The UUK blueprint proposes a series of measures that would ameliorate the current financial crisis across higher education and help make universities more responsive to the government’s skills and economic agenda.
In return for funding solutions – including higher fees, research funding and maintenance loans – it places the onus on institutions to find more efficient and innovative ways of working – from exploring opportunities for shared services and collaboration, to boosting philanthropic giving, digitalisation and commercialisations.
Governors who spoke to Advance HE before Chancellor Rachel Reeves announced her Budget, view the UUK approach as “sensibly pragmatic” and acknowledge that the sector cannot expect “something for nothing”.
However, all point to the challenge of exploring strategies for efficiencies and innovations when financial pressures can force shorter-term thinking and in some cases, a “hand to mouth” existence.
“Efficiencies are easier if you’ve got money because then you can invest now in things that save you money in the long run,” a Russell Group governor observed.
Others point out that the efficiencies that UUK asks universities to consider are already happening via the cost-cutting measures being put in place across the sector, prompted by a drop in income from international students. While the UUK Blueprint suggests a “fresh look at staff–student ratios”, a new round of hiring freezes and redundancies has already been announced at some universities.
“The word ‘efficiencies’ covers a lot of different things,” said one board member. “To some people it means staff restructuring and that is happening left right and centre already. For other people efficiencies mean course closures, and again there are instances of that already.”
Without a funding solution, the call for changes to how universities operate is simply asking them to do more with less, said a governor of a new university in the north of England.
“I think the difficulty is that asking institutions to make changes usually has a cost associated it. But things are so tight that most institutions are saying ‘where can we cut costs?’ not ‘can we afford to fund this new endeavour?’, even if it saves money in the long run,” she said.
For this governor, there needs to be “some money put into the system”, to enable more HE-FE collaboration, for instance.
“UUK’s proposal for a Transformation Fund to back these kinds of endeavours would be important here,” she says. “And by all means, that money could come with some conditions about how it is spent, how it needs to be prioritised and what it needs to achieve. But when institutions are in a dire situation financially, it limits how far you can go.”
Another board member points to the complexity of navigating how FE and HE can work more closely together. While there are one or two examples of universities incorporating FE colleges, such close partnerships are “really complicated”, not least because of the differing funding models, with FE colleges counted as publicly funded while universities have a quasi-private or charitable status.
“These kinds of collaborations are not a money saver and possibly the opposite,” the governor argued. “They bring other advantages – such as clear pathways -that can be helpful to boost student numbers and widening participation, but they are not a solution. FE colleges are very badly funded. You can’t think you’re going to take over an FE college and suddenly be in clover – probably the opposite.”
While survey findings suggest that universities want to collaborate more – with each other, FE, businesses and other bodies – there are barriers. The removal of the student numbers cap led to more institutions competing for the same students. And there are few financial incentives for universities that are financially healthy to get involved with an institution that is less so.
“If you are doing OK, what is the incentive for getting involved with a weaker entity? If you’re financially strapped, you’ve got your work cut out getting through to Christmas; you’re not thinking about setting up a big shared services in three years’ time, even if that would be a useful thing to do,” said one governor.
Size and financial differences across the sector could mean unequal partnerships, where decision-making and strategic direction might not always align.
“I think the issue in shared services and great collaboration is that one partner is the more predominant and sharing their services with another institution. Someone has to be the receiver. It’s difficult to do that in a balanced way.”
Incentives for collaboration, such as exempting VAT on shared services as suggested in the Blueprint, could make a difference.
“The current system is set up to be marketised and for institutions to be in competition with each other,” said the governor of a post-92 institution. “I don’t think we can have a conversation around shared services without acknowledging the element of competition and if we want universities to work in a more collaborative way, what is government going to do to help us do that?”
Other governors echo concerns about whether universities, in the current climate, have the time, labour and resources to establish such partnerships.
“The calls for efficiencies, collaborations and partnerships have been knocking around the sector for 20 years,” said a governor of a new university in the south. “But nothing will change unless there is incentive to do so, usually a financial imperative.”
There are areas of higher education activity that have traditionally seen more collaboration, such as research and widening participation, that could be starting points or models for more extensive links.
A governor whose institution is part of the N8 group of the most research intensive universities in the north of England, highlights the benefits of collaboration.
“There are a number of incentives to collaborate, particularly on expensive pieces of equipment for instance,” he says.
His university is also involved with Northern Gritstone, an HE-led group which supports commercialisation of science and IP-rich businesses and which has secured £312 million in investments. In 2023, it invested in ten new companies, including eight university spinouts.
But even in areas that have a history of greater cooperation, there are concerns about funding, with persistent rumours of a “flat cash settlement” in the research budget.
“There’s a commitment in the Labour manifesto for a better research settlement which would include a long-term funding plan,” said a board member. “Long-term is definitely better and the implication was that they would be more generous. But the rumours are that they are instead going to ‘tuck in’ activities in the main budget that weren’t included before, such as the Horizon settlement.”
There is some optimism in the sector that the government’s commitment to devolved working and mayoral combined authorities could present opportunities for closer collaboration on a regional basis, perhaps backed by funding.
In London, where devolved infrastructure goes back 25 years, universities work jointly to promote the London brand and widening access, as well as partnering with numerous stakeholders and organisations, including the Greater London Authority.
Value can be added when institutions work together, according to Diana Beech, chief executive of London Higher, and Peter O’Brien, executive director of Yorkshire Universities.
The international dimension, whether it be research collaboration, international partnerships or foreign student admissions, is also important and governors welcomed the call in the Blueprint for a new global strategy for universities to secure “sustainable levels of recruitment and well managed growth”.
“On international students the rhetoric has changed at least, even if none of the policies have as yet,” noted a Russell Group governor.
A rethink on pensions was another popular Blueprint recommendation. UUK says the government must either review universities’ statutory obligation to offer the Teachers Pension Scheme (TPS) and allow more flexibility, or provide support for universities to meet the “significant and unforeseen increase” in employers’ contributions.
“Post-92 institutions are forced by legislation to put their academics in the TPS where employer contributions are nearly 30 per cent of salary,” said one governor. “That should be changed: universities are no longer classed as public sector bodies and the universities that can least afford it are having to pay more in contributions than many wealthier institutions.”
A similar concern is the rumoured budget plan to increase National Insurance employer contributions, which would heap further pressure on university finances.
“Cuts to research funding and employer NI contributions going up – those two things could leave some institutions in a really bad place,” said a governor. “Universities are hammered by teacher pension contributions and to have this on top would be terrible.”
From a governors’ perspective, efficiencies, collaborations, driving skills development and reaching new students will all be made harder if finances are tightened further.
“The board is working on the assumption that things are as they currently are and that this is what we need to get through,” said one governor. “If we get better news then great. But if things get worse than they currently are, that could mean big concerns coming out the other side of the budget.”
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