Investing in success puts elites in red

Elite research universities are operating at a loss and will suffer worse shortfalls if cash they were expecting from the research assessment exercise fails to materialise next year.

Many of the institutions that did best in the 1996 RAE are reported to have operating deficits in the financial year to July 31. They have run into trouble after spending huge sums preparing for this year's RAE, expecting improvement to be rewarded quickly.

Although final accounts are not due until next month, University College London had a deficit of £5 million according to unaudited accounts.

Marilyn Gallyer, vice-provost of UCL, said: "We have a recurrent shortfall of £10 million. We are making sizeable inroads into that by trying to increase income while cutting costs, but we still have a £5 million deficit.

"We don't know the results of the RAE, but we have expectations of increased funding. If there is a delay in implementing the results, then that is clearly a disappointment."

The London School of Economics had an operating deficit of £1.2 million compared with a £3 million surplus the previous year. It sold student accommodation for £1.5 million to plug the gap.

Imperial College, London, had an operating deficit of £1.7 million last year. It sold estates worth £18 million to generate income for teaching and research and for attracting staff.

Rodney Eastwood, director of planning and information at Imperial, said:

"The recruitment of internationally recognised academic staff has always been a top priority for the college, but now it makes sense to ensure that these staff are in post before RAE deadlines."

The University of Oxford has a "very small" operating surplus, according to a spokeswoman. The university spent some £2 million on preparing for the RAE and sold shares in its spin-off companies to generate extra income. The spokeswoman said: "Over the years this is a worthwhile investment, considering the amount of research income generated by the university."

The extra cost of funding the improved results of the RAE is estimated to be £170 million. It is understood that funding chiefs could drum up £50 million to £60 million from within their existing budgets by cutting back on other activities, but that would still leave a £110 million gap.

Sir Howard Newby, chief executive of the Higher Education Funding Council for England, wants implementation of the results to be delayed by a year. The final decision will be made by the Hefce board on December 14, the same day the results of the RAE will be made public.

Hopes of government help look likely to be dashed. Higher education minister Margaret Hodge told The THES this week that extra funding was out of the question. She said: "Hefce has been given its allocation up until 2003, and it has got to live with that. They know what is available to them. We have put an 18 per cent real-terms increase into higher education this spending period. It is not unreasonable to say to the higher education sector that it should live within that expanded budget."

In the longer term, Ms Hodge said she hoped to secure enough extra resources from the forthcoming spending review. But she warned: "There are all these areas of research that need supporting, and in the best of all possible worlds we will be able to pursue them all. (But) if I get nothing out of the spending review, then I am going to have some difficult choices to make."

The government's strategic review of higher education, which the Department for Education and Skills plans to start consulting on next year, will examine future research funding.

The RAE was designed to concentrate funds in areas of excellence. It appears to have stimulated substantial improvement, with 50 per cent of the staff submitted to this year's exercise now working in departments rated 5 and 5*, up from 35 per cent in 1996.

The plans that are emerging from Downing Street to create an elite tier of research universities would do away with the need for the RAE. Instead, an institution-level audit of research could take place every five years or so. The audit would be used to determine membership of the elite tier.