Income Distribution Model (IDM) Review

Jeremy Lindley

Terms of reference

Support the University’s strategic objectives

Assist in the increase of STEM

Grow the unregulated business

Support the infrastructure needs

Process Two Groups:

• IDM Group• Working Group

• Explored two IDM themes:

Replace HEFCE units of T resource

Replace of poll tax with an income tax

HEFCE T resource

Would an Exeter unit of resource

better reflect activities at the

University?

TRAC data not conclusive

HEFCE work on new national T

units not definitive

Charges under review

PSC

SDF

Infrastructure

Space

Changes to PSC Income tax

Based on nine income streams

Tax rates set to insentivise activity

“Above the operating line” charge

Endowment income excluded

Suggested rates…

PSC tax bands

Category 2010/11 2011/12 2012/13

Home/EU UG 41% 41% 41%

Other income 41% 41% 41%

HEFCE T Grant 30% 30% 30%

Home/EU PGT 30% 30% 30%

International PGT 30% 30% 30%

International UG 20% 20% 20%

Research QR 0% 5% 10%

Research PGR 0% 0% 0%

Research other income 0% 0% 0%

PSC incentives

Grow research awards

Grow PGR numbers

Grow UG international numbers

Grow PG numbers

Regulated business?

Other income?

SDF Disaggregate SDF, infrastructure

charges and long term maintenance

Income tax as with PSC

10% charge on all income excluding the

research categories

“Below the operating line” charge

Space charge Remain in current format for 2010/11

Currently not sensible to shift resources

to STEM

“Above the operating line” charge

Charge utilities directly

Create new group to review space charging including: Cellular office space

Centrally bookable space

Corridor and other circulation space

Mothballing of space

Infrastructure charge

New charge

Responding to HEFCE reducing capital

resourcing

“Below the operating line” charge

Rates:

2010/11 = 0%

2011/12 = 1%

2012/13 = 2%

Impact at the operating line

College2010/11

Current IDM Revised IDM Gain/ (Loss)PSC Space Total PSC Space Total

L&ES 8.8 4.7 13.5 8.4 4.7 13.1 0.4

EMPS 5.8 2.8 8.6 5.3 2.8 8.1 0.5

Business 6.1 1.4 7.5 7.3 1.4 8.7 (1.2)

Social Sci 8.0 2.2 10.2 8.1 2.2 10.3 (0.1)

Humanities 8.6 2.3 10.9 8.3 2.3 10.6 0.3

Total 37.3 13.4 50.7 37.4 13.4 50.8 (0.1)

All data is £m

Impact at reserve position

College 2010/11

Current IDM Revised IDM Gain/ (Loss)(£m)

Reserve

(£m)

% income Reserve

(£m)

% income

L&ES 0.2 0.4% 0.7 1.5% 0.5

EMPS 1.1 3.2% 1.5 4.3% 0.4

Business 1.7 5.4% (0.5) (1.8%) (2.2)

Social Sci 1.4 3.9% 1.5 4.1% 0.1

Humanities (0.4) (1.1%) 0.7 2.0% 1.1

Total 37.3 13.4 37.4 13.4 (0.1)

Marginal tax rates

College2010/11

Current IDM % Tax Revised IDM % Tax Gain/ (Loss)Op SDF Total Op SDF Total

L&ES 28.8 5.7 34.5 27.9 5.5 33.3 1.2

EMPS 24.2 4.5 28.7 22.9 4.7 27.5 1.2

Business 24.5 5.4 29.9 28.6 8.5 37.1 (7.2)

Social Sci 27.5 7.1 34.6 27.6 6.7 34.3 0.3

Humanities 31.6 9.1 40.6 30.6 7.0 37.6 3.0

Total 27.5 6.3 33.8 27.5 6.4 33.8

All data is £m

Overall impact

Adverse impact on the Business School

Little effect on overall University position

Impact on colleges and services

Growth areas taxed less

Addition of QR tax to support research

growth

Key benefits

Simple and less costly to operate

Very transparent – more predictable and

useful for planning purposes

Improves link between the taxes paid

and the capacity to pay

Adaptable model that can be flexed

Other issues:Risk:

• Volatility ...good incentives…• … but what if Colleges do grow?• Support Business School• Based on HEFCE five year plan

Opportunity:• SDF devolve?

Recommendation Approve new IDM model

Support Business School

New model out to Colleges on Monday

Iterate through business planning

Review as part of budget approval

Go live with Colleges on 1 August 2010