Monday, 2 June 2014

Boom or bust?

Capital spending by UK universities has had a bit of attention in the past couple of weeks. I thought I’d look behind the headlines.

What were the headlines? Well, firstly the Russell Group’s claim, reported in the Times Higher, that capital spending plans by their members would boost the economy by £44billion over the next five years. Secondly, HESA’s data release showing the sources of funding for capital spend, picked up by the Times Higher (with a serious case of chart-junk) and by Registrarism.

The picture painted by the media is striking: confident institutions investing for the good of all, and looking to their own resources to replace lost public money. And jolly good too.

My dim-and-distant social science training made me want to know more, so I looked at the HESA data itself to see what was going on, using the most recent four years’ data. HESA report in nominal terms (that is, the actual pounds spent), so I used the ONS GDP deflator to convert the HESA data to constant prices, using 2009-10 as the base year. This is what the data then looks like:


So the real story is a decline in capital spending, with perhaps the stirrings of a revival fuelled by internal funds. This does suggest that the increase in income due to higher undergraduate tuition fee income is enabling institutions to invest more. Or to put it another way, universities recognise that increasing student expectations driven by £9k fees make increased investment necessary.

What also strikes me is the amount of loan financing: from £475m in 2009-10 down to £305m in 2012-13. At a time when interest rates are at historically low levels. Does this show a lack of confidence in the future? It’ll be interesting to see what the 2013-14 data shows this time next year.

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