Hungry Treasury eyes universities 'awash with cash'

Further austerity measures could wreak havoc with BIS’ stretched finances

March 7, 2013

Cable wired: the business secretary is vowing to oppose cuts to his budget in the next spending review

Fears are growing that England’s universities could suffer from the perception that they are “awash with cash”, as the Treasury seeks cuts of £1 billion in the Department for Business, Innovation and Skills’ 2015-16 budget.

Vince Cable, the business secretary, is opposing the Treasury’s spending review plans for cuts of up to 8 per cent to his department, where higher education is by far the biggest area of spending.

Such a cut would be in line with projected reductions at other non- protected departments.

By contrast, in Australia the representative body for universities has launched an A$5 million (£3.4 million) campaign in election year to push for annual increases in state investment and promote public awareness of higher education.

In England, there is concern in the sector that its financial figures for 2011-12, to be published by the Higher Education Funding Council for England on 15 March, may add grist to the Treasury’s mill.

The figures are likely to show healthy surpluses across the sector as universities prepared for the uncertainty promised by the new fees and funding regime.

Graeme Reid, head of research funding at BIS, said last week at a conference that it was time for universities to show they were making efficiency savings, as the sector was viewed by some as “well-funded” and “resistant to change”.

“The term ‘awash with cash’ has reached my desk several times recently,” he told Universities UK’s efficiency in higher education conference, held in London on 26 February.

Talks between Cabinet ministers are under way on the 2015-16 spending review, with the Treasury seeking £10 billion of cuts across the government. The review is due to be announced this summer and will cover the period immediately after the next general election.

Mr Cable has criticised the lack of protection for departmental budgets such as his own. He told the BBC there was “a very strong argument if we’re interested in growth and recovery for investing a lot more, not less, in skills and science and innovation and our industrial strategy”.

BIS’ published departmental expenditure limit in 2014-15 is £15.1 billion, down from £18 billion in 2012-13.

If the science ring-fence within BIS’ spending were maintained, then cuts even deeper than 8 per cent would be needed across other areas of the department’s spending.

Pam Tatlow, chief executive of the Million+ group of new universities, said: “The Treasury’s ambition to close the gap between spending and the structural deficit in election year risks creating a pincer movement for universities, in spite of the fact that by 2015 their direct funding will have been cut by 40 per cent.”

Ms Tatlow warned that further reductions by the Treasury could lead to BIS “cutting the widening-participation premium, the last remnants of Hefce teaching grant”, the Higher Education Innovation Fund or research funding.

‘Bipartisan wisdom’

Glyn Davis, the University of Melbourne’s vice-chancellor and chair of Universities Australia, last week launched the Smarter Australia campaign. He called for “indexed base funding to increase by 2.5 per cent annually over the next five years” and aims to make “support for investment in universities…bipartisan wisdom” in the 2013 election.

Asked if England needed the equivalent, Steve West, chair of the University Alliance and vice-chancellor of the University of the West of England, highlighted his mission group’s recent University Vision project, which emphasised the sector’s social and economic role.

“I think we’ve already started this,” he said. “We got huge interest from all the political parties when we presented at their conferences.”

Professor West said he would shortly spend two weeks in Australia to “examine how their funding system works and present our findings to colleagues and hopefully the Treasury and BIS”.

The idea is to see if lessons can be learned from Australia’s demand-led system, where student numbers are not capped, he added.

On the spending review, Professor West said that universities were “central to the growth agenda” and that innovation and the development of a knowledge economy were impossible “if your universities aren’t firing on all cylinders”.

A BIS spokeswoman said: “The spending review has not been launched yet, so any figures suggested are speculation.”

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