A Discussion was held in the Senate-House. Deputy Vice-Chancellor Professor John Rallison was presiding, with the Registrary, the Junior Proctor, three Pro-Proctors, and six other persons present.
The following Report was discussed:
Report of the Council, dated 18 May 2009, on the financial position and budget of the University, recommending allocations from the Chest for 2009-10 (Reporter, p. 760).
Professor A. C. MINSON:
Mr Deputy Vice-Chancellor, preparing the Budget Report this year has been an unusually difficult task. The financial and economic landscapes have been changing throughout the past twelve months with accompanying uncertainty about cuts in public spending, increases in pension contributions, and the outcome of pay negotiations. When the final draft of this Report was agreed by Council, uncertainties remained about the response of the Funding Council to the spending cuts for 2009-10 and 2010-11 announced by the Government in the April Budget. Recent announcements provide some comfort. Research Council budgets will be protected and reductions in HEFCE expenditure will impact only marginally on the 'R' element of the Block Grant. The indication is that reductions to the Block Grant to the University for 2009-10 and 2010-11 will be in single millions and the Report attempts to take a balanced view of the financial challenge during that period. The position beyond 2011 is however, much less clear: the projected level of public debt implies substantial reductions in public expenditure and a new Government, perhaps with different priorities, is likely to be in power. The Planning and Resources Committee believes that the University should be prepared for reductions in public expenditure on higher education and research beyond 2011 and recommends that, notwithstanding the projections described in this Report, it would be prudent to plan on the basis of a zero cash increase in 2010-11, equivalent to a Chest Allocation below inflation.
Turning to the details of the Report, the financial position in the current year is relatively healthy. Schools and Institutions are operating within budget and Chest income is higher than expected due in part to the increased operating surplus projected by Cambridge Assessment. Although indirect cost recovery from research grants is below forecast on a percentage basis, absolute returns to the Chest from this source are close to forecast because of increased research activity. A Chest surplus of about £11m is projected for the current year but a deficit is predicted for 2009-10. The HEFCE Block Grant for 2009-10 is increased by 2 per cent compared to the previous year but pension contributions to USS will increase by 2 per cent and to the CPS scheme by 4 per cent. Pay costs will therefore increase by more than 2 per cent before pay awards, promotions, and incremental increases are taken into account. At the same time, a major area of income growth, research grants and contracts, cannot be expected to continue to grow at recent rates in the current economic climate. While most sources of income are relatively secure, the University will not be immune to the recession, and costs must therefore be contained. This will not be straightforward because the fixed costs of the University are very difficult to control. Proposals to cease any activity will meet with strong opposition. Pay costs are determined largely by external forces that govern pay awards and pension contributions. The cost of utilities is rising and the Resource Management Committee has introduced a scheme to incentivize Departments and Institutions to reduce electricity consumption. The response has been good and the University is projected to reduce consumption in 2008-09 by comparison with the previous year despite overall growth in activity. This is encouraging, but the financial impact is relatively small. Staff costs are by far the largest single element of expenditure and the Report proposes that restraint must be exercised in the filling of posts. Only exceptional cases should be authorized.
There have been some discussions of the University's operating surpluses recently and I would like to comment. The figure of £40m as a surplus for 2007-08 has been quoted and this is the figure given in the University's Financial Statements. Mr Reid and his colleagues in the Finance Division produce statements of a very high accounting standard which are agreed 'true and fair' by our auditors. But these are consolidated accounts for all elements of the University, including the Press, Cambridge Assessment, and the Trusts, and they include all income and funds for restricted purposes held by Departments and Institutions. The reported operating surplus cannot therefore be interpreted simply as funds available to the University for expenditure. The Chest represents the central fund available to Council for paying the core costs of the University including academic salaries and is the source of income that is available to the University for strategic investment.
The Chest surplus for 2007-08 was approximately £4m, slightly more than 1 per cent of Chest income. I refer members of Regent House to paragraphs 31 and 32 of the Report, which note that our capital programme is funded largely by benefactors and by earmarked grants from the Funding Council. The latter source is decreasing and the University should not be placed in a position where its capital programme is solely benefactor-led. The long-term aim must be to generate operating surpluses sufficient to support the capital programme.
Deputy Vice-Chancellor, this is the last Budget Report that I shall present to Regent House. I would like to think that our financial and academic planning has improved over the past six years and this is due in large part to the efforts of my academic and administrative colleagues. I would like to thank the members of the Planning and Resources Committee and the Resource Management Committee, the Chairmen of the Schools, and the staff of the School Offices for their help in introducing devolved budgeting and in preparing detailed academic and financial plans. I should also like to record my gratitude to the staff of the UAS and in particular to those of the Finance Division, Estate Management and Building Service, and the Planning and Resource Allocation Office of the Academic Division. It has been a pleasure to work with such able and committed administrators and I thank them for their advice and support over the past six years.
Professor A. D. YATES:
Mr Deputy Vice-Chancellor, the Board of Scrutiny usually finds it difficult to comment on what, adopting the customary shorthand, I shall call the Allocations Report, in the Discussion that follows its publication, largely because timing issues result in the publication of this Report in comparatively close proximity to the Board's own end-of-year report. This year is no exception, and the Board would wish to reserve most of its substantive comment to its 14th Report that it hopes to be in a position to deliver at the end of this month. Nevertheless, while not in any sense welcoming the long-term prognostications contained in the Report currently under discussion, which make for some grim reading, the Board does welcome the candour of the narrative and the cautions and caveats therein contained. In general the Board feels that next year's Budget (that is, the academical year 2009-10) will fall in generally as predicted, though it does have some concerns about what it considers may be the over-optimistic 1.5 per cent non-pay inflation assumption. Years two to five, however, become progressively more uncertain and the projections progressively more open to challenge, given the enormous uncertainties concerning interest and inflation rates, government approaches to taxation and the assumptions underlying public finances, the performance of the stock and bond markets, and the trading outlook for Cambridge Assessment (on which the projections are heavily reliant to achieve a balanced budget).
There are also the uncertainties surrounding USS, to which the Allocations Report makes proper and worrying reference in paragraph 34, as well as the difficulties of funding under current arrangements both the future service benefits and the historic service deficit in the Cambridge University Assistants' Contributory Pension Scheme. In the Board's view the academical years 2010-11 onwards are going to see the University endeavouring to manage its affairs in some extraordinarily difficult financial environments in which some extremely delicate funding priorities will have to be negotiated.
Turning briefly to paragraphs 31 and 32, which the Board welcomes, not only referring, as it does, to the University's capital spending programme but also, albeit tangentially, flagging the possibility that the various development plans for the Old Press Site and the New Museums Site may need to look to alternative funding mechanisms. The Board is concerned that the future of SRIF money must now be in some doubt and that a rather more adventurous attitude to long-term debt is going to be required of the University if its desirable new capital projects are to continue to be seen through to fruition. The Board will be commenting on this and other aspects of the Allocations Report in its 14th Report.
Professor G. R. EVANS (read by Dr P. BEATTIE):
Mr Deputy Vice-Chancellor, it is instructive to look behind this Allocations Report to what may be glimpsed of the preparatory work, in the Minutes of the Planning and Resources Committee. I focus my remarks on the discussion of the funding to be made available for senior academic promotions, though one should not let pass without comment the immense disparities between the kinds of sums thought reasonable when capital projects are in prospect (or a bailout for Cambridge Enterprise), and those thought appropriate for rewarding staff. I hope assistant staff will forgive my not discussing their prospects of upgrading and advancement. It does not mean that I think that less important than academic promotions.
The Minutes of the PRC on 18 February ([RMC minutes] 09.25 Allocations 2009/10: part three (Mins 08.77, 09.13, 09.04)) record that 'the Committee agreed that due diligence had been done on the Funds'.1 What planning about allocations entitled them to pat themselves on the back in this way?
The following proposals are recorded in the March PRC [RMC] Minutes:
(a) deferment of, or if that were not contractually possible reducing the funding for, the next professorial and grade 12 contribution round;
(b) setting a lower cap on academic promotions and non-academic regradings;
(c) a moratorium on extensions beyond retirement;
(d) introduction of a procedure to exercise considerable central restraint over approvals for the filling of vacancies.2
With 'due diligence' the Committee also calculated possible savings from axing the whole promotions process for a year or halving the funding made available for promotions:
(a) the effect of postponing the October 2009 professorial and grade 12 contribution round, as discussed at General Board on 4 March, would be a reduction to the administered fund forecast for 2009-10 of a total of £525k (the expenditure would be assumed transferred to 2010-11);
(b) if senior academic promotions funding for the October 2010 exercise were reduced to half current levels, the effect would be to reduce the administered fund expenditure forecasts by about £200k in 2010-11
What was the content of that General Board discussion referred to in the PRC Minutes? Look at the Minutes of the March 4 meeting, where we can only imagine this was discussed under C3. You wouldn't guess that they had talked about postponing a whole promotions round, would you? So had the Minutes of the PRC not let this slip the Regent House would never have known until the promotions round was axed, or not at all if an arbitrary decision were made without reference to the Regent House to hold a promotions round but halve the number of promotions next year, presumably while still claiming that they had been 'fair' to individuals disappointed of success.3
I was unable to find any discussion about present or future policy on those secret special extra payments for certain Professors. Surely the cost of those ought to be factored in when the available money for promoting those who are not yet Professors is under consideration?
Let me end with a warning note. John Denham's post-budget letter to universities was considered by the Council at its May meeting:4
But of course on 5 June the Department of Innovation, Universities and Skills was abolished in the Cabinet reshuffle. Universities are now in the capable hands of Peter Mandelson and the Department of Business, Innovation and Skills.5 So the only certainty for the University is that it can have no certainty. In a climate of utter unpredictability it proposes to act in a way which will deny its patiently waiting senior academics the recognition they have earned for at least a further year. For them that is a certainty.
I am not suggesting that there should be no budgeting and no annual Allocations Report. Of course not. But I do think there should be transparency about the taking of major policy decisions based on financial guess-work which will affect the prospects of the University's staff. Those should not be at the whim of a General Board which obfuscates the matter in its Minutes.
1 http://www.admin.cam.ac.uk/cam-only/committee//rmc/minutes/20090217.pdf
2 http://www.admin.cam.ac.uk/cam-only/committee//rmc/minutes/20090311.pdf
3 http://www.admin.cam.ac.uk/cam-only/committee//gb/minutes/20090304.pdf
5 http://www.guardian.co.uk/education/2009/jun/05/mandelson-to-run-universities
Dr S. J. COWLEY:
Mr Deputy Vice-Chancellor, I am a Senior Lecturer in DAMTP and a member of the Council. PRC and General Board may have, quite properly, discussed whether there should be a lower cap on academic promotions and regradings, but Council decided there should not.