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Report of the Council on the financial position of the Chest, recommending allocations for 1999-2000

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


The following are the principal points of this Allocations Report:




1. As in previous years, the purpose of this Allocations Report is to assess the financial position of the University and to recommend allocations from the Chest for the ensuing financial year to the General Board for the University Education Fund (UEF) and to the Council for all other purposes.

Revised estimates 1998-99

2. When the Council reported in May 1998 (Reporter, 1997-98, p. 678) they expected that total income for the year 1998-99 would be £297.1m, of which £145.3m would be unrestricted Chest income and £151.8m would be restricted income (research grants and contracts, trust funds, special funds, self-supporting accounts, and commercial activities). The overall position was expected to be a surplus of £1.5m on restricted income and a deficit of £0.8m on the Chest.

3. The Chest out-turn for 1998-99 is now forecast to be as follows: income £148.1m, expenditure £150.3m, deficit £2.2m. The extra income, shown in detail in Appendix 2, includes additional grants from the HEFCE, slightly more income from fees (mainly overseas) than was originally estimated, and additional income from research grant overheads and other sources, including a £1.5m refund of VAT. This latter amount represents the final stage in the exercise which was started in August 1996 to recover excess VAT paid in the period from 1 April 1973 to 31 July 1998. With the help of consultants KPMG and, latterly, the appointment of a specialist VAT Officer in the Finance Division, a total of £7.7m has been refunded by HM Customs and Excise. Expenditure will be less than forecast last year, partly as a result of careful management and partly owing to the delay in implementing pay restructuring, for which money had been set aside in the estimates. These changes have enabled the Council to finance the early retirement scheme and to make provision for funding proleptic appointments prior to the next Research Assessment Exercise. Details of the proposed additional expenditure are set out in Appendix 2.

4. The revised forecast for restricted income for 1998-99 is £165.3m; expenditure is now estimated at £163.8m, giving rise to a forecast surplus of £1.5m.

Forecasts for 1999-2000

Achieving our mission

5. The University's mission is to provide an education of the highest quality at both undergraduate and postgraduate level and to encourage and pursue research of the highest quality over a wide range of subjects. The University's role is regional, national, and international. A review of the University's mission is currently being undertaken by the Planning and Resources Committee in consultation with the Councils of the Schools and other bodies.

6. It is fundamental to the University that research and teaching are integrated. The maintenance of the University's excellent ratings is primarily dependent on the quality of its staff, and it is essential that they should have sufficient time and appropriate space in which to carry out research, as well as up-to-date equipment, books, and journals, and access to other sources of information. The Council believe that all staff at whatever level should be adequately paid and supported and that their workplace accommodation should be adequate and appropriate. Over the past decade the number of staff employed by the University has increased steadily. Ten-year figures were published in the 1997 Allocations Report, and Appendix 1(B) to the present Report gives details of all categories of staff and student numbers for 1998-99. The balance between established staff, funded by the Chest or the University Education Fund, and unestablished staff, paid for primarily out of research grants, continues to change, with an increasing number in the latter category. However, the ratio between FTE student numbers and established academic and academic-related staff has remained remarkably constant, at least over the past five years. The maintenance of this ratio, which implies continuing support by the Council for new academic needs, involves many difficult decisions, particularly in relation to pay (see paragraphs 8-12 below).

7. The overall increase in staff numbers places increasing pressure on the University's physical infrastructure. The charts on pp. 640-643 show in real terms the ten-year trends in income and expenditure from all sources, together with the movement over a seven-year period of the unit of funding for Home/EU students. Despite the financial constraints which have affected the higher education sector in recent years, the Council have continued to strive to include adequate support in the budget for the maintenance of buildings and the renewal of plant and equipment, as well as doing all they can to facilitate the provision of new or refurbished accommodation.

Pay restructuring and early retirement schemes

8. The University's world-class reputation in teaching and research depends on the quality of the contribution made by its staff. The University must be able to attract and retain staff of the highest calibre if it is to remain a leading international academic institution. Its remuneration policy and terms and conditions of employment must be sufficiently attractive and competitive to induce leading academics and professional staff to accept appointment and to reward them in the course of their employment for their commitment and achievements. The General Board's Report on the recruitment, reward, and retention of academic and academic-related officers (Reporter, 1997-98, p. 804) set out proposals for reforming the present arrangements in relation to recruitment and retention of staff. Those proposals were approved by the Regent House; in the case of the proposed introduction of the office of Senior Lecturer they were accepted by the Regent House in amended form, subject to further consideration being given to particular aspects of the proposals. Funds have been set aside, amounting to £3.5m in 1999-2000 and £4.5m in 2000-01 and subsequent years, to meet the cost of implementing the proposals of the Board's Report, including consequential changes in academic-related pay. The Council and the General Board will give further consideration in the near future to the implications for recruitment and retention policies of the recommendations of the Independent Review of Pay and Conditions in Higher Education, chaired by Sir Michael Bett, whose report is expected to be published shortly.

9. An additional amount of £300,000 has again been included in the budget for 1999-2000 (as it was in 1998-1999) to allow for some modest restructuring of Assistant Staff posts.

10. The early retirement scheme referred to last year, which was necessary in order to help to fund the increased pay costs referred to above, has been successfully completed, leading to the retirement on 31 July 1999 of 79 University officers and assistant staff.

11. Having reviewed the applications received under the scheme, the Council and the General Board concluded that there were a significant number of members of the University staff who were interested in voluntary early retirement and whose applications would be supported by the Heads of their Departments if the conditions of the scheme were modified by dropping the requirement to achieve a saving in expenditure. They accordingly proposed an extension of the scheme with revised terms, under which it will still be necessary to demonstrate that an applicant's retirement is in the managerial interest of the University, but there will be no requirement for a permanent reduction in expenditure. This extension has been approved by the Regent House; the resulting additional retirements will take effect from 31 July 1999.

12. It is expected that the cost of extending the scheme on the terms proposed will amount to about £2m; however, this figure is only a rough estimate and the eventual sum required, if the managerial interest of the University is to be adequately served, may be greater than this. The Council believe that £2m for this purpose can be found non-recurrently within the estimates for 1999-2000; if a larger sum is eventually required, the Council will propose that it should be charged to the Quinquennial Equalization Fund.

Financial prospects for 1999-2000 and beyond:

13. The overall financial position of the University continues to be one that requires the cautious strategy referred to in previous Allocations Reports, particularly in the face of the Government's continued requirement for 'efficiency gains'.

14. The University's five main sources of revenue are as follows:

15. The amounts which accrue to the Chest and which form the subject of this Report are the unrestricted elements of these revenue sources. Total estimated income amounts to £342.5m (or £316.3m without the College Fee Transfer, see paragraph 16(a) and Appendix 3), of which £177.2m will be unrestricted income accruing to the Chest. Efforts continue to be made to increase the income available to the Chest, for example by ensuring optimum distribution of income from the University's Amalgamated Fund, by continuing to adopt an energetic cash management policy, and by encouraging greater use of trust and special funds. However, the major portion of Chest income comes from HEFCE grant and student fees, both of which are subject to restraints. Table 1 sets out the view of the Planning and Resources Committee on the likely financial position up to the year 2002-03.

16. A breakdown of expected Chest income in 1999-2000 is set out in Table 1 (p. 655). The following are the main components:

(a) HEFCE grant

The HEFCE grant already notified is £118m, as detailed in Note 1 to Table 1 and commented on further in paragraphs 18-21. This includes for the first time amounts (totalling £26.2m) paid in partial compensation for the funding formerly received though undergraduate College fees. Note 1 shows the division of the grant between funds for teaching and research and non-formula funding.

(b) TTA grant

The total TTA grant is £1.2m (see paragraph 22), specifically to cover the costs of the provision of Initial Teacher Training (ITT) and In-Service Training (INSET) by the School of Education.

(c) Fees: Home and EU students

The estimated income to the Chest from this source for 1999-2000 is £17.1m, based on composition fees for undergraduates, which have been set by the Government at £1,025. The postgraduate fee for 1999-2000 has been set by the Government at £2,675. Fee-paying student numbers are in line with current College estimates for 1999-2000, at 10,536 undergraduates (including Homerton College students) and 2,540 graduates. Undergraduate numbers conform as far as practicable to the Maximum Aggregate Student Number (MASN) of 10,404 set by the HEFCE; this number plus 2 per cent is the maximum number of undergraduate and PGCE students that the University is allowed to recruit without financial penalty.

(d) Fees: overseas students

The estimated income to the Chest from this source is £17.7m, which assumes 862 undergraduate students and 1,586 postgraduate students. By Grace 1 of 17 March 1999 University Composition Fees for overseas students have been increased by 4.5 per cent for 1999-2000; additional financial support will be made available to the Cambridge Commonwealth Trust, the Cambridge Overseas Trust, and the Cambridge European Trust, to compensate them for the increased fees that they will pay on behalf of overseas students, with the aim of ensuring that there is no reduction in the number of overseas students that they can support.

(e) Endowments, income and interest receivable
Income from Amalgamated Fund representing Chest capital 3.6
Interest on short-term and other investments 2.6†
Rent (including transfers from the Estate Account) 0.7*

† Interest rates on cash balances have fluctuated between 5 and 7 per cent during 1998-99, and it has been assumed for 1999-2000 that they will remain at about 5 per cent.

* The University owns a considerable amount of non-operational property in and around Cambridge. This is managed by the Estate Management and Building Service; the net income (after all costs have been taken into account, including money set aside for maintenance and refurbishment) is transferred annually to the Chest.

(f) Other operating income

It is estimated that income from this source will be £7.2m, made up as follows:

Annual transfer from the Local Examinations Syndicate 3.6†
Annual unearmarked donation from the Cambridge Foundation 1.0*
Refund of VAT (recurrent) 1.5
Amalgamated Fund administration fee 0.2
Deposit Account 0.6
Miscellaneous 0.3

† See paragraph 23.

* Fund-raising by the Development Office for unearmarked income has been increasingly successful in the past year and it is possible that this target will be exceeded in 1999-2000.

(g) Overheads on externally funded research

It is estimated that income to the Chest from this source will be £8.5m. This represents the Chest's share of overheads, which is generally two-thirds and offsets the cost of expenditure incurred centrally, for example on the running and maintenance of premises as a consequence of the acceptance of grants and contracts; it excludes the share of such income that is credited to the discretionary and other appropriate accounts of individual Departments and other institutions in the University.

17. Paragraphs 18-22 below set out further comments on some of the Chest's main sources of income in 1999-2000. Total HEFCE funding for the University is up by 2.4 per cent overall in cash terms, a net reduction of 0.1 percentage point against the GDP Deflator for the academical year 1999-2000 (2.5 per cent). The most recent figures for the Higher Education Pay and Prices Index (HEPPI), which is produced for the CVCP by a team at the London School of Economics, show an increase of 2.2 per cent for the year to January 1999. A major element of HEPPI is pay expenditure.

HEFCE funding for research

18. The quality-related component of research funding ('QR') for the University shows an increase of 3.4 per cent over 1998-99. This is relatively small when compared to the increases enjoyed by other research-intensive universities. The 'QR' for 1999-2000 reflects the final step in phased revision of the overall funding 'quanta', the total sums allocated nationally by the HEFCE to each subject area (or Unit of Assessment) before the detailed allocations to universities based on quality. The quanta are now based only on the volume of research activity to be supported, and the relative cost of undertaking research in each subject as measured by the average of universities' expenditure. Many Arts and Humanities subjects in particular attract lower 'QR' funding than before. It was expected that this change would disadvantage Cambridge, and the University has lost significant sums, in some cases even where there is a constant or increasing level of research activity.

19. As an addition to 'QR', a sum of almost £3m has been provided following inclusion in the calculations, for the first time, of College-employed staff who were research-active as at 31 March 1996. This sum forms part of the total of some £26.2m included in the HEFCE grant as a result of the new arrangements for funding undergraduate College fees. There is a hint that it may fall relatively in future years, since the revised quanta mentioned above have not yet been applied in this element of the HEFCE calculations, and College-employed staff work predominantly in subject areas where funding has declined.

HEFCE funding for teaching

20. The HEFCE 'T' funding model for 1999-2000 is as newly introduced for 1998-99. The underlying principle is that similar academic subjects should be funded at similar rates regardless of university; a more detailed description of the practical effect on the University was provided in last year's Allocations Report (Reporter, 1997-98, p. 685). The effect this year is that the University's grant for 1998-99 attracts an increase of 2.5 per cent for inflation, suffers a further reduction in real terms (an 'efficiency gain') of 0.75 per cent, - rather less than originally feared, owing to the provision of additional funding by the Government through its Comprehensive Spending Review last summer - and is then adjusted to provide for the additional preclinical students whom the University has accepted from 1999 onwards. The product of all this is a teaching grant of £41.6m for next year.

21. The HEFCE have included in their 'T' calculations two new elements of funding, namely 'premiums' to recognize the additional costs of historic buildings and of small institutions. Although these are available to all eligible HE institutions, for Cambridge (and Oxford) they replace a substantial part of the former Home/EU undergraduate College fee income. As with the addition to 'QR' (see paragraph 19), these sums form part of the £26.2m included in the grant under the revised College fee arrangements.

TTA funding for teaching

22. The funding for Initial Teacher Training in 1999-2000 is 2.3 per cent less than in the current year. This represents a further step in the reduction of funding arising from the standard 'price tariff' - or fixed units of funding per student - adopted by the TTA. Funding for In-Service Education of Teachers (INSET) is similarly subject to a new funding method, with a percentage of past funds being guaranteed and the balance being open to competitive bidding, in which Cambridge was one of the few successful institutions. Unfortunately the level of guarantee declines in tranches of 25 per cent until 2001-02. During 1998-99 it was finally agreed that the University's part-time M.Ed. course offered by the School of Education is not an INSET course, and the responsibility for funding it therefore reverted to the HEFCE.

Financial support from the Local Examinations Syndicate and the University Press

23. The Annual Reports and Accounts of these two associated bodies will be published in the Reporter later this year. Regulation 13 for the Local Examinations Syndicate (Statutes and Ordinances, p. 139) provides that 'In any year in which the audited accounts show a sufficient balance the Syndicate shall pay to the Chest such a proportion of the balance as shall be agreed between the Syndicate and the Council'. In 1998, the Syndicate made an operating loss, but nonetheless transferred £3.44m to the Chest; this was drawn from capital funds. The examinations business has been subject to extreme turbulence over the past two years and continues to be very uncertain. Although the Council have assumed for budgeting purposes a transfer of £3.6m in 1999-2000, it may well be that such a transfer could only be made by drawing from capital funds, the value of which will be affected by stock market movements.

24. The Press is governed by its own Statute (Statute J), which entrusts the management of its finances to the Press Syndicate. Capital and income are controlled and applied by the Press Syndicate for the purposes of the Press, i.e. '… to printing and publishing in the furtherance of the acquisition, advancement, conservation, and dissemination of knowledge in all subjects; to the advancement of education, religion, learning, and research; and to the advancement of literature and good letters' (Statute J, 1). The Press Syndicate make regular allocations to the University for library purposes consonant with those of the Press; £1.33m in respect of 1999-2000 was transferred in 1997. The amount held for these purposes was valued at £7.3m at the end of 1998. The whole of the income on this sum, and part of the capital, forms an appropriation-in-aid to the University Library. An amount of £3m will also be transferred to the University in 1999-2000 for capital purposes, following the sale of the Institute of Education building to the Press for £2.75m in 1998. The latter sum is set aside for use by the School of Education for capital purposes.

Quinquennial Equalization Fund (QEF)

25. The QEF is derived from accumulated surpluses (or deficits) on Chest income and expenditure, and is available to make good any deficiency of income in a year in which the authorized expenditure of the Chest exceeds its income. The balance in the Fund at 31 July 1998 was £10.4m. If the deficit of £2.2m forecast in this Report for the current year is realized (paragraph 3), the balance in the QEF will be reduced to approximately £8.2m. The effect of the deficit forecast for 1999-2000 will be to reduce the balance in the Fund to about £6.8m. Stated balances reflect the current valuation of units of the Amalgamated Fund in which part of the QEF is invested, no account having been taken of the revaluation of units at 31 July 1999 and 31 July 2000 respectively; it is hoped that part of the reduction will be offset by an increase in the capital value of the units.


26. Draft estimates of expenditure for 1999-2000 have in general been prepared by updating the 1998-99 figures so as to include pay inflation and any new recurrent needs agreed by the Council and the General Board in that year, which then go into the baseline for the following year. Some demand-driven increases in volume have been agreed for central expenditure (for example on buildings maintenance and utilities) but otherwise little change has been made. Individual detailed estimates have however been referred to Heads of Departments and other institutions as a check against error.

Funding priorities for 1999-2000

27. The General Board accord a high priority to making progress with the implementation of the restructuring of academic and academic-related offices, as well as providing for temporary upgradings and personal promotions to Professorships and Readerships. The Board also recognize the importance of making sufficient provision to fund new developments, including strengthening the infrastructure and the creation of additional academic posts to facilitate restructuring and reorganization that may be required in response to reviews and also in preparation for the next Research Assessment Exercise. Their views have been reported to the Planning and Resources Committee. In the light of advice received from that Committee, the Council have proposed that £3.5m should be allocated recurrently to meet the costs of salary restructuring for academic and academic-related staff, including any cost of upgradings and personal promotions beyond that provided for within the recommended allocation of £1.2m for new needs. The General Board have agreed that personal promotions should be primarily determined by the assessment of academic merit, without budgetary restriction. If necessary the Council will ensure that funds are available to meet the additional cost of promotions recommended by the Board. This is in addition to the amounts regularly set aside for recruitment incentive payments (£0.385m for Professors and £0.239m for non-professorial staff in 1999-2000).

Commitment accounting -- Project CAPSA

28. In the 1998 Allocations Report it was reported that work had been carried out with the aim of developing a University-wide commitment accounting system. A subsequent independent review by an external consultant recommended that an entirely new accounting system should be introduced to meet the broader requirements of Faculties and Departments and the University's need for more accurate, comprehensive, and timely management information. Assessment of the proposed Enterprise Resource Planning (ERP) system was undertaken between October 1998 and February 1999 by a team composed of University staff and staff from the preferred software supplier Oracle under the leadership of the consultant. The Council have now approved the implementation of the project (entitled CAPSA) over the period 1 March 1999 to 31 July 2000 at a non-recurrent cost of £4.7m, to be funded from Chest capital. The implementation team of twenty-two consists of seconded University staff and staff from Oracle, working under the direction of the consultant and occupying rooms in the newly acquired Royal Greenwich Observatory building. Significant recurrent savings are expected in the medium to long term as a result of the installation of CAPSA, although these will not have any impact on expenditure in 1999-2000.

Analysis of Chest expenditure

29. A breakdown of proposed expenditure from the Chest is set out in Table 1. The following table shows the main components. Detailed estimates will be referred for approval to the Council in the case of Council institutions and to the General Board in the case of institutions under the supervision of the Board.

30. As indicated above, much of the University's core expenditure is budgeted for on a historic basis. The Council take this opportunity, however, to comment on some of the main areas of expenditure in 1999-2000 which will be funded out of reserves.

Expenditure UEF £000s Per cent1 +/- Chest £000s Per cent1 +/- Total £000s Per cent1 +/-
Academic Departments 73,450 1.6 877 -17.1 74,327 1.3
Academic services 14,186 1.3 1,219 5.1 15,405 1.6
General educational expenditure 878 -2.4 4,278 0.4 5,156 -0.1
Maintenance of premises: Buildings Maintenance Fund and Head 8 3,810 1.3 18,806 4.6 22,616 4.0
Administration and central services 140 0.0 9,141 -1.0 9,281 -1.0
Student and staff facilities and amenities   1,723 1.1 1,723 1.1
Residences and catering operations 562 -9.6 562 -9.6
Severance costs and unfunded pensions 346 -13.3 346 -13.3
Allocations for capital expenditure (Minor Works, NBEF,2 and Planning) 3,050 45.2 3,050 45.2
Miscellaneous expenditure 2,765 -10.6 2,765 -10.6
Strategic Planning Reserve 1,000   1,000
Provision for pay and price increases 4,500   4,500
Provision for salary restructuring 3,800   3,800
Provision for new recurrent needs (including inflation related increases in non-pay items) 1,918   300   2,218
Provision for non-recurrent expenditure 875   350   1,225
College fees transfer     26,245   26,245
95,257 -5.5 78,962 11.1 174,219 -0.2
Equipment and furniture 7,000 16.7 521 0.0 7,521 15.3
102,257 -4.2 79,483 11.1 181,740 0.5


1 Percentage increase/decrease on comparable expenditure in 1998-99 (including supplementary allocations described in this Report).

2 New Buildings Enabling Fund.

Medium-term capital programme

31. Once again the Council have been advised by the Planning and Resources Committee that the pressures on recurrent funding are too great to allow for any contribution to be made from the Chest to the New Buildings Enabling Fund (formerly the New Buildings Sinking Fund). The balance standing to the credit of that fund at 1 August 1998 was £8.164m, of which £3m is earmarked for work on the Raised Faculty Building and £4m is set aside for various contingencies, including settlement of a claim in respect of the Law Faculty Building and remedial acoustic work to that building. A further £3m will be transferred into the Fund from the University Press (paragraph 24).

32. Notwithstanding the reduction in recurrent Chest funding for new buildings, the programme of building continues with support from a wide range of benefactors, including individuals, companies, and charitable trusts as indicated below. The work of the Development Office is crucial in this area.

33. The following major projects commenced in 1998-99 and will be in progress during 1999-2000:

Faculty of Divinity, Sidgwick Avenue 7.7
Chemical Engineering, Phase III refurbishment 1.5
Physiology: combined facility 5.4
Centre for Mathematical Sciences Phase I (Pavilions 1, 2, 5 and Central Core) 20.0
Raised Faculty Building, Sidgwick Avenue: alterations 6.0
Biochemistry Part I Teaching Laboratory and other alterations 1.8

34. Forthcoming projects for 1999-2000 are set out below:

Infrastructure works at West Cambridge (including park & cycle facility and a new sewer)

Clinical Veterinary Medicine, post-mortem facility

University Library Stage III, Phase 3 (north-west corner)

Centre for Mathematical Sciences, Clarkson Road: Pavilion 3

Betty and Gordon Moore Library, Clarkson Road

Faulkes Gatehouse, Clarkson Road

William H. Gates III Building for Computer Science at West Cambridge

Unilever Centre for Molecular Sciences Informatics

BP Institute

Island Site Phase II (Clinical School/MRC)

University Centre: kitchen refurbishment

Genetics: refurbishment

Chemistry: south wing refurbishment

35. The total cost of these projects amounts to just over £75m, which comes from the following sources:

Corporate investment and donations from industry and commerce and from individual benefactors 40.4
Chest (Buildings Maintenance Fund, Minor Works Fund, New Buildings Enabling Fund) 10.7
Land Fund 10.0
Borrowing and appropriations-in-aid 4.9
Cambridge University Press (part of £20m referred to in earlier Allocations Reports) 2.1
Lottery funding 1.4
Departmental contribution 0.6
Further fund raising 3.0

Minor capital works

36. The Minor Works Fund, which is used as a source of funds for building alterations, refurbishments, and extensions, has again been subject to heavy demands. These arise for numerous reasons, including health and safety, the arrival of new staff, especially Professors, and in response to (or in anticipation of) Subject Review visits and changes in teaching arrangements. In order to ensure that the University's resources are deployed in as cost-effective a manner as possible, schemes have continued to be subject to detailed examination by the Minor Works Review Group throughout key stages of their development. The General Board and the Council have also continued to require contributions towards the cost of minor works to be made from funds available to Departments and other institutions; this encourages the authorities concerned to keep specifications to the minimum necessary to satisfy the purpose of a scheme.

37. A further refurbishment scheme was submitted to the HEFCE in the Michaelmas Term 1998 under the second round of the 'Poor Estates' initiative, but, like the five applications made a year earlier in the first round, was not successful. The central bodies are concerned about the level of work involved in the preparation of such applications, which may prove to be abortive. Implementation has continued of the five schemes for which partial funding has been provided under the HEFCE Research Laboratories Refurbishment Initiative, and a number of applications relating to minor works have been made to the Joint Infrastructure Fund (paragraph 49). Funding has also been made available under a joint Royal Society and Wolfson Foundation initiative in Informatics in the areas of chemistry, biology, and medical sciences. It remains a concern that funds given through such targeted initiatives can support only a part of the work necessary to bring all the University's teaching and research facilities up to modern standards. Accordingly, there will be a continuing need to provide substantial funds for that purpose from the University's own resources.

38. A summary of the estimated position of the Minor Works Fund in the current year and a forecast for 1999-2000 is given below:

Opening balance (cash) at 1 August 8.87 4.49
  Chest allocations 2.00 3.00
  Other receipts* 0.50 0.27

Sub-total 11.37 7.76
Expenditure (6.88) (5.48)
Closing balance (cash) at 31 July 4.49 2.28
Less outstanding commitments (3.61) (0.64)
Uncommitted balance at 31 July 0.88 1.64

* The Fund is credited with interest on its cash balances.

39. As the Minor Works Fund has to meet the needs of Council as well as General Board institutions, and a number of minor works schemes for Council institutions are in preparation, the Planning and Resources Committee have agreed that the allocation to the Fund in 1999-2000 should be £3m.

40. Schemes where the contribution from the Minor Works Fund is in excess of £50,000, which have been approved or commenced since the last Allocations Report, include:

Biochemistry: relocation of Part I Teaching Laboratory 0.75
Computing Service: provision of teaching classrooms in Old Music School 0.11
Counselling Service: conversion of basement rooms for accommodation 0.06
Engineering: mezzanine floor in Hydraulics and Structures Laboratory 0.35
Inglis Building: roof conversion 0.50
Geography: refurbishment of Hardy Building north wing 1.00
Plant Sciences: refurbishment 0.09
Department of Zoology: Elementary Laboratory 1.00

41. There are a number of further schemes in development which are likely to place substantial demands on the Fund.

Maintenance of buildings

42. The position of the Buildings Maintenance Fund for the years under review is estimated to be as follows:

Balance brought forward 5.85 3.70
Allocation from the Chest 3.20 3.40
Additional allocation 1.00 1.00
Expenditure (6.35) (6.74)
Balance carried forward 3.70 1.36

43. On the recommendation of the Finance Committee, and having regard to the need to prevent levels of annual maintenance expenditure falling below the level recommended by the HEFCE, namely 1.5 per cent of the insured value of the estate, after the completion in 1998 of the KDK backlog maintenance programme,1 the Council have proposed an allocation of £3.4m to the Fund in 1999-2000, supplemented by the second of five additional annual allocations of £1m for the continuance of the fume cupboard upgrading programme. The Council have also agreed to an increase in the Head 8 estimate for maintenance items to £4.63m (£4.45m in 1998-99).

44. The Council have noted the Finance Committee's advice that, on current projections, allocations to the Buildings Maintenance Fund will have to be increased by some £5.8m over the years 2000-01 to 2003-04 if the target level of 1.5 per cent of replacement value of buildings for maintenance expenditure is to be maintained. This forecast assumes that the operational estate will continue to grow at a rate of 2.5 per cent a year. It should be noted that the target of 1.5 per cent takes into account the benefit of major refurbishment projects and improvements funded by the Minor Works Fund, without which the benchmark would have to be 2.0 per cent.

45. Monitoring of future levels of maintenance expenditure will take into account the introduction in the 1998-99 accounts of a charge for depreciation on the University's buildings. Under the previous policy of non-depreciation, which was based on the fact that the University maintains its buildings in perpetuity, only additions to floor space were capitalized. In future all expenditure which, in accordance with the relevant accounting standard, 'provides an enhancement of economic benefits of the asset in excess of the originally assessed standard of performance' will be capitalized. Thus major refurbishments and minor works will in future be capitalized. Nonetheless, contributions from the Buildings Maintenance Fund towards major refurbishments under the Long-Term Maintenance Plan can be taken into account when comparing the overall level of expenditure to the wider 2.0 per cent benchmark.

46. The Maintenance and Standards Review Group monitor proposed works within the framework of the Long-Term Maintenance Plan. Projects approved or commenced since the last Report include:

Electrical installations 16th edition testing (Phase I) 0.103
Physics: fire protection system and emergency lights 0.617
Physics: Mott Building,: fire precautions 0.420
Sidgwick Avenue Site: decentralization of boiler plant 0.634
Physics: Bragg Building, fire precautions 0.239
History: electrical refurbishment Phase 4 0.210
Engineering: boiler house refurbishment 0.164
Pathology: boiler plant refurbishment 0.191
Electrical installations 16th edition testing (Phase II) 0.140
History: basement modifications 0.106
Pathology: lift refurbishment 0.080
Cold water storage facilities: refurbishment and upgrading 0.098

Strategic Planning Reserve Fund

47. The Strategic Planning Reserve Fund was established in 1993 in response to the need to introduce a measure of flexibility into the budget so as to make it possible to provide financial support for projects of strategic importance, as determined by the Council on the advice of the Resources Committee (now the Planning and Resources Committee) and the General Board. The Council take this opportunity to inform the University of the projects for which assistance from the Fund has been committed since the publication of the 1998 Allocations Report, as follows:

School of Clinical Medicine: equipment for Phase I of the Island Site development 0.80
Institute of Management Studies: support for the Beckwith Professor of Management Studies 0.07
Minor works of strategic importance 1.00
Institute of Criminology: bridging funds in respect of the new Directorship for the period to 30 September 2001 0.12
Estate Management and Building Service: Estate Strategy 0.25
Faculty of Social and Political Sciences: Professorship of Sociology, research support 0.148
Research Professorship in Computer Science 0.104
Department of Genetics: Arthur Balfour Professorship of Genetics 0.10
Department of Zoology: Professorship of Conservation Biology 0.10

48. The uncommitted balance of the Fund at 30 April 1999 was £1.8m. The existence of the Fund continues to enable the central bodies and the Vice-Chancellor to respond rapidly and creatively in pursuit of the University's goals, especially in negotiations with new Professors and external funding bodies. The Council propose a further allocation of £1m to the Fund for 1999-2000.


49. As well as the conventional funding streams through block grant and fees (and Research Council support for specific projects), the HEFCE and the Government are increasingly awarding substantial amounts of non-recurrent funds on a competitive basis in response to bids, through initiatives and challenges (the latter generally requiring a matching contri- bution from the institution). Firstly, following the announcement of the Comprehensive Spending Review in July 1998, the Joint Infrastructure Fund (JIF) was established at a level of £600m (£300m from the Government and £300m from the Wellcome Trust for purposes consistent with the Trust's aims). This was supplemented by a further £100m of HEFCE funds during the year. The Fund, which will be allo- cated over three years, covers all elements of re- search infrastructure for science, social science, and engineering encompassed by the remits of the Wellcome Trust and the Research Councils. There are to be five rounds of applications. In the first two rounds 21 applications, of a total value of £230m, were submitted from the University. Three of the applications in the first round were approved for funding and four were deferred for consideration in the second round; the value of the awards made will be confirmed in due course. The central bodies recognize that, while the institution of the Fund provides a welcome opportunity both to upgrade existing facilities and to advance the achievement of important strategic goals, including the development of the West Cambridge Site, the University's needs far exceed what might on a realistic assessment be obtained. The University also has a pressing need to improve teaching facilities and to provide more and better accommodation for arts subjects which, being outside the scope of the Fund, will be highly dependent on fund raising. Furthermore, the development of JIF bids for consideration involves significant expenditure. The Council were informed, through the Planning and Resources Committee, that costs in the region of £0.7m might be incurred, and it was agreed that these would be charged mainly to the Land Fund and the Minor Works Fund, with a contribution of up to £0.1m being requested from Departments. The central bodies are aware that if bids are successful important financial implications will have to be addressed, e.g. the need to meet running costs, and the need to refurbish vacated space.

50. Secondly, the Government, through the Department of Trade and Industry, has launched two 'challenge' funds:

(a) a University Challenge Fund, for which a total of £45m was allocated, in response to bids from universities for seed corn funds to enhance the commercialization of research; and
(b) a Science Enterprise Challenge Fund of £25m to support the establishment of up to eight centres of enterprise in UK universities.

The University, together with the Babraham Institute, was successful in winning £3m of seed capital from the University Challenge Fund. A proposal has been submitted to the Science Enterprise Challenge Fund seeking £4.5m to support a Cambridge Entrepreneurship Centre linked to the Judge Institute of Management Studies; this has reached the second stage of the selection process, for decision in July. The need to meet the requirements of such initiatives, including the preparation of responses on a tight timescale and the identification of matching funds, presents a considerable challenge for the University.

Provision for rising costs

51. The estimates have been prepared on the basis of stipends and wages in payment on 1 January 1999, and provision has been made for estimated cost-of-living pay increases which are expected to take effect before 1 August 2000. The Council emphasize, as they have done in earlier years, that pay remains the most critical factor in the University's overall budget, representing approximately 60 per cent of total expenditure from the Chest. It is therefore essential that the overall pay budget should be contained at a level which the University can continue to afford in the long term. Changes in pay costs are a function not only of annual pay awards but also of changes in the structure of staffing throughout the University as a whole. A sum of £166m has been estimated for the University's total annual salary costs as at 1 January 1999; this includes staff numbers as follows:

  1998-99 1997-98
Established academic and academic-related staff 1,857 1,824
Support staff 2,635 2,627
Unestablished staff 2,081 1,977
Total staff 6,573 6,428

52. Approximately £89m falls on the Chest (including the UEF), and the balance of £77m is from restricted income (research grants and contracts, trust funds, etc.).

College fees

53. Following discussions between representatives of the Universities of Oxford and Cambridge, the Secretary of State, and the Chief Executive of the HEFCE, agreement has been reached on the future arrangements for the funding of Oxford and Cambridge Colleges from public funds. Public funds will no longer reach the Colleges through College fees paid on behalf of Home and EU award holders by Local Education Authorities; instead, public funds relating to the services provided by the Colleges are now included in the universities' block grants. On the recommendation of the Planning and Resources Committee, the Council have agreed that for 1999-2000 the identifiable additional income in the University's block grant on account of the new arrangements (£26,244,771) should be paid to the Colleges. Discussions are taking place between representatives of the University and the Colleges over the mechanism for this transfer and over the conditions, including audit arrangements, under which the funds will be transferred.


54. The Council recommend:

I. That the supplementary allocations for 1998-99 referred to in this Report be approved.
II. That allocations from the Chest for the year 1999-2000 be as follows:
(a) to the Council for all purposes other than the University Education Fund: £79,482,477;
(b) to the General Board for the University Education Fund: £102,257,395.
III. That the allocations for 1999-2000 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 additional surplus achieved in 1998-99 and any supplementary HEFCE grants which may be received for special purposes during 1999-2000 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.

24 May 1999


1 For an account of the KDK programme of backlog maintenance, see paragraph 20 of the 1995 Allocations Report, Reporter, 1994-95, p. 782.

Ten-year trends in income and expenditure
Appendices, Tables and Notes

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Cambridge University Reporter, 26 May 1999
Copyright © 1999 The Chancellor, Masters and Scholars of the University of Cambridge.