New warning on university financing as staff subsidise higher education

THE latest independent research into the funding of UK universities predicts “grim implications” in return for the millions of pounds spent on “bean-counting” – as it shows that higher education (HE) delivers far higher economic benefits to society than financial ones.

The preliminary research, conducted by Viewforth Consulting Ltd, calculated the economic rather than accounting value of UK HE and found continued financial instability with increasing numbers of institutions teetering on the brink of insolvency caused by a “failure of policy and imagination” and a “sectoral and government concern with accounting issues rather than economic reality”.

The consequence is that university staff are being paid 22% less than their economic value while the amount that is estimated to be required by universities to maintain and develop the sector is around 49% short of what’s needed.

Ursula Kelly, the report’s co-author, said: “There’s no difference between the direction of travel for Scottish universities than for those in the rest of the UK because UK universities are governed by variations on a fixed-price administration system.”

The major difference between this analysis and the standard accounting-based approach normally used is that it captures the economically important information which demonstrates that UK higher education has been subsidizing UK society, not the other way round, and that the people doing the subsidising and taking the brunt of the shortfall between financial and economic value have been HE staff.

The National Audit Office’s analysis of English universities warned in March that 13% of institutions will not have enough money to fund at least 30 days’ expenditure from their cash or credit facilities just days before the Academy of Live and Recording Arts in London went bust.

Also in March of this year, the Scottish Funding Council reported that 10 institutions – 55% of the Scottish HE sector – expect to report underlying operating deficits in 2020-21 while eight of them will continue in deficit in both 2021-22 and 2022- 2. 3.

Kelly explained: “Smaller institutions will always be more vulnerable in models where money, rather than overall economic value, is the dominant measure and it’s the value of universities in terms of what they generate for the economy and society as a whole that is essential for us to understand.”

The Viewforth analysis sits in the wider context of general academic discontent, intermittent strike action and the recent UCU survey finding that 60% of UK academics are set to quit within five years, many of whom are early career academics who are the pipeline on which UK Universities will no longer be able to rely while overseas academics will have less incentive to work here, leading to a decline in the UK HE sector compared to international competitors.

The latest QS World University Rankings show Edinburgh, Glasgow and St Andrews universities as in the top 100 this year, exactly the same as in 2020 and, while Glasgow and Edinburgh universities are listed in the top 100 of Times Higher Education table, six of the world’s top universities are in China.

Kelly said: “If we were to start our higher education sector today, we wouldn’t want to start from here.”

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