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REPORT

Report of the Council on the financial position of the Chest, recommending allocations for 2003-04

The COUNCIL beg leave to report to the University as follows:

1. This Allocations Report assesses the financial position of the University and recommends allocations from the Chest for the financial year 2003-04.

Overview

2. Latest forecast 2002-03. The latest forecast deficit on the Chest for 2002-03 is £(8.4)m, an improvement on the original Estimate deficit of £(11.6)m.

Estimate for 2003-04. Additional Funding Council grants, and Science Research Investment Fund (SRIF) funding, have allowed the building maintenance budget to be restored to adequate levels and the capital costs of the new student records system to be accommodated, whilst restricting the deficit to £(5.0)m. However this is only after severe restrictions of provision for other recurrent and non-recurrent expenditure, a savings exercise across the University totalling £1.5m, and taking into account the favourable impact of the recommendations of the Finance Working Party of the Planning and Resources Committee.

Projections for 2004-05 and beyond. Although income is forecast to increase every year, it is important that recurrent expenditure should be contained within the expected level of income by various means including the more efficient use of resources. The Council, on the recommendation of the Planning and Resources Committee, are planning year on year reductions in the Chest deficit so as to achieve break-even on the Chest by the fourth year, 2006-07. To meet these challenging targets, the measures recommended by the Finance Working Party must be implemented, including review of the structural issues which have the possibility to deliver considerable future efficiencies. Further savings targets will be needed. The proposed Resource Allocation Model (RAM) and devolved budgeting will play an important part in this - it is essential that all University institutions are given incentives for income-generation and cost containment and reduction. The RAM will also lead to better prioritization of academic objectives, and encourage the costing and pricing of all activities.

Chest income and expenditure for the current year 2002-03

3. The Council reported in June 2002 (Reporter, 2001-02, p. 921) that the expected total income for the year 2002-03 would be £468.2m, of which £206.6m would be Chest income and £261.6m would be non-Chest, or restricted income. The overall position was expected to be a deficit of £(11.6)m on the Chest.1

4. The latest forecast for the current year is for an improvement compared to the original estimate, but still a significant deficit.
 Latest forecast Original Estimate Change
£m
Change
£%
 
Chest income209.2206.6+2.6+1.3
Chest expenditure217.6218.2+0.6+0.2
 
Chest deficit (8.4) (11.6)+3.2
 

5. The main changes compared to the original Estimate are as follows:

Income

- Additional fees, total £1.6m, spread across postgraduate, overseas undergraduate, and part-time course fees
- Increase in recovery of indirect costs (overheads) on research grants and contracts, £1.0m

Expenditure

- Reductions in utility and other property running costs, £0.8m
- Savings in stipends and wages, £0.5m

6. All of these changes are favourable, and together with the net effect of other smaller variances, contribute to a £3.2m improvement reducing the forecast deficit to £(8.4)m. However, once again, the discretionary reserves of the University continue to be eroded reducing further the future income.

Estimate for 2003-04

General introduction

7. The Council were concerned to see that the White Paper 'The Future of Higher Education' (Cm 5735, January 2003) adopted a rather narrow utilitarian statement of the purposes and value of higher education. However they were pleased that the White Paper recognized the need for additional resources for universities, especially those like Cambridge which are strong in research. The decision that a selective RAE approach should continue to apply for research funding, and the funding consequences which flow from this, and the creation of an Arts and Humanities Research Council were both welcomed. The funding of higher education continues to be problematic. Cambridge is not alone in having struggled to deliver excellence in all areas of teaching and research on reduced resources.

8. In May 2002 a Finance Working Party of the Planning and Resources Committee was established to advise on how to reverse the trend of increasing deficits. The report of the Finance Working Party was summarized in Reporter, 2002-03, pp. 697-700. It identifies and recommends that the University takes a number of measures to ease the current problems and to reverse the trend over a longer period. These measures need to be adopted by both Schools and non-School institutions, and for both academic and non-academic activities. They will be monitored and kept under review.

9. Some measures are recommended for implementation during the next financial year and have been included in the Estimate for 2003-04 and in the projections forward; others are structural issues which require further review and development but have the possibility of delivering considerable future efficiencies. They are all sensible measures which will strengthen the University, and help it make the best use of its resources, but do not of themselves cure the underlying trend for expenditure to exceed income.

10. Some of the financial problems stem from the University's 'core plus' approach to annual budgeting, in which the baseline expenditure from the previous year is rolled forward with the annual addition of 'New Needs' but without detailed examination of the spending within the baseline; others from the division of funds between the 'Chest' and 'non-Chest'. There is still only limited analysis of 'non-Chest' income and expenditure at this stage, although some progress has been made. The Council are intending to publish a Report about a Resource Allocation Model (RAM) and its implications for the entire University. The introduction of the RAM should improve the review of baseline expenditure. It should provide incentives for income-generation and cost efficiency, enable better prioritization of academic objectives, and improve costing and pricing of all activities. It will erode the division between Chest and non-Chest.

11. The RAM will also enable greater flexibility in the deployment of funds within and between institutions, including moving away from an inflexible 'establishment' approach to pay costs. The appropriate service levels, and funding, for academic and other services such as the University Library, the Fitzwilliam Museum, the Computing Service, and the Unified Administrative Service, must be determined and agreed.

12. The Working Party outlined further work to be carried out, all of which will be of utmost importance in ensuring that the targets for 2004-05 and beyond, leading to break-even on the Chest by 2006-07, are met.

For study during 2003-04; for conclusions to inform allocations in 2004-05

Develop total budgets incorporating Chest and non-Chest income and expenditure
Review rates of overhead recovery
Widen adoption of procurement policy
Introduce variable postgraduate fees, based on transparent costing studies
Value for Money studies: income from trading, catering, stores, maintenance, energy, insurance, security, etc.
Capital Budgeting process
Review of committee relationships and exercise of financial responsibilities

For study and incorporation in long-term strategy

Review allocation and use of teaching, office, workshop, and storage space
Consider if there are radical options for the University estate
Maximize the benefit from the next RAE
School reviews of academic organization
Strategic management of staff resource throughout the University

13. This Report is primarily on Allocations from the Chest. However the Council believe they should draw attention to the state of world financial markets which despite recent improvement remains of concern. This concern extends to the degree of reliance on investment income to the Chest and in support of non-Chest activities, and also to the financial position of the pensions schemes in which the University participates, the trusts which support many overseas students, the Local Examinations Syndicate and Cambridge University Press (both of which support the University), as well as the position of potential sponsors and benefactors.

Overall position of the Chest

14. The estimate for 2003-04 is for a deficit of £(5.0)m, a small improvement on the latest forecast for 2002-03 and a significant improvement on the projection of £(15.7)m made for 2003-04 in last year's Allocations Report. The improvement has been a result primarily of additional Funding Council grant, inclusion of the recommended actions of the Finance Working Party, SRIF-2 funding of some infrastructure cost, and imposition of savings targets, offset by capital costs of a new student records system and an increase in the allocation for maintenance of the estate. The deficit remains of deep concern to the Council, and delivery of the budgeted savings exercise and restricted provision for new needs will have an impact on day-to-day activities and on opportunities for new initiatives.

  Estimate
2003-04
£m
Latest forecast
2002-03
£m
Change
£m
Change
%
 
Chest income224.8 209.2 +15.6 +7.5
Chest expenditure (229.8) (217.6) -12.2 +5.6
 
Chest deficit (5.0) (8.4) +3.4  
 
(+ = favourable)

Preparing the Estimates

15. As in previous years the Estimates have been based on existing estimated expenditure. The officers have taken the previous year's estimated expenditure figures, updated for the impact of the year 2002 pay award, based on approved establishments. They have added in an overall estimate for future pay awards in 2003 and have incorporated a net £2.0m of recurrent new needs, net of savings targets of £1.5m, both as approved by the Resource Management and Planning and Resources Committees. Other expenditure is adjusted for known changes or estimated from volume changes.

Chest Income

16. Income is estimated to rise by 7.5% to £224.8m.
  Estimate
2003-04
£m
Latest forecast
2002-03
£m
Change
£m
Change
%
HEFCE/TTA grant 147.0 136.7 +10.3 +7.5
Academic fees and support grants 45.2 43.4 +1.8 +4.1
Other income/services rendered 11.4 10.6 +0.8 +7.5
Endowment and investment income8.8 7.2 +1.6 +22.2
Research grants and contracts - indirect 12.4 11.3 +1.1 +9.7
Chest overheads
 
 224.8 209.2 +15.6 +7.5
 

The details of the changes are as follows:

HEFCE Grant

17. Although the basic teaching (T) funding formula is unchanged from 2002-03, the part-time premium was abolished and the base price within the formula was reduced in order to release funding for separate allocations to support widening participation strategies throughout the sector. The result for the University has been a reduction in baseline T funding of £1.6m (-3%), which has been only partially made up by a £0.6m increase in the University's own widening participation funding. The outcome is that the sum of baseline T + widening participation funding is £1m (1.9%) lower than it is in 2002-03 (a reduction from £54.8m to £53.8m; these sums include elements which are part of the College fee transfer). The HEFCE has stated in its draft strategic plan that it intends to consult later this year on a review of its approach to funding for learning and teaching.

18. The allocation of QR in 2002-03 was the first to use the outcome of the 2001 RAE. The number of higher rated departments across the sector increased compared with the 1996 RAE. The lack of additional resource to fund this improvement resulted in no substantial increase in funding, and even a reduction in the average unit of funding for units of assessment rated 5 and below. For 2003-04 the HEFCE has been able to maintain in real terms the resource for 5*-rated departments, and (as compared with 2001-02) to restore in real terms the average unit of resource for 5-rated departments. However the average unit of funding for 4-rated departments has fallen still further.

19. The White Paper proposed a new category of 6* departments to receive additional funding; £20m was set aside by the HEFCE for departments that achieved a rating of 5* in both the 1996 and 2001 RAEs. Cambridge has gained £4.1m of this funding for 2003-04 only. The HEFCE will be consulting later this year on 'allocating supplementary funds for 2004-05 and beyond to the very best 5* departments, consistent with the Government's priorities' but has also stated that a increase in real terms in total recurrent research funding in 2004-05 is unlikely.

20. The weighting within the formula applied to income from charities has been reduced by 16% to ensure that the proportion of QR attributable to each element of research volume remains broadly constant.

21. A rise in Home/EU numbers has generated a 5.7% increase in funding for the supervision of Home/EU postgraduate research students in years 2 and 3 (postgraduate students in the first year are supported by 'T' funding).

22. Taking all these factors into account, total research (R) funding for the University has risen by 14.8% (from £67.8m to £77.9m).

TTA

23. The TTA grant is received on the same pattern as in 2002-03 following the transfer to the HEFCE in that year as a result of reclassification of certain students. INSET (In-service education and training) for 2004-05 and beyond will be subject to a bidding exercise.

Student numbers

24. The Council are assuming that the number of undergraduates will continue to increase slowly, at about 0.5% a year. This projection includes the increased numbers arising from the new four-year course in Clinical Medicine intended for graduates transferring to medicine after their first degree, for which the first students were admitted in October 2001.

25. The Council believe that the University has reached a steady state in the number of home postgraduate students and therefore no volume increase has been included for future years. Overseas postgraduate student numbers are expected to increase at a modest rate of around 2.0% a year.

Academic fees and support grants

26. Fees: Home and EU students. The estimated income to the Chest from this source for 2003-04 is £20.0m. The University Composition Fee for an undergraduate has been set by the Government at £1,125, for an estimated 11,459 students. The postgraduate fee for 2003-04 has been set by the Government at £2,940, for an estimated 2,603 students.

27. Fees: Overseas students. The estimated income to the Chest from this source for 2003-04 is £23.7m, which assumes 969 undergraduate students and 1,830 postgraduate students. The Council have reviewed the level of Composition Fees payable by overseas students and noted that the fee levels for 2002-03 are typically about 5% below the average payable at other comparable institutions. By Grace 1 of 12 March 2003 the University approved increases in Composition Fees for overseas students of 2.0% above the rate of inflation for 2003-04 (a total increase of 4.4%). In addition, the Council propose that the increase of 2.0% above inflation be maintained for each of 2004-05 and 2005-06. Part of this increase will be used to provide additional resources for overseas scholarships.

College fees

28. The agreement between the University and the Colleges on College fee payments (Reporter, 2000-01, p. 259) has recently been reviewed. From 1999-2000 to 2002-03 the University agreed with the Colleges a per capita payment in respect of each qualifying student. This arrangement had the disadvantage that payments by the University to the Colleges were in principle uncapped. It has been agreed that, from 2003-04 onwards, the sum to be transferred to the Colleges will be fixed at the start of each year. This sum will be calculated each year in the light of the various components of the University's block grant. The underlying principle will be that the sum to be transferred should be financially neutral to the University when compared to the structure for the block grant and College fees which existed before 1999-2000 when the new arrangements for College fees were negotiated with the Funding Council. In accordance with this principle it is proposed that the sum to be transferred to the Colleges including Homerton (which was outside the 1999 settlement) should be £30.4m.

Endowment and investment income

29. It is estimated that the unrestricted income from this source will be £8.8m.

 £m
Income from Amalgamated Fund 4.3
Income on short-term and other investments2.9
Income from managed non-operational property1.6
 
 8.8
 

The Investments Sub-committee of the Finance Committee has provisionally agreed a distribution by the Amalgamated Fund of 116.4p per unit. This represents the 2002-03 base dividend plus 2.5% but does not repeat the special dividend of 16.5p per unit which has been paid in each of the years since 1999-2000. The interest rate on the deposit account is budgeted at 3.5%. The net rental income on the University's non-operational estate is approximately 3.2% of capital values.

Other operating income/other services rendered

30. It is estimated that income will total £11.4m.
 £m
Arts and Humanities Research Board support for museums (provided to assist with the cost of maintaining the University's collections) 1.4
 
 £m
Annual transfer from the Local Examinations Syndicate 4.0
Refund of VAT (recurrent) 2.4
Charges to cover building project management costs 0.9
Recovery of indirect costs from external trading activity* 0.8
Central overheads recovered from Trust Funds* 0.6
Annual un-earmarked donation from the Cambridge Foundation0.5
Amalgamated Fund administration fee0.3
Miscellaneous 0.5
 
 10.0
 

* Recommendation of the Finance Working Party of the PRC

Although donations generated through the Development Office, the Cambridge Foundation, and directly by Departments support numerous academic developments, they do not in general assist the financial position of the Chest, since donations are typically restricted for specific purposes. Increasingly the generation of donations for unearmarked purposes, though difficult, should be a priority.

Research grants and contracts

31. Overheads on externally funded research. It is estimated that the Chest share of overheads to contribute to the indirect costs incurred centrally on activity associated with research grants and contracts will be £12.4m. The estimate is based on a predicted volume increase of 6.2% in the year 2003-04. In line with the Finance Working Party recommendations there is an urgent need to increase overhead recovery from UK Government and industrial sponsors to contribute to the costs of the activity. The additional income from improved recovery will be retained by the Chest from 2003-04 onward, resulting in a small change to the percentage split between the Chest and Departmental funds.

Chest Expenditure

32. Expenditure is estimated to rise by 5.3% over the latest forecast for 2002-03 (see below).

33. The University has been allocated up to £60.3m over 2003-05 from the second round of the Science Research Investment Fund (SRIF-2). The aims of SRIF-2 are to contribute to the long-term financial sustainability of an institution's physical research infrastructure (buildings and equipment) and its activities and to make up some of the past under-investment in research infrastructure. The funds should not be applied in increasing capacity except where this is justifiable - for example for new and emerging fields of research. Funds can be used for refurbishment of premises for research; replacement, renewal, or upgrading of equipment. The University has submitted proposals setting out how it will use the funds. These proposals include £9.0m in each of the years 2003-04 and 2004-05 to contribute to estimated expenditure from the Chest on building maintenance, minor works, and equipment.

Funding priorities

34. In considering funding priorities, the Council and the General Board recognize the need, even in a year of continued financial constraints and at the cost of remaining in deficit, to ensure that some funds are available for essential developments. In particular, the central bodies recognize that the delay in the filling of vacant offices, introduced to reduce expenditure in 2002-03, has a disruptive effect on the delivery on teaching and other activities which may be disproportionate to the amounts saved. The proposed budget, therefore, assumes the lifting of the 'freeze' on the filling of vacancies from the beginning of 2003-04, but in the context of the development by all institutions of staffing plans to guide their future deployment of resources. In the proposed budget additional recurrent funds are also earmarked for:

- Cambridge Commonwealth, Overseas, and European Trusts, to help maintain existing levels of support for overseas graduate students (£0.2m)
- The costs of an increased number of Pro-Vice-Chancellors (£0.2m)
- New appointments in Schools and in the centre to implement the proposed Resource Allocation Model, as recommended in the report of the Finance Working Party to the Planning and Resources Committee (£0.4m)
- New Needs within the Unified Administrative Service (£0.5m), in order to fund the level of services which are critical for the University to achieve its aims
- Other New Needs, including essential staff for the new buildings for the Faculty of English and the Institute of Criminology (£0.6m)
- Cost of continuing to develop the University's financial system (£0.5m)

35. The Council have set aside £0.9m for promotions. The Council and the General Board have agreed that promotions to personal Professorships, Readerships, and University Senior Lectureships should be on the basis of academic merit. However it is clear that increasing staff costs have been a major factor in creating the current financial deficits. The budgetary position must also be considered, and the proposed allocation is therefore restricted and not open-ended.

36. The Council consider the maintenance of the estate to be of high priority, and have increased the allocation for building maintenance costs by £5.9m over that budgeted for 2002-03 to a total of £18.1m, which includes an element of backlog maintenance. The allocations for minor capital works and for equipment have been increased to £3m and £5m respectively. As explained in paragraph 33 it is anticipated that £9.0m of these infrastructure costs will be funded from SRIF-2 funds.

37. Provision has been made for the new student record system CamSIS: £4.0m is included for expenditure in 2003-04 and a further £3.3m in the projection to 2004-05. Other non-recurrent sums totalling £4.6m have been set aside for known commitments and to cover areas of regular expenditure.

38. In order to fund part of the additional expenditure, and to maintain the deficit at an acceptable level, there will be a further recurrent savings target of £1.0m, in addition to the £0.5m already assumed in earlier projections for 2003-04. This will be allocated across the whole University to Schools and non-School institutions in accordance with a formula determined by the Resource Management Committee.

Chest expenditure

  Estimate
2003-04
£m
Latest forecast
2002-03
£m
Change
£m
Change
%
Academic departments112.2105.27.06.7
Academic services15.114.20.96.0
General educational expenditure5.24.80.46.0
Administration and central services19.317.81.58.4
Student and staff facilities and amenities2.32.10.26.5
Residences and catering operations0.70.70.06.3
Severance costs and unfunded pensions0.10.2 (0.1) 
Miscellaneous expenditure4.03.80.23.5
Provision for pay and price increases4.04.5 (0.5) -0.1
Strategic planning reserve 1.0 (1.0) 
Recurring new needs0.52.7 (2.2) -79.9
Non-recurring expenditure2.72.10.629.7
 
 
 166.1159.17.0 

Infrastructure

Maintenance of premises35.428.47.024.7
Equipment and furniture5.02.12.9132.7
 
 
Less: SRIF-2 funding(6.0)  (6.0) 
 34.430.53.9 
College fee transfer30.429.90.51.7

Allocations for capital expenditure

Minor works3.02.70.314.7
Less: SRIF-2 funding (3.0)  (3.0) 
CamSIS4.00.83.2 
 
 
 4.03.50.5 
 
 
Total expenditure234.9223.011.95.3
 
 

Capital programme

Long-term planning

39. The University has made written representation in the statutory public consultation exercise and participated in the Examination in Public (EiP) of the Cambridgeshire Structure Plan prior to its formal adoption in autumn 2003. Similar procedures for reviews of the Local Plans for Cambridge City and South Cambridgeshire are under way, and are on track for completion in winter 2005-06. The EiP Panel Report recommended relaxation of the Green Belt in two areas that are significant for the University (West/North-West Cambridge and South-West Addenbrooke's), thereby helping to secure options for expansion of the University over the next 25 years.

Major capital works

40. The rate of physical expansion of the estate remains at a significant level. In the three-year period to August 2003 the estate will have grown by over 11%. The focus of new-build centres on the continuing development of the West Cambridge, Sidgwick Avenue, and Addenbrooke's sites. The capital programme remains as it has for the past two years at over £500m of buildings in design or construction, including possible projects still at an early stage. Projects totalling £94.2m started on site in 2002-03, and a further £141.5m of projects are due to start thereafter, subject in a number of cases to full funding yet to be secured. The value of large projects due for completion in 2002-03 and 2003-04 amounts to £190.4m and includes:

- Centre for Nanoscience, West Cambridge
- University Library South-West Extension
- Centre for Genetic Epidemiology, Strangeways
- Music Technology and Performance Area, Sidgwick Avenue
- Chemistry Refurbishment, Lensfield Road
- Maths Phase II, Pavilions F, G, and H
- Wellcome/CR-UK Biological Science Phase 2, Old Addenbrooke's
- Fitzwilliam Museum Courtyard Infill
- Institute of Criminology, Sidgwick Avenue
- Multi-Storey Car Park, Addenbrooke's
- School of Education Building
- Faculty of English, Sidgwick Avenue
- East Square Phase 2a, West Cambridge
- Residences and Nursery, West Cambridge

41. The quality of new and refurbished built space has been generally very high as assessed by the users of the buildings, and by peer-review within the construction industry. Over the last three years £206m has been spent on large capital projects and in total the construction costs have been within budget.

42. The Council, via the Planning and Resources Committee, have ensured a more robust control of strategic fit of projects, prioritization, of full capital and recurrent funding, and of the management of associated risk with capital projects, through the introduction of the Capital Projects Process (CPP). The CPP identifies specific stages of review prior to sanctioning or rejecting a project's progress to the next stage. An important outcome of implementing the CPP will be a clearer and more transparent understanding of the risks to the Chest which certain projects involve. A comprehensive review of the utilization of teaching and other space will inform requirements for additional space.

43. All opportunities to dispose of surplus property, including that vacated for new buildings, will be taken. Disposals will generally be by ending leases, by selling long leases of University-owned properties, and by sales of freeholds only where there is no long-term strategic interest in holding the land.

44. The projection of expenditure on capital building projects is attached as Table 2 at the end of this Report.

Maintenance of buildings

45. As predicted in previous years, the significant growth of the estate has had a consequential effect on the cost of maintaining it at an adequate level. Funding provision for maintenance since 2000-01 has been barely sufficient. Maintenance backlog has grown but the condition of built space is still better than the average for other research-intensive universities. To the increasing backlog of routine maintenance needs to be added the pressures of legislative compliance in a number of key areas: Access for people with disabilities; Fire safety; Trade effluent consent; Incoming water supply; Asbestos; Animal accommodation. The maintenance budget has been restored to a sound level for 2003-04, against a detailed maintenance needs assessment and benchmarked against industry guidelines. The projections for future years increase the maintenance budget in line with the expected growth in the estate.

Non-Chest income and expenditure

46. Research grants and contracts direct costs incurred in academic Departments have been estimated to increase by approximately 6%, which is a slight reduction in the growth experienced in recent years. Fees, other income, and services rendered are all estimated to increase much in line with inflation.

47. Endowment and investment income is estimated to reduce by £2.0m. Interest rates on monies placed on deposit are at a relatively low level, and the special dividend from the Amalgamated Fund will cease, as explained in paragraph 29. However there are major balances of unspent income brought forward in trust funds and in special accounts available to be utilized.

48. In the absence of any detailed forecasts it is estimated that non-Chest activity will break even in that expenditure will be made against identified sources of funds.

49. Regular management accounts for the University are prepared which allow improved monitoring and forecasting. However, detailed budgeting for the University as a whole is not yet in place. The pressures inherent in the proposed RAM, and the proposed appointments in the Schools and the centre to help implement the Model and improve financial planning, analysis, monitoring, and control, will lead to detailed budgeting for Non-Chest activities to complement the extensive Chest budget.

Overall position of the Quinquennial Equalization Reserve (QEF)

50. The latest forecast balance on the QEF at 31 July 2003 is a deficit of £(8.4)m, which after the estimated deficit in 2003-04 will increase to £(13.5)m at 31 July 2004.

Outlook for 2004-05 and beyond

51. Projections beyond 2003-04 have been prepared including the impact of recommendations of the Finance Working Party. Further targeted improvements are required so that steady progress is made to achieve the position required by the Finance Committee and the PRC, namely break-even on the Chest by year four (2006-07). This will be difficult to achieve and will involve on-going challenges for all budget-holders.
  Estimate
2003-04 £m
Target
2003-04 £m
Target
2004-05 £m
Target
2005-06 £m
Chest income224.8 234.1 247.4 254.1
Chest expenditure (229.8) (237.6) (249.4) (254.1)
 
Deficit on Chest (5.0) (3.5) (2.0) 0.0
 

The main assumptions made in these projections are:

- The financial implications of the recommendations of the Finance Working Party of the Planning and Resources Committee (Reporter, 2002-03 p. 697) are incorporated in full.
- The HEFCE grant is increased in line with information in the Government's White paper.
- Basic pay costs increase broadly in line with inflation.
- National insurance and pension contributions are assumed to remain at current rates. However the Council are conscious of the mounting costs of funding the pension schemes in which the University participates, against weak stock markets, and will be monitoring closely the schemes' actuarial valuations. An actuarial valuation of the University Assistants' Contributory Pension Scheme will be carried out as at 31 July 2003, and may well disclose a gap in funding. The size of this, and any implications for contribution rates, cannot yet be estimated with any confidence.
- Volume growth is 0.5% a year for undergraduates, and 2% a year for overseas graduates. The fee level for overseas students has been increased by 2.0% above inflation in each year.
- No 'top-up' fees for Home/EU students have been included in these projections. Such fees would, if introduced at the maximum level of £3,000 a year for all subjects (i.e. £1,900 above existing fee rates), give gross income of approximately £7m in the first year of charging (2006-07) increasing to £21m in 2008-09. It is likely that any such gross fees would be reduced by appropriations for bursaries and other contributions. Detailed work on costing of teaching remains to be to be completed.
- Increased growth in research grants and contracts activity by 5-6% a year.
- Additional new recurrent new needs and non-recurrent allocations are maintained at the same level for future years as agreed for 2003-04.
- Building maintenance expenditure is increased by a further £1.5m, £2.9m, and £4.6m over the three years 2004-07 in line with the expanding estate.
- Estimated capital and running costs of the CamSIS student records system are included in future years.

52. In addition to 'business as usual' projections, further savings and/or increases in income will be necessary to achieve the target of break-even on the Chest by 2006-07. Whilst some assistance may be expected from, say, further SRIF rounds or additional government funding, it is not satisfactory to rely on these sources. The University's budgets and plans should be set accordingly. Further work is required as outlined in paragraph 12 above.

Recommendations

53. The Council recommend:

I. That the revised allocations for 2002-03 referred to in this Report be approved.

II. That allocations from the Chest for the year 2003-04 be as follows:

(a) to the Council for all purposes other than the University Education Fund: £106.3m;
(b) to the General Board for the University Education Fund: £128.6m.

III. That the allocations for 2003-04 be adjusted to take account of any differences between actual and estimated expenditure on pensionable stipends, wages, pensions, national insurance contributions, and other personal emoluments.

IV. That any supplementary HEFCE grants which may be received for special purposes during 2003-04 be allocated by the Council, wholly or in part, either to the General Board for the University Education Fund or to any other purpose consistent with any specification made by the HEFCE, and that the amounts contained in Recommendation II above be adjusted accordingly.

16 June 2003ALEC N. BROERS, Vice-ChancellorIAN LESLIEG. A. REID
 RICHARD BARNES A. M. LONSDALE M. SCHOFIELD
 JOHN BOYD D. LOWTHER ALEX SWALLOW
 PETER GODDARD D. W. MACDONALD LIBA TAUB
 S. LEATON GRAYJAMES MATHESONJOAN M. WHITEHEAD
 DAVID S. INGRAMMARTIN REES 

1 Note. Chest income consists of Funding Council grants, home and overseas fees, endowment income, a share of research grant overheads, transfers from CUP and UCLES, and certain other operating income. Non-Chest income consists of income from trust funds, special funds, the direct cost element of research grants and contracts and departmental share of overheads, self-supporting accounts, services rendered, and residences and catering.

Appendices 1 and 2 are available as PDF download.


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Cambridge University Reporter, 18 June 2003
Copyright © 2011 The Chancellor, Masters and Scholars of the University of Cambridge.