Cash crisis warning for Wales

Higher education in Wales is heading for a financial crisis unless it gets a significant cash injection, Welsh universities have warned.

Figures from the Higher Education Funding Council for Wales show a 70 per cent per cent drop in the sector's total operating surplus, down from £16.6 million in 2002-03 to £5.2 million this year. The operating surplus is forecast to fall to £4.6 million by 2006-07.

It means that the sector's total operating surplus this year is forecast to be 0.69 per cent of income, compared with 2.22 per cent of income last year.

The figures do not take into account the extra expenditure institutions will incur from honouring the framework agreement for academic staff salaries, amounting to a 7.7 per cent pay rise over two years.

And institutions do not know how or when the Welsh Assembly will honour a pledge to compensate them financially for not introducing top-up fees.

A spokesman for Bangor University, one of three institutions reporting an operating deficit for 2002-03, said: "It feels like there is this crisis looming and no one seems to be coming up with a solution."

Robert Pearce, vice-chancellor of Lampeter University, which found itself in the red for the second year running in 2002-03, said the funding council's forecasts suggested some "very large holes to be filled".

He added: "Our position is like others in Wales - it is a very difficult operating environment in which the funding is just not there to cover the increasing costs."

The University of Wales College of Medicine, the other institution with a deficit in 2001-02 and 2002-03, is due to merge later this year with the more financially sound Cardiff University.

But Noel Lloyd, registrar and vice-chancellor elect at Aberystwyth University, predicted that even institutions that had healthy surpluses, such as his own, would begin to suffer in the face of rising staff and other costs.

He said: "Looking forward, there are significant risks. We will have to work very hard indeed to maintain our position."

Richard Hirst, director of finance for the HEFCW, said that financial forecasts were always conservative, and the funding council had been encouraged by the fact that the position in 2002-03 was better than expected.

He added: "We recognise that the level of surplus leaves no room for complacency.

"It is still pretty much at the lower end of what we would hope to see for institutions to have funds for development and to be able to absorb cost pressures."