A financial examination for the University
The long-awaited Augar Review has recently been published to much debate and discussion - the full report coming in at over 200 pages long and containing over 50 recommendations. Some of the key details include:
- A reduction in fees from £9,250 to £7,500, which should be compensated by HM Treasury
- Reinstating maintenance grants for students from the most disadvantaged backgrounds
- Reducing student loan interest and extending the repayment period to 40 years
The Government will now decide how, whether or when to respond to the report’s recommendations in the context of its own Spending Review. There are some welcome recommendations, which the University has called for alongside its Russell Group colleagues, for example, restoring maintenance grants for those students most in need. The reduction in the level of fees would be a positive for students, however, this would need to be accompanied by the recommended compensation to universities for the significant drop in funding to be sustainable.
What does the current financial landscape mean for the University? The true picture is of course, more nuanced than the headlines would have us believe. Our University finances have never been more sustainable, yet at the same time, they have never been more under threat.
Nottingham now has an annual turnover of £660 million that contributes more than £1 billion of value each year to the national economy, and a world-leading research portfolio worth £600 million. Careful management means we generate an annual surplus that is reinvested every year on the things that are important to us all - our teaching, research and services for students - our University does not, and will never seek to, make a ‘profit.’
To help students and alumni understand where the University sources its income and where it is spent, we have produced Fees & Finances Explained, a set of webpages which chart our main income sources and explains how the typical student fee is spent on every aspect of students’ time at our University.
The webpages show that Nottingham receives income from student fees, government grants and research grants, as well as generating our own income through fundraising, investments and business activities such as ‘spin-out’ companies. We have also benefitted enormously from the generosity, loyalty and passion of you, our alumni and donors – securing £242 million through the Impact campaign for investment ranging from scholarships and community projects to cutting-edge research and teaching facilities.
However, all universities including Nottingham face unprecedented challenges to that financial sustainability.
Student fees were introduced in 1998 to help the government fund increasing numbers of students to attend university while reducing the cost of this to the taxpayer. Fees have increased over time, as direct government funding to universities has decreased.
Currently, more than 50% of Nottingham’s income is now secured from student fees, 18% from research grants, 17% from fundraising and investments, and just 14% from central government. Ten years ago, the picture was almost reversed with 30% of our income from government, 30% from student fees, 20% from research grants and 20% from fundraising and investments.
All universities are operating in an increasingly competitive recruitment context for UK undergraduates - with the 18-year-old demographic continuing to drop significantly, at least until 2020 - making it ever more challenging to recruit the next generation of students. And no one - least of all government it seems - can yet quantify the financial impact of Brexit on our research funding, EU and international student income and staffing costs. Our own estimates place this figure in the region of £35 million for Nottingham.
This is why we have developed a new financial strategy in partnership with colleagues across the University to ensure we can prepare to weather the storms ahead and continue to invest in our staff, our students, our teaching and our research by generating more income from our research base, philanthropic fundraising, investments and business activities such as ‘spin-out’ companies. We will also continually improve how we work - our processes and systems - to make savings that can be reinvested in our University and its community.
While we do not subscribe to any sense of “financial crisis” at Nottingham, meeting the ongoing financial challenges will require imagination, ambition and engagement from all of us at the University. I invite all members of our extensive and influential community of global alumni to support us in this endeavour by contributing their voices to the political, press and social media debates on the undoubted value of the nation’s universities, and of course, the University of Nottingham in particular.
Words: Margaret Monckton, Chief Financial Officer, University of Nottingham
*original article published in January 2019, prior to the relase of the Augar review