No 6736
Wednesday 17 April 2024
Vol cliv No 26
pp. 465–496
A Discussion was convened by videoconference. Deputy Vice-Chancellor Professor Johan van de Ven, CTH, was presiding, with the Registrary’s deputy, the Senior Proctor, the Junior Proctor and seven other persons present.
Remarks were made as follows:
(Reporter, 6731, 2023–24, p. 298).
Dr S. J. Cowley (Faculty of Mathematics):
Deputy Vice-Chancellor, I am a member of the Board of Scrutiny but I speak in a personal capacity. I was previously a member of the Board (2001–2005) and a member of the Council (2007–2014 and 2017–2020). I served on the Resource Management Committee (RMC) (2007–2014) the Planning and Resources Committee (PRC) (2011–2014) and the Finance Committee (2017–2020). Given my background one might hope that I could make sense of the Financial Statements but I am about to disappoint you since I am not a trained accountant. However, I can read the commentary, Tables 1 and 2 and Appendix 1.
To quote from the commentary,
The Group considers the best measure of underlying recurrent operating performance to be the adjusted operating surplus/(deficit) for the year shown in Appendix 1 (p. 386).1
[...] The University considers the best measure of underlying recurrent operating performance to be the adjusted operating surplus/(deficit) for the year, being the surplus for the year adjusted for gains and losses on investments, the CPI‑linked bond fair value adjustment, the change in USS pension deficit recovery provision, donations, endowments, and capital grant income, and the CUEF income on a distribution basis.2
[...] Management regard the most representative measure of underlying performance to be the adjusted operating deficit for the year of £9.5m (2021–22: surplus of £25.4m) reflected above and in Appendix 1 to the financial statements.2
What I find of concern about the adjusted operating surplus/(deficit) is that it is a deficit. This is the whole Group deficit, including Cambridge University Press & Assessment (CUPA) (which conventionally has been the University’s sugar daddy, cf. OUP for Oxford). For context, the surpluses for recent years were £25.4m (2021–22), £19.8m (2020–21), -£42.3m (2019–20) and £50.8m (2018–19). From my time on the Council, the pre‑Covid figure for 2018–19 seems reasonable and leaves scope for investment whether in staff, buildings and equipment, or other capital expenditure; the current figure does not.
However, the Group deficit is not the worst news. According to Table 2, the Academic University adjusted operating deficit is £72m (£47m in 2021–22) which, to my surprise, includes the £39m ‘Add‑back’ uplift from CUPA (a sum traditionally used for capital expenditure), without which the Academic University deficit would be £111m. Again, from my time on the Council, the hope was at least breakeven for the Academic University. Apparently, that is still the case. To quote again from the commentary:
Our ambition remains to achieve a modest, sustainable surplus for the Academic University cash flow in the long run, in order to maximise the funds available for reinvestment into the University’s mission and provide greater resilience across funding sources.
[...] Within the Academic University, we are targeting a sustainable annual surplus over time, through raising revenues and utilising collective resources more efficiently, while enhancing the academic strengths of the University and investing in our people.3
Aspirations to balance the books are of course commendable, particularly if the deficit was not predictable, and of course the pandemic and world events have not helped particularly on the energy front. However, as I recalled in last July’s Discussion of the Allocations Report for 2023–24 (predicting a Chest deficit of approximately £90m for the coming year), I signed Notes of Partial Dissent for both editions of the 2020–21 Allocations Report4 objecting to an operating cost base that was growing beyond the funding available to meet it, and which needed to be clawed back. Yes, I know that there was and is the Surplus Improvement Fund (of which there is no mention in the Financial Statements) and other initiatives such as Reimagining Professional Services (one mention), but my view was and is that these initiatives were never going to deliver at the level required to eliminate the deficit in a desirable time frame.
Does the Council need to take this deficit more seriously? I hope that the process that evolved during my third term on Council, whereby some intra‑year spending decisions were made by the Council itself rather than through the planning process (and which the RMC was expected to fund via a magic‑money tree), has now ceased. I also hope that I have mis‑read the level of complacency in some of my recent conversations. On the plus side, I gather that the Vice-Chancellor is sufficiently concerned that she is now Chair of the PRC (although in my time the key allocation decisions were thrashed out at the RMC).
Again, on the plus side, following my aforementioned remarks on the Allocations Report for 2023–24, I was pleasantly surprised that the Council made a substantive response in the Reporters of 26 July 2023 and 11 October 2023.5 I highlight three points:
• The Council observed that: ‘Running operating deficits, while manageable for Cambridge in the short term, does erode capital from the CUEF, reducing the future annual drawdown needed to balance the operational budget every year’. I am not sure that I can parse that sentence. To my mind there should never be a need for a drawdown from the CUEF to balance the operational budget, and as I have observed repeatedly before both in the Council and in this House, drawing down capital from the CUEF reduces future distributions (which I presume was the gist of the statement). The recent drawdown of £150m for the Cambridge Multi-Asset Fund (CMAF) potentially reduces the annual distribution by, say, £7.5m.
•To my questioning of the cost of the maintenance contract, it was stated that
The Estates Division is taking a very firm commercial position to minimise the overall cost impact to the University. It is not yet possible to provide a clear quantum; the considered view of the Estates Division is that the final outcome of this exercise will see an increase in the annual maintenance costs but that this will be within contained and manageable proportions. It is not expected to be anywhere near the rumoured £150m.6
Is the final outcome now known?
•I also asked for the Tables and Appendices section of the Allocations Report to reappear. The Council agreed to publish the ‘management information pack prepared for the PRC alongside the draft Allocations Report [that] included staff data similar to the table previously published for the information of the Regent House’. This ‘similar’ data appeared in the Reporter of 11 October 2023,5 but in a far less detailed form than previously, e.g. with Academic-related (administrative), Academic-related (computing), Academic-related (other groups) and Assistant Staff all grouped together as ‘Not an academic contract’. While this combination is apparently HESA approved, it makes the data far less informative, and I would have thought that the expanded Academic and Financial Planning and Analysis (AFPA) section might have been able to cobble together data in the old form. However, we have what we have. According to that data, over the period 2015–16 to 2021–22, Teaching & Research Staff, Research-only Staff and ‘Not an Academic Contract’ Staff have increased by 1.7% (1587 to 1614), -0.4% (3722 to 3705) and 19.8% (4902 to 5875) respectively (so non-Academic staff now comprise over 50% of staff). Going back further, and from figures that I have easily to hand, from 2010 to 2019, technical assistant staff increased by 4%, academic staff by 8%, research staff by 43% and academic-related and assistant staff by 49% (where the numbers come from a July 2020 paper to the HR Committee).
Maybe one of the causes of the deficit is now slightly clearer. Costing a post at, say, £50k, indicates that the increase in expenditure on non-Academic Staff since 2015–16 is £48.6m (and this is without taking into account any potential decrease in staff numbers as a result of contracting out services). Increased regulation from HMG and quangos will explain some of the increase, but one might have thought that the ourcambridge and Reimagining Professional Services programmes, which have been running for a number of years, might have started to deliver the ‘significant potential to increase the levels of efficiency and effectiveness’ referred to in the commentary.
I have no magic wand or magic money tree. I am under no illusion that reducing the deficit is going to be easy or painless, and I do not envy those Officers, or those on the Council (i.e. our Charity Trustees), whose responsibility it is. However, I have suggestions:
There are various rumours about the successor for the Pro‑Vice‑Chancellor for Strategy & Planning, e.g. renaming the role as PVC for Resources & Operations (or similar) and/or recruiting from outside the University. The old role of PVC for Planning & Resources worked, as did much slimmer forerunner of the AFPA, i.e. the PRAO. I am not saying resurrect the former role or the PRAO, but I have been surprised in recent conversations of the lack of awareness of the University’s relatively recent history where it has twice successfully tackled deficits. Those who cannot learn from history are doomed to repeat it, and the history of Enhanced Financial Transparency, the new HR system, etc., suggests repetition.
Rightly or wrongly, PVCs are not responsible for running parts of the administration. The University Administrative Service (UAS) is firmly in the remit of the Registrary and the Directors of Divisions, e.g., unless something has changed, the Registrary is responsible for the running of the Finance Division, not the Chief Financial Officer (CFO). Operations are administrative, so having a PVC for X & Operations, without reorganising the UAS is, in my opinion, a non-sequitur. Maybe the University needs to return to an administrative triumvirate. Pre‑Wass there was the Registrary, the Treasurer (who was responsible for the Finance Division), and the Secretary-General. If I have been reading the runes correctly, the CFO is morphing into the role of the Treasurer. Maybe we do not need to resurrect the Secretary-General, but if it is true that a PVC for X & Operations is being considered, would not a Chief Operating Officer be a better alternative?
Whatever structure is decided, the right person needs to be appointed. So, an anecdote. At the very end of my second term on the Council, a PVC was to be appointed. My view was that an alternative to the proposed appointment would have been better, but I did not object since I could not face being the lone voice of dissent on Council yet again. At the end of the meeting, a senior academic turned to me and said that the appointment was not going to work. I questioned why he did not say so, because I would then have supported him. Some months later it was reported that the aforementioned PVC was resigning to spend more time with his research, at which point another member of the Council said they knew the appointment would not work, as did the Deputy Chair of the Council. All four of us should have initiated a discussion at Council before the appointment was confirmed. We failed in our duty.
One of the morals of the above anecdote is that members of the Council, as well as the Senior Officers, need to be in touch with the feelings of the Regent House (which is where I had picked up my concerns). I am told that the Senior Leadership were surprised that the vote on the PVC for Sustainability went south. Did no one read the Discussion remarks? Why wasn’t a more detailed case made for the post? Why organise the vote to make it look like it was trying to be forced through? Again, I have no easy solution. However, if the mood of the Regent House is not taken into account, then the vote on the Employer Justified Retirement Age could turn into a car crash, and if the rumours of the disposal of parts of the Old Schools have any validity, then a quick review of the history of the ‘lift’ saga might be expedient.
Finally, where is the Senior Officer introducing this Discussion? There should be somebody here explaining the deficit, and willing to be called to account, either in Discussion or by being button-holed virtually or in person after the Discussion.
4See Reporter: 6586, 2019–20, p. 512 and 6593, 2020–21, p. 96 at p. 101.
5See Reporter: 6710, 2022–23, p. 882 and 6713, 2023–24, p. 32.
6Reporter, 6710, 2022–23, p. 884 (para 2).
Professor G. R. Evans (Emeritus Professor of Medieval Theology and Intellectual History), read by the Junior Proctor:
Deputy Vice-Chancellor, the Financial Statements say that the ‘senior leadership team is responsible for identifying and managing risks across the University’s activities’. I am conscious that I have raised a concern about the use of this expression before. Perhaps the Council could offer a constitutional justification in its reply to this Discussion? The Statutes and Ordinances mention ‘risks’ many times, but award no such responsibility to any such ‘team’. Only Press and Assessment has a ‘Leadership Team’ in those pages. ‘Seniority’ is accorded constitutionally on academic rather than managerial grounds, for example to Associate / Assistant Lecturers and in order to list the ‘seniority of graduates’.
Cambridge’s constitutional norm is to do its business through committees whose membership and remit is expected to be published and clear. The drafting of the present Statements seems to accept that, when it says that ‘the Council has delegated to the Audit Committee the responsibility for reviewing the University’s risk management processes to ensure that they are adequate and effective’ and ‘the Audit Committee considers risk management as a standing item in its meetings to ensure routine monitoring, and will report to the Council on internal controls and alert the Council to any emerging issues as necessary’. This ‘team’ forms no such committee. Perhaps it should, if the Regent House is prepared to give its permission for it to be established?
But we have not heard the last of that ‘team’ in the Statements. They continue ‘In parallel to the risk management framework, the University’s senior leadership team have identified a set of University risks’. These may be found online in a statement approved by the Council on 2 February 2024.1 That explains that:
The Vice-Chancellor, the Registrary, and the Council have ownership of all the institutional risks. However, to ensure that risks are managed appropriately, responsibility for each of the risks has been delegated to an appropriate academic lead, supported by an administrative lead and a Committee that has responsibility for oversight of the risk.
But that delegation surely required an Ordinance (Statute A II 6)? Indeed a Special Ordinance (Statute A IX 8), neither of which the Regent House has been invited to Grace.
Secondly, some key strategic risk areas have relevance to the current review of the Employer Justified Retirement Age, on which a ballot is promised in June. One is the University’s alleged:
inability to attract and retain the best academics and adequately resource professional staff through a failure to compete with escalating levels of international reward levels, growth in the University’s complexity and scale, and high costs of living and housing in the Cambridge area.
The Statements explain what is being done to address this in financial terms, by ‘seeking economy, efficiency and effectiveness in its operations to accommodate pay and pension inflation as necessary’ and making ‘an additional cost of living-related payment of 2% of salary to all staff, and implemented part of the 2023–24 sector agreed pay award in February 2023, six months early’. The University is stated to be ‘offering a flexible working environment’. I suppose that may be taken to include the growing confusion of established and unestablished posts making some academic staff but not others subject to forced retirement. This is not the place to go into that at length, but it surely calls for the Report and Discussion which should follow as soon as the Council receives the Report of the EJRA Review Group. University Officers at risk of forcible retirement this September need to know where they stand.
(Reporter, 6732, 2023–24, p. 419).
No remarks were made on this Report.
(Reporter, 6732, 2023–24, p. 420).
No remarks were made on this Report.