Principal’s Open Fora 3 rd November 2010

Principal’s Open Fora 3rd November 2010

The situation is serious but

not desperate…..

1

Source: Sachs, J. (2008), Common Wealth, Penguin Books.

100%

80% 60%

40% 20%

0%

Asia

Africa & Latin America

US, Canada & Oceania

Europe

2000 2050 (projected)

2 A New Economic Landscape

Economic Activity by Region

60%

50%

40%

30%

20%

10%

0%

Source: OECD, Education at a Glance 2009.

25 to 34

35 to 44

45 to 54

55 to 64

US UK Canada Korea Japan

3 US & UK versus Top Performers

Percentage of Adults with a Tertiary Degree by Age

Source: OECD (2010) Education at a glance

100%

80% 60%

40% 20%

0%

Asia



Europe



4 Trends in tertiary type A graduation rates – place of the United Kingdom

1 NZ Australia Iceland Iceland Iceland Iceland Finland

2 Finland NZ Australia NZ NZ Poland SK

3 Norway Finland NZ Australia Australia Australia Iceland

4 UK Iceland Finland Finland Finland Finland Poland

5 Denmark Poland Norway Denmark Poland NZ NZ

6 Australia Denmark Poland Poland Denmark Denmark Denmark

7 NL Norway Denmark NL NL Ireland Ireland

8 Poland NL NL Italy Norway Norway Portugal

9 USA UK UK Norway Sweden NL Norway

10 Iceland Ireland Ireland UK Italy Portugal NL

11 Ireland Sweden Sweden Ireland Ireland Sweden Sweden

12 Spain Japan Italy Sweden UK SK Japan

13 Japan Portugal Japan Hungary Japan Japan USA

14 Sweden Spain USA Japan USA UK CZ

15 Canada USA Spain USA SK USA UK

Key: CZ, Czech Republic; NL, Netherlands; NZ, New Zealand; SK, Slovak Republic; UK, United Kingdom; USA, United States.

Rank 2000 2003 2004 2005 2006 2007 2008

100%

80% 60%

40% 20%

0%

Asia



Europe




5 UK Expenditure on tertiary education relative to competitor countries 2007

100%

80% 60%

40% 20%

0%

Asia



Europe



6 Net public benefit for a male obtaining tertiary education


9 Expansion demand for employment between 2007 and 2017 by occupational group

Source: UK Commission for Employment and Skills (2009) Working futures 2007-2017

The situation is serious but

not desperate…..

Planning for the Storm

Open Fora

3 November 2010

12

Puzzle – 5 TextAgendaHere

ContextContextUK GovntUK Govnt

Scottish Govnt TransitionTransition Destination

The world has changed

UK Context

• Govnt borrowed hugely to avoid meltdown• Recessionary pressures

– Reduced tax take+ Increased welfare costs+ Increased debt burden= Government’s Financial Imbalance

• Balance needs addressed

15

Bank of England Projection

Clearing the Fog

• Hutton (interim) (7 Oct 2010)

• Browne (12 Oct 2010)

• UK CSR (20 Oct 2010)

• Scottish CSR Outline (18 Nov 2010)

• Scottish Budget Agreed (March 2011?)

• Scottish Elections (May 2011)

• Scottish Emergency Budget (June 2011?)

• New Scottish CSR (November 2011?) 17

Puzzle – 5 TextUK GovernmentHere


TimescaleScaleOther issues

Scale & Timescale

• Timeframe– Current UK Parliament– Assume full term – through ‘till 2014/ 2015

• How much– Scottish Government - c10.8%– Distribution– Protection of priority areas?

19

Other issues

• Browne– Actual implementation– Implications for competitors

• Hutton– Climate / necessity for reform

20

PuzzleScottish GovernmentHere


Scottish Govnt

ProtectionScaleLocal ContextSFC Options

Scottish Budget Allocation

Government approach?

• Balance in reductions required between– Reasonable annual efficiency gains– Recognition of necessary output reduction

• Government will want efficiencies– Without reduction in output– When does efficiency become unreasonable?– After how many years becomes unsustainable?

Local Context…….

What Universities get paid for

Scotland St Andrews

Who funds Universities

Scotland St Andrews

Operations Surplus as % of Turnover

According to TrACUniversity Surplus Generation

28

Scottish Funding Council

Implementing Scottish Government Higher Education Policy

SFC Options (1)• Salami Slice everything

– Shares pain – Requires little thought / justification– 20% off of volumes across the board?

• 800 FTE (non controlled student FTEs)

• Doesn’t demonstrate strategic leadership

• Doesn’t advance Scotland HE– Doesn’t justify existence of SFC

30

SFC Options (2)

20% cash cut, all from T

• 27% of Total T

• c30,000 Student FTEs

• Impact on UStA– Lose £5.2m,

– 14% of SFC Grants

– 1,200 student FTEs• c300 per annum less

20% cash cut, all from R

• 79% of Total R

• Public impact on volume?

• Impact on UStA– Lose £14.2m,

– 37% of SFC Grants

SFC Options (3)• Restrict Horizon Fund size

– Capital £65m (StA £4.25m – 7% of total)– Revenue £50m (StA £1.1m – 2% of total)– Balance c£15m

• Less impact on recurring services

• Less opportunity for Govnt initiatives

• 3% to 5% annual efficiencies– Minimises scope for volume cuts, esp on T– Cuts in volume could be countered by ‘fines’

SFC Options (4)

• Salami Slice on T

• Increased excellence focus on R– Minimum proportion of 3* or 4*– Significant impact on less R intensive– Less impact on UStA– Reduced incentive to ‘bulk up’ for REF– Challenge to minimise proportion of 1* & 2*

Assumed scale of problem

UStA Total Impact • If Scottish HE cut is 20%

• SFC – Cash in 2010/ 11 – £8.5m shortfall – £4m from Aug ‘11, balance over next 2 yrs

• Fee consequentials (if numbers cut)– Assume 800 Student FTEs - £1.5m– From Aug ’12 over 4 years

• Research Grants – protected?

• VAT £0.6m from January 2011

• CRC £0.4m from June 2012

Puzzle – 5 TextTransitionHere


Scottish Govnt TransitionTransition

Rate of cutsInitial plan

Continuing uncertainty

• Need to preserve current ranking

• Decisions must deliver strategic goals

• Proposed initial measures– With consideration of more radical solutions– But avoid prejudicing strategic decisions

Cost base (2010/ 2011)• Pay – c£95m (58% of total spend)

• Non Pay – c£68m (42% of total spend)• Fixed elements £53m and counting………

– Research Grant £12m,

– Depreciation £11m,

– Scholarships £6m,

– Loan Interest £5m,

– Energy £5m

– Maintenance £4m,

– Residences £4m,

– Books / Journals £3m

– Income related £2m,

– Insurance £1m…….

Summary Plan

• Phase 1– Non Recurring Savings

• Phase 2– Improved efficiency– Other targeted measures

• Phase 3 – if required– More radical cost reductions

Phase 1

• Initial non recurring measures• Until recurring path agreed

– Vacancy Management £3m– Minor Capital £2m– Non Pay £1m– Additional Revenues £1m

• Overseas students/ Commercial/ Development

40

Phase 2

Back office activity• Support staff - 500 FTE across campus

• Sharing support between schools (clusters)– Facilities & Systems– Single sources for information– Devolution of expertise / support

• Building upon recent projects– Lean, MMS, ASP, Timetabling– Leverage from vacancy management– Potential savings £2m to £3.5m pa

Research Focus• Recognition of change in funding focus

– Emphasis on 4* and 3*– Not all academics Grant Active or 4*

• Teaching needs and research excellence?

• Key research themes within each school– Alignment staff to themes– Identify points of weakness– Focus on sources of grant funding

• Cost / benefit analysis of individual pools

• Potential savings £1.5m to £3m

Other activities

• Overseas Demand– Offset by reducing home numbers?

• Renewables– Guardbridge CCHP & Kenly Wind

• Commercialisation– StEP, own spin outs

• Shared Services – With other public bodies

• Development Activity

Underlying issues

• Academic prioritisation

• Market forces on student numbers– vs artificial protection from current regime– vs ‘academic freedom’ and breadth of offer

• Need for rebalancing of T portfolio?

45

Puzzle – 5 TextDestinationHere


Scottish Govnt TransitionTransition Destination

VisionStatus QuoGraduate Contribution

Strategic Goals• Broadly similar student size

– 7,000 to 7,500 FTE, at least 1/3rd Scots– Diverse student background– Broad subject base

• Top Research Rated in Scotland

• Top Student Rated in Scotland

• Consistent league table performance– Top 10 in UK– Top 100 in World

Status Quo for funding model

Approach

• If funding is cut– Cut service volumes to permit cost cutting– Minimise impact on other income streams

• Need to focus resources to retain quality

• Academic standards key to decisions

• Negative impact on reputation inevitable– Have to sustain programmes through 4 years

Other Issues• Ability to trade up on other subjects

– Replace HUG with OS UG– Impact on mix within Schools

• Actual Funding Cell

• Retention of research area– Ability to trade on non HUG activity– Sustainability of teaching through run down

• Emerging market trends

Graduate contribution in Scotland

Likelihood?

Potential Graduate Contribution Models

• Graduate Tax

• Tuition fees

• Top-up fees

• Trade above core

• Funding follows student

52

Graduate Tax

• Govnt recovers cost from future tax

• Uniform funding model for all HEIs

• Issues– Free on entry to student– Government ability to fund up front– Level of investment in HEIs – sufficient?– Disincentive to stay in Scotland / UK for career

• Ultimate payment not linked to service received

– Lack of incentive to individual HEI to improve

Tuition Fees• Private approach

– No government support– Funded by Students, or– Funded by Universities…..

• Issues– Ability to trade, against subsidised competition– Diversity of student body– Attractiveness?– Acceptability to Scotland / UK

Top-up Fees

• As in place in England

• Govnt funds fee as variable loan– Additional bursary support available

• Issues– Acceptability to Scottish Government– Government ability to fund– Level of debt for graduating students– Link of University charge and payment

Trade above core

• Core govnt provision agreed– Above that level, ability to charge Tuition

• Issues– Could be introduced gradually– State funding remains for core student nos– Those who can afford to pay, can offer to– Reputational risk of double standards– Pace of growth / income generation

Scholarships

• Rather than funding Universities – Govnt funds students through scholarships

• Issues– Controlling eligible student numbers– Scholarship at realistic level– Removal of subsidy for other students– Acceptability to Government – radical solution

Summary

• Public funding position will be rough

• Current state is highly uncertain

• Need to plan for worst– But careful not to launch lifeboat too soon

• Browne has accelerated need for altered funding environment

• No easy answers – Preference to trade our way through

• Everyone must play their part

Principal’s Open Fora 3 rd November 2010

Documents

Transcript of Principal’s Open Fora 3 rd November 2010