Review says financial reserves are too low to assure long-term future

But unions complain that information provided is of little use for pay talks, writes Melanie Newman

December 11, 2008

Universities' financial surpluses are "too low confidently to assure a sustainable future".

This is the conclusion of a year-long study into the financial health of the university sector, which was set up to inform pay negotiations for 2009-10 and beyond.

But in their report, the Finance and Data Review group declines to make any clear conclusions on the affordability of future pay rises, and campus trade unions complained this week that it offers too little detail.

"We do not feel that the sector or anybody involved in it will really be much the wiser after reading this body of work," said Sally Hunt, the general secretary of the University and College Union.

The remit of the review, which was agreed as part of the 2006-09 pay agreement, was to "establish commonly accepted data" on universities' income and expenditure and their forecasts for 2008-09 and beyond, which would inform pay talks. It did not take account of the turmoil in the UK economy over the past six months.

The report says that although universities are now financially stable, surplus levels are "too low confidently to assure a sustainable future" and are insufficient to meet long-term estates and infrastructure investment requirements.

"The sector faces significant risks, which include costs rising much faster than public funding, potentially serious pension deficits and the vulnerability of overseas student income," the report says.

Staff costs increased by an average of 8 per cent a year over the past six years - much higher than the rise in public funding for teaching, the report says.

Pay awards were "broadly in line" with private- and public-sector awards over 2001-07, although the 8 per cent pay award of 2008 was "likely to be well ahead" of those in the economy as a whole, it adds.

Unions have criticised employers for failing to disclose their individual financial forecasts to the review group.

A member of the UCU executive, who asked not to be named, said: "It was reasonable to interpret the terms of reference as requiring institutions to make their individual forecast data available."

The union Unite called for the disclosure of institutional data, "detailed business plans and growth estimates so that a complete analysis of the demands that the sector is to face in coming years can take place".

Phil Harding, the employer representative to the review, said the forecast data had been aggregated to preserve the confidentiality of individual institutions, and that all parties had agreed that this approach was adequate.

Asked whether the sector could sustain another pay deal at the level of the 15 per cent 2006-09 agreement, Baroness Rennie Fritchie, who chaired the review, said: "It became clearer as we did our work and the economic situation worsened that life is likely to be different in the future for everyone in every sector ... (the report) will bring a sense of realism to all conversations about what can be done. Nothing is likely to be the same as it has been."

Bill Wakeham, chairman of the Universities and Colleges Employers Association, said: "The timing of the review did not allow for forecasts relating to a developing recession that adds to these economic pressures and current levels of uncertainty."

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