The financial sustainability of the university system is not a challenge that can be ducked, either by government or by universities themselves.
Chapter summary
The funding of universities is structurally unsustainable across all four nations in the UK. Universities are already making very significant cuts to balance their budgets and will need to continue to find better and more streamlined ways of working, but we need further action from both universities themselves, and from government.
For England, we propose a two phased approach to this. In the first phase government and the sector should work to stabilise the sector’s finances. In the second phase government could support university led transformation.
Our recommendations
As a first phase, the government should support the sector to take immediate steps to move to a more solid foundation by:
increasing funding for teaching to meet the real costs through a combination of linking fees to inflation and restoring the teaching grant
ensuring policy stability in relation to international students in order to achieve sustainable, managed growth
reversing the decline in Quality Related funding for research
working with the sectortoestablish a sustainable solution for universities in relation to the significant increase in contributions to the Teachers Pension Scheme
developing, with the sector, aclear plan to implement if an English university finds itself in severe financial distress.
In phase two:
Universities UK commits toleading a transformative programme of work which will bring our members together to share learning and good practice in relation to efficiency, transformation and income generation; and explore options for additional regional or national shared services.
Universities should look to boost philanthropic giving building on substantial growth in recent years. Government should look for ways to support the sector in growing a culture of giving to universities, including by exploring the potential to repeat previously successful matched funding schemes and introduce tax efficient vehicles for legacy giving.
The government can support this sector-led effort by removing VAT on shared services; introducing a transformation fund to enable and accelerate university led-change, and supporting sustainable and well managed growth in international recruitment.
UK universities have been remarkably entrepreneurial and successful in the last decade. Despite a fixed and shrinking domestic resource, they have managed to engage internationally and generate the revenues to support research and domestic education of the highest quality.
However, that innings has run its course. If universities are forced to play the same game for longer, we jeopardise the sector and its international reputation and success. It is time for universities and government to sit down together and agree a new financial model for the system that works for students, serves all our regions and ensures the future growth and prosperity of the UK.
Professor Shitij Kapur and John Rushforth
Vice-Chancellor and President of King’s College London; Executive Secretary, Committee of University Chairs
