Analysis: Frugal few fly as others fall

Is your university in surplus or in deficit? Alison Goddard and Claire Sanders conclude a two-part study of the wealth of UK institutions. The full league tables are on our website: www.thes.co.uk

A small group of new universities has built up small but steady surpluses, bucking the trend towards deficit in the rest of the sector.

These lean, mean machines say they have to build surpluses because they do not have the assets or reserves of older universities to fall back on. They are the new universities whose student numbers have remained steady, or even increased, while new universities as a whole have under-recruited by 22,000 over the past seven years.

But other universities are drowning. There are now more universities in deficit than at any time since the Higher Education Statistics Agency started compiling data in 1993-94. At a time when many students are being crippled by fees and the loss of grants, the extra money being generated is not making its way into universities.

Government funding has not kept pace with rising staff costs. This has pushed already hard-up universities into deficit. In 1999-2000, total expenditure rose by 6.6 per cent - or £789 million, of which £484 million was staff costs.

At the end of July 2000, 74 institutions reported a deficit. This compares with 49 institutions in 1998-99 and 39 the previous year. In 1999-2000, 96 universities broke even or reported a surplus.

League tables compiled by The THES from Hesa data for the four years from 1996-97 to 1999-2000 show that about a quarter of old universities were in deficit in 1996-97. In 1999-2000, well over a third were in deficit. Of new universities, a third were in deficit in 1996. Now well over half are.

In all four years, just six universities have appeared regularly in the top 20 when ranked by surplus. Kingston, Glasgow Caledonian and Glamorgan all come consistently in the top 20, along with Oxford, Manchester and the London School of Economics.

A spokesperson for Glamorgan said: "A strong financial position will stand us in good stead in the immediate future, given the continuing requirement to deliver efficiency gains if we are to carry on investing in our facilities and future development. This is particularly the case while levels of student funding in Wales continue to lag behind those in the rest of the United Kingdom."

Kingston had planned its surplus to cover the costs of building developments and the upgrade of technical equipment, a spokesperson said. "In the coming year, Kingston plans to operate a deficit so its infrastructure can be improved to cope with an anticipated growth in student numbers. This deficit will be eliminated in the next few years."

Cambridge appears in the top 20 only in 1996-97 and 1999-2000.

But the size of the surplus of the old universities dwarfs that of the new. For 1999-2000, King's College London reported a surplus of nearly £38 million. A King's spokesperson said that this was a result of the sale of properties as part of the merger with the United Medical and Dental Schools of Guy's and St Thomas's.

Over the past four years Oxford's surplus has been in the region of £17 million - falling just once to about £14 million. Cambridge has a surplus of £12.1 million for 1999-2000.

Kingston's surplus is near £4 million, and Glasgow Caledonian has a surplus of £2.5 million.

At the other end of the table, Liverpool John Moores University and the University of Ulster appear in the bottom 20 for all four years. Aberdeen, Hull, Keele, the School of Oriental and African Studies, Goldsmiths College and the University of Wales, Bangor, appear in three out of four years.

It is possible for universities to be in deficit but still to have healthy balance sheets. Ulster has a healthy balance sheet. It attributes its deficit to the depreciation charge on its revalued assets. Not all universities revalue their assets, thus keeping depreciation charges off their expenditure columns.

A spokesperson for LJMU said: "This year we have achieved a balanced budget after a planned deficit last year that enabled the university to restructure and support a number of voluntary redundancies and early retirements."

Vox Pop

Spokesperson for the DFES

"Funding for higher education in England will increase by 10 per cent in real terms over the next three years - by £412 million in 2001-02, by £268 million in 2002-03 and by £298 million in 2003-04.

"We have listened to concerns from the higher education sector about pay and the need to recruit and retain high-quality staff.

"That is why this settlement includes £50 million in 2001-02, rising to £110 million in 2002-03 and £170 million in 2003-04, to support increases in academic and non-academic pay."

Spokesperson for UUK

"The national pay settlements have been running ahead of income. It is hard for universities to make short-term adjustments to meet the wages bill.

"There have been years of underinvestment in the teaching infrastructure - in buildings, equipment and rewards. Our spending review submission will make it clear that this deteriorating situation must be addressed."

David Triesman, AUT general secretary

"The government must invest between £1.8 and £1.9 billion in the teaching infrastructure.

"Universities need to be far more efficient in generating income. Many have no real understanding of intellectual property rights and do not sufficiently exploit spin-offs."

Spokesperson for Higher Education Funding Council for England

"A deficit in any one year may not be a problem. This may be planned as the institution restructures or funds developments. Where we do have concerns about the financial position of an institution, we work with them to address those problems to help them secure long-term viability.

"There is no indication that any institution is in a position where it cannot survive."

Tom Wilson, head of universities department at Natfhe

"Funding problems are probably closely linked to recruitment difficulties, which are a direct result of change in student support in 1997. The only way to re-boost demand is to improve student support.

"The deficits mean an annual wave of redundancies in the new universities that have no reserves to speak of and employ relatively few fixed-term contract staff who would otherwise act as a buffer."

Complete tables: all UK universities, five measures of wealth