Collection costs may eat up cash

University and college funding. THES reporters assess the impact of the chancellor's pre-budget statement

University finance directors fear that the extra Pounds 125 million provided by government to higher education for 1998-99 will be wiped out by administrative costs and signing off bad debts.

The British Universities Finance Directors Group estimates that just the extra basic administration for dealing with new student funding arrangements could cost the higher education sector at least Pounds 40 million to Pounds 50 million. The worst-case scenarios suggest this could rise to more than Pounds 200 million.

Miles Hedges, chairman of the BUFDG, says: "We could end up with the nonsensical situation of the cost of collecting fees and bad debts being higher than the amount raised. My biggest concern is that the impact of the new arrangements will be damaging to those institutions and students least able to cope."

The government announced the extra Pounds 125 million for universities as part of a Pounds 165 million package. Of this extra, Pounds 44 million is earmarked to widen access, including Pounds 4 million for further education. A Department for Education and Employment spokeswoman says: "Administration costs have been taken into account (in this package), but we are not going into details of what these costs are."

Mr Hedges explains that for a typical institution with 10,000 students, the number of transactions involved will at present be about 120 at most, comprising an invoice to each of the local education authorities that up to now have dealt largely with the payment of grants and fees directly to institutions.

Under the new arrangements, the number of transactions for such a university - including the chasing of students who do not pay on time - becomes 10,000 and considerably increases the administrative workload.

"Even with those who are not liable for payment -Jalthough we may not physically have to issue invoices to them - the data still has to be put into the system. The only thing we are saving in these cases is the cost of a sheet of paper and a postage stamp," says Mr Hedges.

The situation becomes more complex and costly if, as the DfEE's director of higher education, Tony Clark, advised in a letter sent to vice chancellors last week, universities consider "instalment arrangements" for students.