Thursday 7 September 2017

Whose money is it anyway?

It’s hard not to notice the current focus by some in government, parliament and the media on universities, and in particular issues of value (levels of tuition fees) and accountability (how can VC’s high salaries be justified).

There’s lots to be said on this, but in this blog I want to focus on an underlying issue: whose money is it anyway? Put bluntly, if universities are spending private money, then it’s no business of the state what they spend it on, as long as it’s legal.

Universities get money from lots of sources, and they publish information annually – through their annual accounts and through statutory returns to the Higher Education Statistics Agency (HESA) – about what exactly they get and from who. The information is in a standard format, with many categories. Bear with me while I list these; it’s worth seeing to give context to the argument I’ll be making later. There are:

  • Funding body grants

  • Tuition fees, comprising Full-time undergraduate, Full-time postgraduate, Part-time undergraduate, Part-time postgraduate, PGCE, Non-EU domicile, Non-credit-bearing course fees, FE course fees, and Research training support grants.

  • Research grants and contracts, comprising grants from: BEIS Research Councils, The Royal Society, British Academy and The Royal Society of Edinburgh; UK-based charities; UK central government bodies/local authorities, health and hospital authorities; UK central government tax credits for research and development expenditure; UK industry, commerce and public corporations; other UK sources; EU government bodies; EU-based charities; EU industry, commerce and public corporations; EU (excluding UK) other; Non-EU-based charities; Non-EU industry, commerce and public corporations; Non-EU other

  • Other services rendered, comprising income from BEIS Research Councils, UK central government/local authorities, health and hospital authorities, EU government bodies and other sources

  • Other income, comprising: Residences and catering operations (including conferences); Grants from local authorities; Income from health and hospital authorities (excluding teaching contracts for student provision); Other grant income; Capital grants recognised in the year; Income from intellectual property rights; and Other operating income

  • Donations and endowments, comprising New endowments; Donations with restrictions and Unrestricted donations

If you’ve made it through the list (well done!) you’ll see that some of these come from public sources (eg BEIS research grants), some of these are private (eg UK industry grants). Add together all of the public income for a university, divide by the total incomer, and you can work out what percentage of the university’s income is from public sources. Which is surely relevant for understanding how accountable universities need to be with their spending choices.

For some categories, though, it isn’t obvious if it’s public money. The big one here is tuition fee income.

For income from non-EU students, it is clearly private income. Even if they’re supported by their own government, the UK government doesn’t have a duty or obligation in relation to the money.

For postgraduate tuition fees paid by home and EU students, it will be a mixed bag: some will be paid by the students themselves or their employers; some will be funded via postgraduate grants; some will be paid via public PG loans schemes.

For home and EU undergraduate fees, we need to think about it. Where students have to pay tuition fees (remember that Scottish students in Scotland pay no fees) they are able to take out a loan, on less than commercial terms, from the Student Loans Company. And students do this. After graduation, students make repayments towards the loan from their salary; the amount they repay depends on how much they earn. And after 30 years the remaining debt is cancelled. The initial funds are provided to the Student Loans Company by the state; and an allowance for the ultimately unrepaid element – called the RAB charge – is also part of government spending. So is it public or private money? With hindsight, a proportion of it is private, and a proportion public. Up front, the cash is public.

On this basis it is possible to masker the calculation about the proportion of universities income which comes from public funds. I’ve included home and EU undergraduate tuition fees; I’ve excluded postgraduate tuition fees; I’ve included research and other services rendered sources from UK government and public bodies, and from EU government and public bodies (the income for this ultimately derives from UK government funds, as we’re a net contributor to the EU budget.)

What this shows is that universities receive significant public funding. Across the UK as a whole, 58% of income in 2015-16 (the most recent year for which HESA data is available) comes from public sources. In actual money, that is £20.3 billion out of a total income of £34.7 billion. Yes, I did say billion. It is a lot of money!

% Publicly-funded
Northern Ireland
Total UK

Of course this varies between individual universities. Some have very little income (comparatively!) from non-public sources; a few have very little (again, comparatively!) from the public. 

The graph shows the data: each university is one of the bars; they’re rank ordered from the most dependent on the left (Plymouth College of Art, since you ask, with 96% dependency on public funding) through to Heythrop College on the right (with no public funding whatsoever.) Even the famously-private Buckingham University has a little public income - £95k in funding body grants and research income from UK public bodies. Which means that it is second from the right, with about 0.25% of its income from public sources.

Source: HESA data
What of other universities? The Russell Group members range from the mid 20s (LSe with 24%) to the high 60s (Queen’s Belfast with 69%). The big post 1992 civic universities range from the mid 50s (Sunderland with 56%) to the mid 80s (Liverpool John Moores with 86%). The smaller or specialist research intensives (the 1994 Group, as was) range from the high 30s (SOAS with 38%) to the mid 60s (Birkbeck College, with 66%).

So does the state have an interest in how universities spend their money? The data say yes: at least to the extent that the money derives from public sources.

This doesn’t mean that all of the criticisms made of universities are valid. And it doesn’t mean that university autonomy isn’t a good idea. History, and international comparisons, tell us that the best universities are those that have the most freedom to make their own academic choices.

But it does lend validity to arguments that universities need to be accountable for their spending choices. In my experience, universities don’t disagree with this need for accountability. 

What of current criticisms? The danger is that the huge good that universities do for individuals and for society as a whole is forgotten amongst the current hubbub, and damage is then done. To avoid this, those making the noise need to be careful that their criticisms are well-founded. There’s an anti-elitism in current public discourse which easily mutates into unthinking policy.

And universities themselves need to be aware that (some at least) of the criticisms come from a real point. Are student always the first thought? Sometimes research sees like it is king. And is there real transparency? A few universities have a student on their remuneration committees, and their world has not fallen down. Why not more?