Phil Baty reports on plans to make Newcastle a focus of academic excellence
Kel Fidler had barely got his feet under the vice-chancellor's desk at Northumbria University when he made a discovery that made his blood run cold.
A review of the university's financial management revealed that instead of enjoying the security of a £3 million surplus as he had been assured, Professor Fidler was facing a £1.8 million deficit for 2002.
The black hole - blamed on "outmoded" spending control systems rather than impropriety - put the university immediately on the Higher Education Funding Council for England's notorious danger list for special measures and sent the institution reeling.
It was to change the course of history at the university, which can trace its roots back 134 years.
"It was a shock," Professor Fidler said, with characteristic understatement. "I was put on report to Hefce and had to meet them every month until they could regain confidence in us.
"But looking back now, it was a useful trigger. It highlighted to us a lot of things that needed doing."
Now, three years after the black hole was discovered, much has changed and the university is in the mood for celebration. Northumbria has increased its turnover by almost 40 per cent and has reduced its reliance on Hefce funding, cutting this as a proportion of income from more than 60 per cent in 2001 to 37 per cent today.
It has added about 4,000 students to its books to record a 2004-05 enrolment of 28,500, and it expects to have well over 30,000 students by 2008.
It has more than doubled the number of lucrative international students to 6,000, and its profit margins for reinvestment are well over twice the 3 per cent that Hefce demands for all institutions as a safe operating profit.
But, most impressive of all, the university has launched plans for a spectacular £100 million development in Newcastle. This will add a new seven-acre site next to its city-centre campus, which will offer state-of-the-art facilities for three booming university schools - law, business and design. It will also vacate space in the existing crowded campus, which will be "greened" and pedestrianised.
Both developments will, by summer 2007, replace the current collection of buildings to create a single integrated campus.
The road to such exciting times has not been easy. Cuts have cost at least 50 academic jobs and have threatened staff morale along the way. Although the university strongly denies it, lecturers' union Natfhe says that the changes have left some departments overstretched and many staff overworked.
The union claims that the management is undermining the foundation of Northumbria's reputation, namely the quality of the student experience it offers.
So how did the university get here?
Professor Fidler said: "I came here from a research-intensive university, York, so I was ready for a culture shock. But I'd noticed before coming that despite the successes in the league tables and on teaching quality, for five years the number of applications had been decreasing."
He carried out a "personal audit", visiting all corners of the institution, and, in April 2002, he secured the board's approval for a sweeping restructuring programme.
Faculties, along with their deans, were abolished, and 11 schools were created, directly accountable to a senior management team increased from two deputy vice-chancellors to five equal managers at the deputy/pro vice-chancellor level.
"A whole host of things were not right," Professor Fidler said. "We found that there was a degree programme for every two academic staff at the university. It was a nonsense."
The number of separate degree programmes was cut from 500 to 400, while broad subject provision was maintained.
Professor Fidler also embarked on a risky strategy to raise the A-level entry grades required to study at Northumbria. This resulted in more applications, in part because Northumbria was seen as a more prestigious and so more desirable university.
And with only £1 million in quality research funding received from Hefce in the 2001 research assessment exercise, the university set about increasing its alternative sources of research funding by exploiting scholarship through activities such as consultancy.
But staff levels were the most controversial issue. "Staffing costs made up 68 per cent of our expenditure, when the national average was about 58 per cent," Professor Fidler said.
"We simply spent too much money on our staff."
The culture of cross-subsidising between academic areas was halted. All schools were given tough performance indicators. They were told to ensure that staff costs made up no more than 45 per cent of expenditure - in one school it was a massive 70 per cent, Professor Fidler said. Each was ordered to ensure surpluses of 6 per cent.
"There was a tremendous gap between the number of staff we could afford and the number we had," Professor Fidler said.
The process culminated in a staff reduction exercise last summer. The university announced cuts of 58 teaching posts, but Natfhe said that more than 70 positions were lost, due to non-renewal of posts, from a total of about 1,000 academics.
Martin Levy, Natfhe branch chair, said: "Our members here are justly proud of Northumbria's reputation as a first-class teaching university. Good staffing levels have been the basis of this.
"Last year, to protect those staffing levels, we were forced to go to dispute with the university. While, happily, compulsory redundancies were avoided, a number of really experienced people left voluntarily, and that has put the teaching quality in their former programme areas under pressure."
Natfhe believes that the ending of cross-subsidies between schools has created a large gap between the rich and the poor schools. The union says it has also led to a "flavour of the month" short-termism in which areas that are able to make money in the immediate future flourish at the expense of important areas with longer-term potential.
This, the union fears, also threatens the concept of a university as a general public good, maintaining a broad subject provision irrespective of trends.
But for Tony Dixon, the pro vice-chancellor responsible for development who has masterminded the £100 million expansion, the university is in an excellent position.
The introduction next year of top-up tuition fees, with the limited market it will bring, hold no fears.
"Our place in the market has moved away from being merely a local widening access ex-poly to being seen as the best of the modern universities," he said.