Oxford in the red by 2005 if nothing changes

OXFORD University will go into the red in a few years under current policies and trends, according to financial maps from a team of management consultants.

Oxford's 1995-96 surplus of Pounds 7.6 million will plummet to a deficit of Pounds 90 million by 2005, according to a financial model by accountancy firm KPMG. The model, developed for Peter North's commission of inquiry into Oxford's management, sees the deficit hitting almost Pounds 600 million by 2015.

The consultants' scenario, which assumes a continuation of current policies and trends, shows a dramatic decline in teaching over time. "Teaching falls from 28 per cent of activity in 1995-96 to 16 per cent in year ten, and by year 25 becomes a marginal activity at less than 6 per cent of total expenditure", says the report.

In 2005, sponsored research accounts for 72 per cent of activity, compared with 50 per cent in 1995-96. In year 2015 this grows to almost 90 per cent, said the report.

The alarming scenario emerges with even an optimistic approach to trends. The model assumes that Higher Education Funding Council grants remain largely unchanged and that student numbers across all subject areas grow by 1 per cent a year.

The model also assumes an annual growth of 10 per cent in research grants and contracts across all subject areas, although it admits that "this rate of growth in sponsored research is highly unlikely". It also shows how in research sponsorship will create a future imbalance in subject areas. "Medicine and science account for 57 per cent of activity in the base year (1995-6)", says the report. "On present trends this would grow to over 70 per cent in year ten and 80 per cent in year 25."

Coral Newton, executive consultant with KPMG's higher education consulting practice, stressed that the model was not a forecast, and that its accuracy waned after ten years. "It provides a tool which allows the Oxford managers to explore the impact of different scenarios, " she said.

The model has provoked calls for urgent discussions. Alan Ryan, warden of New College and chair of the Conference of Colleges, said: "It is a matter of concern if research sucks resources from teaching. There needs to be vigorous discussion over the balance of resources and expenditure."

A spokesman for Oxford University said: "Scenario modelling is a very useful analytical tool, but at the end of the day it is just that.

"The results do, however, point up how the university finances might develop and the university is grappling with these issues. A key element in the projection is that external research income from charities and other sources often does not cover related overheads. This clearly must be addressed by HEFCE and the government. The projections also underline the university's strong argument that the loss of college fees would seriously damage its international standing."

The university will be discussing the report in Congregation and key sections have been referred to the appropriate committees.