Brown's starter for Pounds 20 million

March 20, 1998

THES reporters spell out what the budget means for universities and colleges

THE CHALLENGE FUND AND TAX CHANGES

The budget announced:

A Pounds 50 million venture capital fund to help universities commercialise their research

A 50 per cent rise in tax reliefs to encourage venture capital investment. From April 6, investors will be able to secure income tax reliefs for reinvestments in new shares of up to Pounds 150,000.

The new "University Challenge" fund will "help turn British inventions into successes for British business," said the chancellor, Gordon Brown. The government will provide Pounds 20 million, another Pounds 20 million will come from major charities including the Wellcome and Gatsby trusts, with challenge-winning universities bringing in the remaining Pounds 10 million.

A competition this year and next will provide the initial seed funding for universities to develop research ideas, establish commercial viability and cover business start-up costs. The fund will be distributed among about 20 universities, each receiving about Pounds 2 million, and needing to raise about Pounds 500,000 themselves through local businesses or other means.

An expert panel, including people from outside government, will decide the winners. A Treasury spokesman said the scheme is expected to become self-financing, with any money generated staying with the university's investment fund to be reinvested in projects.

The fund has been welcomed by both universities and scientists.

Lord Dearing said he was "delighted". "It's not been easy for vice-chancellors to put money into schemes with such high risks. The fact that four-fifths will come from outside is excellent."

Diana Warwick, chief executive of the Committee of Vice-Chancellors and Principals, said: "It is essential that the government's comprehensive spending review deliver public investment to maintain basic research equipment, which underpins innovative research."

Sir Robert May, the government's chief scientific adviser, called the fund "a step in the right direction". He said it was hard for UK venture capital companies to consider investments of less than Pounds 1 million - the kind of initial sums needed.

Reform of capital gains tax to encourage longer-term investment and allowances to small and medium-sized businesses for investment in plant and machinery are also set to benefit small businesses attached to universities.

On the 50 per cent rise in tax relief to encourage venture capital investment, Roger Ashby, managing director of a technology transfer company owned by Southampton University, said: By giving people additional tax incentives, more people might be willing to take risks."

FURTHER EDUCATION AND TRAINING

The budget announced:

Pounds 100 million of the Pounds 250 million for education will be used to tackle skills gaps. "The priority is to provide training in computers and high technology skills." Details of allocations to be announced by education secretary David Blunkett next week

Pounds 100 million plan to extend the New Deal to the over 25s. There will be 70,000 opportunities for the long-term unemployed to move into work, some via further education

Pounds 60 million to help the partners of unemployed men find work

A child care tax credit to cover up to 70 per cent of childcare costs

Pounds 50 million for advice to the young homeless. "I want the help to be linked to training and preparing them for jobs," said the chancellor.

Colleges hailed the chancellor's welfare-to-work budget, with its stress on upskilling and training for work, as another endorsement of further education's central role in the government's agenda. But the chancellor's persistent financial prudence was met with frustration.

Sue Dutton, acting chief executive of the Association of Colleges, renewed her calls for an immediate additional Pounds 360 million for colleges, rising to Pounds 700 million by 2002. "The association means to help this government's policies succeed. But we need help," she said.

But she added: "Colleges will welcome what the chancellor has done to help adults in their communities off benefit and into work. The announcements on increases in child benefit and tax credits for childcare are especially welcome."

A spokesman for the Further Education Funding Council said: "The budget is another indication that further education is at the centre of the learning revolution. But we wait for details about how this might translate into hard cash."

EMPLOYERS, NATIONAL INSURANCE AND LOW AND BETTER PAID

The budget announced:

The Contributions Agency and Inland Revenue will be brought together in a single organisation

National Insurance entry fees will be abolished from April 1999

The amount an employee can earn before National Insurance Contributions are charged will be aligned with personal income tax allowances

Employer NIC rates will be standardised to 12.2 per cent

Inflation expected to peak at 3 per cent this year.

Changes to National Insurance, which reduce employer contributions for lower paid workers but raise them for the higher paid, could increase costs by up to Pounds 100 million.

The changes mean employees will no longer pay any National Insurance Contributions on their first Pounds 64 of earnings and employers will not start to contribute until earnings reach Pounds 84 per week.

But for those earning above Pounds 450 a week (23,400 pa), employer's contributions, which are now 10 per cent, will rise to meet the standard.

Miles Hedges, head of the British universities finance directors group, said his rough calculations had shown the change could cost institutions up to Pounds 100 million a year, with the greatest impact on London universities, where salary costs are higher.

Chris Trinder, head of research at the Association of University Teachers, said: "In terms of our particular staff group, the extra burdens will outweigh lower burdens at the bottom end."

But Mr Trinder said the AUT had its eye on the Pounds 500 million set aside for reserves. It meant that if the Independent Review Committee, set up to discuss lecturers' pay, recommended higher salaries, the money would be there.

Ann Cotterrell, Natfhe's higher education assistant secretary, said: "We welcome any measures that help the low paid but we would like more information on helping some of these people gain skills." She said some part-time lecturers and ancillary staff might gain from the proposed National Insurance changes.

Peter Humphreys, chief executive of the University and Colleges Employers Association, said: "I can't yet say what the specific implications will be but the impact appears to me pretty neutral."

MUSEUMS AND GALLERIES

The budget announced:

A Pounds 2 million "challenge fund" to ensure free admission at those national museums that currently do not charge

Pounds 7 million fund improving access and education at national and regional museums

An improved Acceptance In Lieu (AIL) scheme under which heirlooms can be given to the government instead of inheritance tax

A Pounds 5 million "New Audiences" programme to help arts organisations broaden their audiences.

Timothy Mason, director of the Museums and Galleries Commission, said: "The Pounds 2 million fund will benefit only a small number of museums, all of which are in London. There are many more, in particular regional museums, that face acute financial pressure."

Richard Foster, director of the National Museums and Galleries on Merseyside, said that Merseyside venues will continue to charge as the fund is not available to museums outside London. But he hopes that bids to the Pounds 7 million museums and galleries access fund may mean that the NMGM does not need to charge educational parties to its eight museums and galleries.

Heritage secretary Chris Smith expects the Heritage Lottery Fund, which is contributing to the overall funding, to increase the amounts spent on access and education for museums significantly in future.

The MGC's Mr Mason said improvement to AIL "will increase the potential to acquire pre-eminent objects for the public domain... this is acutely important at a time when other sources of acquisition are under pressure."

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