A private finance initiative scheme to build student halls has plunged a UK university into a “financial crisis” and led to its latest round of job cuts, staff have claimed.
Bangor University’s method of financing its new residences at its Friddoedd Road and St Mary’s sites is facing growing criticism after it announced plans in December to make up to 60 people redundant over the next three years, just a year after nearly 110 employees took redundancy as part of £8.5 million budget cuts.
The new plans to save £5 million come despite the North Wales university reporting a surplus of £17 million in its 2017-18 accounts, which led some to question why the cuts were needed.
However, an independent report commissioned by Bangor’s University and College Union branch has now highlighted the costs associated with the private finance initiatives to create 600 new rooms in 2015 and 1,100 rooms 10 years earlier.
In the report, its author Andy Green, from THP Chartered Accountants, states that the university used PFI spending to build halls “worth £68.6 million”.
“However, there is a longer term liability to repay the third parties a total of £237 million,” he says, adding “these arrangements present the most significant long term liability to the university” and point “to a reallocation of costs towards the university estate and away from staff and other overhead costs”.
Bangor’s debt cost “£9.9 million to service during 2018 alone, which was more than cash flow generated from operating activities”, the report adds.
In a statement, Bangor said that the report contained a “number of misunderstandings that render many of the comparisons and conclusions invalid”.
The figure for future costs “includes the repayment of capital funding and interest, as well as up to 36 years of future maintenance and operating costs”, it added.
The annual cost of servicing debt was, in fact, £8 million, which was covered by rent received, and the builds “do not [place] any sort of legacy burden on current operations whilst they remain in use”.
However, a UCU document circulated to staff describes the PFI issue as one of the “unspoken causes of Bangor University’s financial crisis”. It said that an “over-investment in expensive new buildings” was the hallmark of an “incompetent estates strategy”.
The document claims that Bangor’s staffing levels will have fallen by 14 per cent on levels two years ago once the latest redundancies and the non-replacement of 70 further posts left vacant by retirements and turnover take effect.
Speaking to Times Higher Education, one Bangor academic said that many staff already faced higher workloads following the departure of colleagues last year.
“The amount of interest we are paying on these PFI deals is just insane – we really need to look at terminating them as the costs are enormous,” she said.
The report also disputes claims by the university’s former vice-chancellor John Hughes, who left suddenly last month after eight years in charge, that falling student numbers and rising staff costs lay behind the cuts. Staff costs as a proportion of income had “tracked between 57-60 per cent over the seven years, which is broadly in line with other Welsh Institutions”, while student numbers had been “consistent”.
Bangor’s impending job losses come amid a tough time for Welsh universities. Last month Cardiff University announced that it was seeking redundancies to plug a £21 million deficit, while the University of Wales Trinity St David said last week that it aimed to save £8.5 million a year by cutting staff costs to 55 per cent of revenue, down from 70 per cent.