In light of last week’s budget and other funding announcements, I wanted to update you on the funding reductions affecting the Higher Education sector and the implications these will have for our own university.
What has been happening?
On 24 May 2010, the new Chancellor of the Exchequer, announced an in-year savings target of £6.2 billion for 2010/11, of which £200 million was applied to funding for universities. The Emergency Budget, delivered on Tuesday 22 June 2010, confirmed the severity of the funding cuts beyond 2010/11, with ‘unprotected’ departments facing average reductions of 25% by 2014/15.
On 24 June, the Higher Education Funding Council for England (HEFCE) received a revised grant letter for 2010/11 from the Department for Business, Innovation & Skills (BIS), reducing the baseline funding by £82 million compared with the original grant letter of December 2009.
BIS told HEFCE that these savings should be split between a £52 million reduction in teaching grant and a £30 million reduction in teaching capital. The BIS letter noted that “these efficiency savings will have implications for allocations in academic year 2009/10”. This is because the Government’s 2010/11 financial year runs from April 2010 to March 2011, overlapping the last four months of our 2009/10 academic year and finishing two thirds of the way through our 2010/11 academic year.
What does this mean for our HEFCE funding?
We believe that our HEFCE recurrent grant for 2010/11 will eventually be around £1 million less than our comparable 2009/10 grant of £52.9 million, which was itself reduced by £153k last week in response to the revised BIS grant letter. We will have a better idea of the scale of the 2010/11 reduction when we receive our Financial Memorandum letter from HEFCE on 20 July 2010.
Even then, there may be further in-year cuts applied to us in 2010/11 to achieve sector savings in the Government’s 2011/12 financial year.
We believe that we have already built into our budget sufficient provision to address these public funding cuts for next year. We will have to wait for the outcomes of the detailed spending review in the autumn before we get a clearer picture of how the public funding cuts will affect us in 2011/12 and beyond.
What do we need to do?
Although the public funding climate is bleak, I can report that we are in a relatively strong financial position. Having implemented our £2.5 million corporate sustainability initiative for 2009/10, we will be able to report a surplus this year.
Next year, we will benefit from a one-year financial boost arising from a recently successful bid to the HEFCE’s University Modernisation Fund which has captured an extra £1.5 million for us.
Nevertheless, there is an unprecedented degree of funding uncertainty and we cannot afford to be complacent. Increased employer NI contributions, increased VAT, and increased pension contributions will have a cumulative impact on our finances when set alongside year-on-year reductions in public funding.
We are facing a prolonged period of intense competition for public and private funding and must respond with flexibility, enterprise and energy. We know we have a strong academic portfolio in place, with good people across campus to deliver and support it, but maintaining the status quo will not be good enough. So we are now putting in place structures to help us create new opportunities, including the Graduate Schools and our International Foundation Year.
Our new activities will build on our strong reputational foundation. We will not compromise on the quality of our research or the student experience. We can, and must, ensure that we are competitive and successful in this new, constrained funding environment, deploying all of our ingenuity and talent to respond to the continuous challenge to make savings and implement change.
David Cameron believes that the UK “can do better with less”. The Higher Education sector will be asked to do exactly this. Some will fail but I believe we can succeed.
I will continue to provide briefings as further information becomes available. In the meantime, everyone can help by looking out for new opportunities to generate income, co-operating with institutional initiatives to reduce non-essential expenditure and thinking creatively about how we can operate more efficiently.
Professor Glynis Breakwell
Vice-Chancellor