Freedom in penury

April 4, 1997

The squeeze on public spending on universities is likely to force higher education to rely much more heavily on the private sector, according to Miles Hedges, chairman of the British Universities Finance Directors Group.

Such a move would have a direct impact on student funding and the way universities operate, said Mr Hedges as the group gathered for a private meeting last week.

"One side effect might be a reduction in the burden of government accountability and an increase in academic freedom - an interesting paradox," he said.

Future funding was high on the agenda. Speakers included Mike Fitzgerald, vice chancellor of Thames Valley University; David Kern, chief economist of Nat West Bank; and Terence Kealey of Cambridge University, who put the case for privatising universities.

Summing up the finance directors' conclusions, Mr Hedges said the good news was that the "knowledge society" would intensify demand for higher education. This and a need to increase participation rates meant the sector would continue to grow.

But public funding was almost certain to continue to fall. And the fact that for most political parties higher education was a lower priority than other forms of education meant that the pressure on universities to generate new streams of income would remain high.

Mr Hedges, finance director of Nottingham University, believes change in the sector will be driven by the need for greater flexibility and diversity in terms of student attendance and delivery of courses. Change will have to be managed with a view to the long-term.

"It can take five years from the design of a course to the first graduates appearing. How many changes in government policy will take place in that time?" he asked.

The meeting also considered the impact of the global economy. Economists argued that the world economy will have relatively flat growth and low inflation. This will lead to lower interest rates and less volatile exchange rates.

Mr Hedges believes that while personal taxation may not increase much, company and pension fund taxation may increase, and that these rises could then present problems for superannuation schemes.

"There could be an unwelcome increase in the cost of employing staff.

"The total staff cost to the university sector in 1994/95 was Pounds 5.6 billion. A 1 per cent increase in pension costs could drain the sector of around Pounds 50 million."

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