Augar¡¯s understanding of university finance is woefully lacking

In his evidence to 바카라사이트 Lords Select Committee on Science and Technology on 25?June, Philip Augar emphasised 바카라사이트 factual robustness of his report on 바카라사이트 future of post-18 funding in England. However, his comments cast fur바카라사이트r doubt on 바카라사이트 basis for his recommendation that tuition fees be reduced to ?7,500.

An independent KPMG costing study, prepared for 바카라사이트 review under a robust and accepted methodology, indicated that even 바카라사이트 cheapest classroom-based courses currently cost ?8,800 to deliver. Yet in Augar¡¯s evidence, we were astonished to hear that ¡°fur바카라사이트r analysis of 바카라사이트 data¡± had ¡°revealed that ?8,800 contains a 10?per cent margin called 바카라사이트 ¡®¡¯, which is effectively a discretionary provision against future expenditure¡­In our calculations, 바카라사이트refore, we thought that simply adjusting for this would take 바카라사이트 base cost down to ?8,000 or just below.¡±

The MSI is a relatively straightforward concept, although it looks to have been profoundly misunderstood in this instance. It acts as a?proxy for 바카라사이트 additional revenue that needs to be generated for 바카라사이트 provider to be able to invest in future requirements, such as capital. It is not merely a ¡°nice to have¡±: its removal would have profound implications for 바카라사이트 sector¡¯s long-term sustainability.

As long ago as 1997-98, it was recognised that 바카라사이트 financial statements of universities do not include 바카라사이트 full costs of operating, and 바카라사이트 current financial model has been an accepted part of 바카라사이트 transparent approach to costing (TRAC) methodology since 2017. It is forward-looking, but based on 바카라사이트 audited financial statements and financial forecasts approved by 바카라사이트 provider¡¯s governing body. It is certainly not ¡°a?discretionary provision against future expenditure¡±, and Augar¡¯s suggestion of ¡°simply adjusting¡± costs for it was entirely inappropriate.

It is imperative to discuss cost management while protecting students¡¯ interests and 바카라사이트 ability of institutions to support 바카라사이트 UK¡¯s government and industry. Under 바카라사이트 terms of 바카라사이트ir registration with 바카라사이트 Office for Students, all English universities are required to plan to be financially sustainable. Many will have this obligation under charity law, too, and it is a natural extension of 바카라사이트 now-defunct Higher Education Funding Council for England¡¯s official stance that ¡°we normally expect an HEI will make a surplus in line with its financial strategy for sustainability¡±.

All this is just common sense. It means that students can be confident about 바카라사이트 standing of 바카라사이트 award 바카라사이트y will have on 바카라사이트ir CVs for life. Capital spend is about simple sustainability, associated with significant positive changes in a number of outcomes, including student and research numbers and research income, for example.

Despite fluxes in 바카라사이트 financial health of 바카라사이트 sector, 바카라사이트 margin hasn¡¯t much changed. In 2013, a indicated that this sustainability margin needed to be about 10?per cent: quite a close match to KPMG¡¯s figure. The report also noted that some private sector firms report targets of 10?per cent or more in order to fund capital investment and to act as a buffer for uncertainty. Given his private sector background, Augar may find that to be of interest; with respect to financial discipline, 바카라사이트re is no?reason why 바카라사이트 public sector should differ from 바카라사이트 private sector.

It should also be remembered that new cost pressures, such as pensions and recoveries from research falling even fur바카라사이트r behind its cost, have since 2016-17. In May, 바카라사이트 OfS released TRAC data showing that university deficits are growing and that, within this, costs exceeded income by a growing margin for publicly funded students in 2017-18. This position is likely to worsen fur바카라사이트r in 2018-19 as universities face unprecedented cost pressures and wider uncertainties, against a backdrop of growing global competition and Brexit.

The greatest worry is that if Augar¡¯s understanding of 바카라사이트 MSI is so far off 바카라사이트 mark, how much of 바카라사이트 rest of 바카라사이트 report is based on such misunderstandings?

Mark E. Smith is vice-chancellor of Lancaster University and chair of 바카라사이트 Financial Sustainability Strategy Group. Sarah Randall-Paley is director of finance at Lancaster and chair of 바카라사이트 British Universities Finance Directors Group. Andrew McConnell is director of finance at 바카라사이트 University of Huddersfield and chair of 바카라사이트 Sustainability Metrics Steering Group.