Cash boost may raise pay hopes

A Hepi report predicts strong income growth for English universities of all types, as staff wonder if salaries will follow suit. Claire Sanders reports

English universities will see a strong increase in revenue for the rest of the decade, according to a long-awaited report that could have major implications for academic pay.

The report, an early draft of which caused controversy at the height of the pay dispute when it appeared to indicate that significant pay increases were affordable, confirms that the sector's income will grow by billions until 2010-11 and that this will benefit all types of university.

The findings from the Higher Education Policy Institute could now have an impact on the 2009 pay review. Bahram Bekhradnia, director of Hepi, said:

"Improving staff pay will certainly be an option for many university managers, and an important one if English universities are to maintain a competitive position."

The report outlines a number of scenarios for university income. It predicts that even in the worst case, there is likely to be an increase in spending power in English universities of between £2.16 billion and £1.05 billion a year up until 2010-11.

Overall it charts an increase in the income of English universities of Pounds 5.4 billion a year in real terms between 2003-04 and 2010-11. This is a cumulative increase of £22 billion, or 39 per cent.

Hepi argues that 60 per cent of the increase will be absorbed by "identifiable factors", such as increased salary costs due to the pay award and higher utilities costs, with "plausible contingencies", such as a significant increase in pension contributions, accounting for a further 20 per cent.

The report says the remaining sums are "not negligible". "While all projections are speculative, it is highly likely that the general conclusion (strongly increasing revenues) will be borne out," it says.

An early draft of the report made headlines in June after it was leaked to The Times Higher . Unions - which have always argued that there is money in the system to fund a significant pay rise - asked why it was not published in time to inform the pay dispute, particularly as vice-chancellors on the Hepi board had seen a draft as early as March.

Mr Bekhradnia repeated this week that the earlier draft had been part completed, and had not contained the discussion of costs and commitments.

The final report, entitled The Prosperity of English Universities and Colleges , says that the sector could be even richer if the Government is serious about closing the funding gap between the UK and the US.

"Chancellor Gordon Brown has indicated that he would like to close this gap and, if he is serious, then the extra income would dwarf the billions currently available," said Mr Bekhradnia.

He said that this money could be used to improve student to staff ratios, which have worsened in recent years, as well as pay.

The big increase in revenue is largely accounted for by the Government's science and innovation investment strategy and top-up tuition fees.

Moreover, all types of institutions, from research led to teaching intensive, will benefit. "This seems to be because institutions are dependent upon regulated fee income in inverse proportion to their dependence upon research funding," the report says.

However, this does not mean that all institutions carry the same risk. The report argues: "Unlike Hefce teaching funding, fee income follows the student, with no safety net for institutions that under-recruit."

Diana Warwick, chief executive of Universities UK, said the report gave "reasons to be optimistic" about English universities' income, but warned that the "whole picture is quite fragile".

"This is why UUK will be calling in our Comprehensive Spending Review submission for continued public investment in higher education, to ensure high- quality teaching and research are fully supported through a period of further growth," she said.

Stephen Court, senior research officer at the University and College Union, said: "All the indications are that the forthcoming CSR is going to be tight.

"We certainly support additional investment in higher education to improve both pay and student to staff ratios."

The Universities and Colleges Employers' Association said that it was looking at the findings with interest.

claire.sanders@thes.co.uk