principal’s open fora 3 rd november 2010
DESCRIPTION
1. The situation is serious but not desperate…. Principal’s Open Fora 3 rd November 2010. 2 A New Economic Landscape. 100%. Asia. 80%. Africa & Latin America. 60%. US, Canada & Oceania. 4 0%. 20%. Europe. 0%. 2000. 2050 (projected). Economic Activity by Region. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/1.jpg)
Principal’s Open Fora 3rd November 2010
The situation is serious but
not desperate…..
1
![Page 2: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/2.jpg)
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
![Page 3: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/3.jpg)
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
![Page 4: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/4.jpg)
Source: OECD (2010) Education at a glance
100%
80% 60%
40% 20%
0%
Asia
Africa & Latin America
US, Canada & Oceania
Europe
2000 2050 (projected)
Economic Activity by Region
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
![Page 5: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/5.jpg)
100%
80% 60%
40% 20%
0%
Asia
Africa & Latin America
US, Canada & Oceania
Europe
2000 2050 (projected)
Economic Activity by Region
Source: OECD (2010) Education at a glance
5 UK Expenditure on tertiary education relative to competitor countries 2007
![Page 6: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/6.jpg)
100%
80% 60%
40% 20%
0%
Asia
Africa & Latin America
US, Canada & Oceania
Europe
2000 2050 (projected)
Economic Activity by Region
6 Net public benefit for a male obtaining tertiary education
Source: OECD (2010) Education at a glance
![Page 7: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/7.jpg)
7
![Page 8: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/8.jpg)
8
![Page 9: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/9.jpg)
9 Expansion demand for employment between 2007 and 2017 by occupational group
Source: UK Commission for Employment and Skills (2009) Working futures 2007-2017
![Page 10: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/10.jpg)
10
![Page 11: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/11.jpg)
The situation is serious but
not desperate…..
![Page 12: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/12.jpg)
Planning for the Storm
Open Fora
3 November 2010
12
![Page 13: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/13.jpg)
Puzzle – 5 TextAgendaHere
ContextContextUK GovntUK Govnt
Scottish Govnt TransitionTransition Destination
![Page 14: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/14.jpg)
The world has changed
![Page 15: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/15.jpg)
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
![Page 16: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/16.jpg)
Bank of England Projection
![Page 17: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/17.jpg)
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
![Page 18: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/18.jpg)
Puzzle – 5 TextUK GovernmentHere
ContextContextUK GovntUK Govnt
TimescaleScaleOther issues
![Page 19: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/19.jpg)
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
![Page 20: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/20.jpg)
Other issues
• Browne– Actual implementation– Implications for competitors
• Hutton– Climate / necessity for reform
20
![Page 21: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/21.jpg)
PuzzleScottish GovernmentHere
ContextContextUK GovntUK Govnt
Scottish Govnt
ProtectionScaleLocal ContextSFC Options
![Page 22: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/22.jpg)
Scottish Budget Allocation
![Page 23: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/23.jpg)
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?
![Page 24: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/24.jpg)
Local Context…….
![Page 25: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/25.jpg)
What Universities get paid for
Scotland St Andrews
![Page 26: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/26.jpg)
Who funds Universities
Scotland St Andrews
![Page 27: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/27.jpg)
Operations Surplus as % of Turnover
![Page 28: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/28.jpg)
According to TrACUniversity Surplus Generation
28
![Page 29: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/29.jpg)
Scottish Funding Council
Implementing Scottish Government Higher Education Policy
![Page 30: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/30.jpg)
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
![Page 31: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/31.jpg)
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
![Page 32: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/32.jpg)
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’
![Page 33: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/33.jpg)
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*
![Page 34: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/34.jpg)
Assumed scale of problem
![Page 35: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/35.jpg)
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
![Page 36: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/36.jpg)
Puzzle – 5 TextTransitionHere
ContextContextUK GovntUK Govnt
Scottish Govnt TransitionTransition
Rate of cutsInitial plan
![Page 37: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/37.jpg)
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
![Page 38: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/38.jpg)
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…….
![Page 39: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/39.jpg)
Summary Plan
• Phase 1– Non Recurring Savings
• Phase 2– Improved efficiency– Other targeted measures
• Phase 3 – if required– More radical cost reductions
![Page 40: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/40.jpg)
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
![Page 41: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/41.jpg)
Phase 2
![Page 42: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/42.jpg)
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
![Page 43: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/43.jpg)
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
![Page 44: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/44.jpg)
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
![Page 45: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/45.jpg)
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
![Page 46: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/46.jpg)
Puzzle – 5 TextDestinationHere
ContextContextUK GovntUK Govnt
Scottish Govnt TransitionTransition Destination
VisionStatus QuoGraduate Contribution
![Page 47: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/47.jpg)
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
![Page 48: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/48.jpg)
Status Quo for funding model
![Page 49: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/49.jpg)
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
![Page 50: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/50.jpg)
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
![Page 51: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/51.jpg)
Graduate contribution in Scotland
Likelihood?
![Page 52: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/52.jpg)
Potential Graduate Contribution Models
• Graduate Tax
• Tuition fees
• Top-up fees
• Trade above core
• Funding follows student
52
![Page 53: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/53.jpg)
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
![Page 54: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/54.jpg)
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
![Page 55: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/55.jpg)
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
![Page 56: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/56.jpg)
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
![Page 57: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/57.jpg)
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
![Page 58: Principal’s Open Fora 3 rd November 2010](https://reader036.vdocuments.us/reader036/viewer/2022062305/56814f39550346895dbcdabf/html5/thumbnails/58.jpg)
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