Freedom: the bottom line

Not only are 'public' universities technically private, says James Tooley, but many are close to fiscal independence

May 3, 2012

Commentators often distinguish between "private" universities, such as the University of Buckingham, and the rest, which are lazily thought of as "public". That distinction is increasingly untenable: "the rest" are all legally private, often corporations or, like the London School of Economics, companies limited by guarantee. But Times Higher Education and Grant Thornton's recent analysis of university accounts shows how tenuous the distinction is in terms of finance, too. This has implications for how universities should respond to the government's increasingly forceful attempts to regulate them.

Overall, less than a third (32.2 per cent) of university funding now comes direct from government in the form of funding council grants. Russell Group universities get even less - under a quarter. Adding in research council funding does not increase the percentage by much, and if we're concerned with how universities should position themselves in terms of dependence on government, then we need not include it, for private organisations can also receive research council funding, providing they register as Independent Research Organisations. Just because they access such funding doesn't make the Institute for Fiscal Studies or the British Trust for Ornithology, to name two of the 55 current IROs, any less independent of government.

What about "home" student fees? As far as universities are concerned, funding arrives from a private source, the Student Loans Company. But Buckingham can also receive this funding, so again, this need not compromise a university's independence.

The implications are huge. Not only are UK universities private organisations, but most of their funding is private too. And yet there is a huge difference between universities that do and do not accept funding council grants. Buckingham is entirely at liberty to set its fees and admission policies. Universities that take any government finance are supplicants to the Office for Fair Access, under the future tutelage of Les Ebdon. They have to be, even when Offa threatens to violate the principles that many believe are necessary for academic freedom, such as the ability to admit students based on academic criteria alone. And they have to be, even though many vice-chancellors feel that the inadequacies of state schooling should be blamed for the problems Offa raises, rather than any shortcomings of the institutions they run.

For any vice-chancellor wondering whether a declaration of independence might be a possibility, but worrying how funding council grants could be replaced, the THE data provide food for thought.

A business looking to make up lost revenue might start by comparing its performance with that of other players in its sector. The figures give hints - which deeper analysis might confirm - of what could emerge from universities engaging in this style of comparison. Take the Russell Group, whose members receive the least government funding and so are likely to be the best candidates for independence. Cambridge is reported to generate 49.5 per cent of its income from "other income", while Oxford manages 17.3 per cent. Assuming these figures reveal more than accounting differences, if Oxford raised its "other income" to Cambridge's level then it could more than double the amount lost if it were to declare independence and lose funding council grants. If Sheffield matched Warwick's level, it might replace a third of its current funding council income.

Other differences emerge across the Russell Group. Cardiff's proportion of staffing costs is higher than Warwick's (59 per cent compared with 49 per cent). Is there scope for Cardiff to match Warwick's levels? This alone could replace 33 per cent of lost funding council income, if it were to declare independence. Could Warwick match Queen's University Belfast's level of "endowment and investment income"? This could replace 10 per cent of what it would lose from its declaration of independence.

The figures give tantalising glimpses of the ways Russell Group universities could replace funding council income by learning from best practices across the group.

Does independence beckon? This will depend on how badly government restrictions start to bite. But these data suggest that the day of universities declaring independence may not be very far away.

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