Lancaster hits cash crisis

June 21, 1996

Lancaster University has taken the unprecedented step of blocking all discretionary spending to halt spiralling debt, which auditors warn could lead to technical insolvency by 1999.

Vice chancellor William Ritchie said the move was designed to ensure that payroll commitments could be met. "I very much regret having to impose such stringent measures but I believe I have no alternative," he told budget-holders.

"I hope that this moratorium will be short term but this will depend entirely on the results of the staff disengagement exercise."

Professor Ritchie warned that the university's financial position was deteriorating and earlier measures, such as a voluntary retirement scheme aimed at shedding 140 jobs, were too slow to produce the necessary savings.

A "restricted" report from Lancaster's audit committee projects that by the end of this year the university will have a current net liability of Pounds 5.8 million. By July 1999 the net current liability will be Pounds 10 million.

"This is a very serious situation in the short term and for the foreseeable future as these figures show that the university will become technically insolvent, unable to meet its debts as they fall due, unless the action plan can turn the situation around," says the report, presented to council in late May.

There was a risk that both funding council and banks would withdraw cash support, the report says. "Without the use of all possible controls over expenditure there must be a real risk of the university's commitments exceeding its ability to pay its creditors given the tautness of the cash situation."

Stephen Lamley, university secretary, said there was no question of the university being allowed to become insolvent. "We are cracking down even harder on avoidable spending during the summer months," he said.

The early retirement scheme put in place last month was expected to attract "a substantial number" of support staff and academic staff.

Lancaster student union was in uproar this week, however, over the freezing of its bank accounts. Union spokesman Rob Cox said: "The junior common rooms have particular cause for grievance because more than half of their income is generated from external sources but they too are being denied access to funds which the university has no right to control."

The university is negotiating disposal of assets, including farmland and properties, to ease the cash-flow crisis.

Teacher training at Charlotte Mason College in Ambleside could be hived off later this year if merger discussions with nearby St Martin's College are successful.

* Lecturers' union Natfhe is conducting a survey of staff satisfaction at London's South Bank University amid growing anger over large-scale redundancy plans.

The local union branch sent out questionaires following the news that around a seventh of the institution's full-time academic posts are to be axed.

This includes the first compulsory redundancies in the sector this year. So far 12 notices of compulsory redundancy have been issued.

* Glasgow University has drawn up plans to shed 90 academic posts by 1999 to meet an anticipated budget shortfall of up to Pounds 4 million.

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