Planning for the future - a special report

In June 2000 the Planning & Resources Committee, concerned about an underlying imbalance between income and expenditure, asked the financial sustainability group (Deputy Principal - Professor Boxer, finance officer & deputy secretary) to bring forward a series of strategic options for change that would provide the basis for the development of future faculty and University planning scenarios. The principal reason for the financial imbalance is a long term decline in the value of teaching and research funding. Funding per student in 2000 - 01 is nearly nine percent lower than it was in 1994 - 95. Given that salary and other costs have gone up by more than the official rate of inflation, the University faces a continuous battle to ensure that its teaching and research are properly funded. Deputy Secretary David George reports:

The University Court held a special meeting on 21 and 22 May at which it considered the report and recommendations of the financial sustainability group. Members of the Group had been asked to recommend ways in which the University might improve its financial position whilst maintaining academically sustainable programmes. Revised criteria governing the sustainability of academic departments were approved in January, so the May report concentrated on the detail at faculty and departmental level. It contains nearly a hundred recommendations: some related specifically to financial issues, others to academic matters such as the structure of degree programmes. The principal themes, repeated across nearly all academic units included:

The group's analysis showed that the drive for good grades in the 2001 Research Assessment Exercise had led to an increase in staff costs in many departments, which would not necessarily be covered by increases in SHEFC funding in 2002-03 and beyond. Staffing costs were now too high in relation to core income from teaching and research and had to be reduced if the University is to have the flexibility it needs to promote new academic developments and to invest in the estate to provide safe, high quality teaching and research facilities for staff and students. The group has made specific proposals for increasing income, but it also recognised that expenditure on staff has to be reduced. It proposed that a wider range of voluntary severance measures is introduced to encourage a reduction in staff numbers.

It is also recommended that a more rigorous financial management model be introduced: one which focuses sharply on managing staff costs and encouraging innovation and change at faculty and departmental level. The group's analysis suggested that there is considerable scope for restructuring the activities of the University to meet financial targets over the next three years, without resorting to extreme measures. Faculties will therefore be required to make provision for their share of central service costs, reasonable levels of equipment and other non pay costs and contributions to the University's capital and strategic development programmes. They will also have to find a 2% surplus, which they will have discretion to spend on new academic developments or short term financial commitments like temporary staff or additional equipment. The balance of the academic budget will be available for expenditure on staff. When this system is in place each faculty will have a financial cushion which will enable them to respond in a measured way to future changes, resulting from changes in either SHEFC funding mechanisms or variations in the pattern of student recruitment.

Court accepted the analysis and main recommendations of the report in principle and agreed that they provided a good basis for agreeing short term changes with Deans and the faculties. Broader questions about long term academic strategy had not been part of the group's remit and these issues would be addressed systematically in the next academic year. Nevertheless the recommendations of the group provide a stable financial platform upon which future strategy can be built.

The period leading up to the final Court meeting in June will be used to develop the financial management model described in the report.

Court's overall financial target of a £1.2M surplus in 2001 - 2002 was confirmed. It was also decided that up to £800k should be identified for the new strategic investment fund. The planned surplus will be used in part to fund the University's capital investment programme: it was noted that even with limitations on new building, there was an unavoidable need to spend £3-4M on projects which would ensure compliance with legislative requirements covering for example health and safety at work and the disability discrimination act.

The capital pressures would continue in years 2 and 3 and we will also have to ensure that we are positioned to support expenditure from the Science Research Infrastructure Fund (£8.2M over three years) with a University contribution, currently estimated at about £2M.

Recognising that approval of the report and its recommendations would require a significant reduction in staff numbers and costs, it was agreed that considerable management effort would be required to ensure that early retirement and other voluntary severance schemes were developed and implemented swiftly and sensitively. A much more rigorous scrutiny of proposals for establishing and filling posts would be introduced, with faculties having to justify continuing or new investment in the context of the University's overall academic financial strategy. In this way the University would be able to take advantage of the breathing space provided by the relatively favourable grant announcement for 2001-02 (6%) and prepare in a measured way for the leaner years promised in 2002 - 03 and beyond when increases in line with inflation levels in the wider economy were expected.

Dealing with the staffing related and other recommendations will require the introduction of a complex and far reaching programme of change management. Taken together with existing commitments, such as the impending merger with Northern College, it was clear that very careful coordination of our activities would be needed, with a clear agreement on who was responsible at each level for implementing the changes.

The Court also received a presentation on the physical development of the campus from David Page, an expert in attractive and effective working and living environments in university settings. The preliminary proposals were accepted as an excellent framework for the long term development of the main campus.

The impact of the financial sustainability group's work and the disciplines required in the 2001/2 budget setting process will be felt across every part of the University. On the one hand we will be operating to much tighter staffing budgets, on the other we will have much greater flexibility and the ability to respond to new initiatives and programmes intended to secure our medium term viability. There will be a number of opportunities over the next four weeks at Senate, the Academic Council, staff meetings and faculty board meetings to discuss these issues in more detail before final decisions are taken at the June Court meeting.


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