Imbalances

If you want to know what really happens in a university look at the management accounts. A sentence that, pretty much, guarantees you lose interest. I guess I have to accept that. Most of the big trends in the sector are best understood as the product of localised decision making. When structural imbalances are built into funding they are manifested in the behaviour of individual academic managers with important large-scale and long-term effects.

Research loses money for UK universities. The overheads associated with research grants supposedly funded at a proportion of 'full economic cost' do not cover the actual costs incurred. The control mechanism is TRAC, through which academics report their activity across teaching, scholarship, research, enabling and so on. It is a crude tool and, if it works at all, only has validity at the larger more aggregate level. Efficiency gains have proved hard to realise and funders have increasingly been seeking 'strategic' or 'matching' contributions from universities intended to offset the longer term impact of a flat-cash settlement that is beginning to bite. It is proving difficult to secure industry and other funding that fully covers its costs - industry believe that they have already paid for the research base through taxation and in any case there are many global institutions, that offer research subsidised by government funding in order to attract innovation, keeping the price down. The dual-funding system in which universities receive funding through 'QR' on the basis of research assessment works, but the last exercise was in 2008 and the 2014 exercise has yet to conclude. It is unclear whether it will fill the gap. My guess is it will not.

So universities are cross-subsidising research from teaching. Perhaps it is no coincidence that questions are being asked about value for money. Overall, the £9000 fee charged to UK and EU students is close, at least at my own institution, to the actual cost of teaching across the whole university. To some extent lower cost teaching subjects, in areas without expensive research, cross-subsidise other areas but their capacity is limited. The real subsidy comes from overseas students who pay very high fees for the same programmes offered to UK and EU for much less.

The system sort of works because of the effects of league tables and university standing. These are driven by research performance. The research intensive universities (who suffer most from the under funding of research) are the more prestigious and students will compete and pay a premium to attend them. Particularly it seems, overseas students. I am not discounting that students opt to study where they will be taught by active scholars, certainly this is important for postgraduate study, also that research intensive institutions attract excellent staff capable of both high quality teaching and research.

I believe, and I recognise this is controversial, we should move to a situation in which we reduce overseas students fees to admit more of the globally talented. This will be to the advantage of the UK. On a less elevated note, the short term expedient of cross-subsidisation through high fees may damage our international competitive position in higher education.

The fact that the system is not conspicuously failing does not seem to me a reason not to look at the systemic imbalance. I believe we should find a way back to ensuring that research pays its way. Perhaps when, if, we are able to break out of the flat cash budgetary squeeze, it will be time to look at whether we want more research or rather to pay the actual cost. We might also want to look again at the growing habit of taxation by asking for contributions and giving capital without the associated, and necessarily incurred, recurrent. Instinctively I worry about a system with misplaced incentives that relies upon implicit funds flow and tenuous feedback loops.

I did warn you that you would lose interest.