Working for a smarter, stronger sector - Professor Sir Ian Diamond


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Working for a smarter, stronger sector - Professor Sir Ian Diamond

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  • First, it is important to remember that our universities are a major success story. We are the centres of innovation that help to drive the economy. We play a massive role in our local and regional communities.As a sector, UK HE is worth over £59bn a year – a figure that is set to be updated a week today, at another event hosted here at UUK!We employ hundreds of thousands of people directly, and support the jobs of many more.And we provide the education and training that will help to ensure that the UK can compete in the 21stcentruy. Over 2 million learners benefit from our world class institutions. And we really are world class. As the report comparing our international research performance demonstrates, we continue to punch well above our weight on the global stage.Our research is top quality. Our researchers do more, with less, than anywhere else.And, according to others – we are paragons of efficiency and effectiveness. Although it is a few years old now, one of the few global, comparative studies held that we are the “top performers” in using resources efficiently and effectively, regadless of how you measured it, in both teaching and research.Our achievements demanded attention, according to the authors. We should be proud of what we do as a sector, and what we continue to achieve in testing circumstances.
  • And there is no doubt that these are difficult times. This goes for higher education the world over, and we are no different here in the UK.There is no denying that the HE sector is in a difficult moment. There are a huge number of roles and objectives we fulfil on one hand, and some very clear pressures and challenges on the other.Governments everywhere are having to make very difficult decisions on public spending. Universities are learning how to operate in more competitive environments, both locally and on the world stageIn the wake of the financial crisis, the OECD undertook a programme of work looking at HE “in a world utterly changed”. This recognised that the parameters in which spending decisions of (predominantly Western) economies were made had shifted. HE is a strategic good that delivers very significant benefits to the economy and to the people who benefit from education and training, and the research our universities produce, but asserting this willnot be enough to guarantee a sustainable level of resource.These challenges stand to “affect every aspect of university provision”. We need to understand these issues, and think through the impact they have on HE, and start to think of new ways in which we can deliver HE in a more pressured funding environment, simultaneously delivering on efficiency and value-for-money while enhancing quality and competitiveness.
  • And it is clear that, with regards to funding, there are some very difficult obstacles affecting the sector, and others that lie ahead.Austerity will be the deciding factor in spending decisions and the public purse for the foreseeable future. There are not going to be any hand outs. Universities have done well to maintain, in flat cash terms, the science and research budget. But we are all aware of the difficulties being faced in government, and know that there are tough decisions on the horizon.The income from tuition fees in England is being eroded by inflation, and the competition for international students becomes ever more acute. A revaluation of the USS pension scheme will shortly take place, plus changes to the way in which this is accounted for in university accounts will have an impact on the presentation of our financesThis is not meant to be a definitive account of the challenges we face – but it does give a sound idea of the pressures we, as a sector, face in the coming years.And our objective can never be to simply tread water or to stand still. We must continue to invest in the future, in our future success.We need the environment, skills, people and capabilities to serve the needs of our students and the country.And, in spite of the difficulties we have faced, this is exactly what we have continued to do: invest in the future.
  • Our universities have continued to invest in infrastructure, for example. Throughout when of the worst recessions in history, our investment remained fairly steady.In spite of very significant cuts to capital grants – the red portion of the bars – we maintained our commitment to investing in the future.And universities did this by drawing on their own cash reserves (purple), and by accessing private finance (green).And, in the current year, we have forecast a significant increase in investment – 46% - and this should be celebrated as quite an achievement Yet there have been some criticism of universities. Criticism that – as a sector – we are some how “awash with cash” because we have returned a surplus. That simply is not the case.First, what surplus there is not evenly distributed across the sector. And second, as this graph shows, it is through our hard work and diligence in operating the business of our institutions effectively that has enabled us to continue investing in our infrastructure.So we need to be clear in our messages to government, and consistent in our arguments.Universities are not awash with cash. We have worked tirelessly to deliver a margin that allows us to invest in the future – in people, and in infrastructure.Efficiency and value-for money are fundamental to universities delivering on their strategic objectives. Working smarter to deliver a stronger sector needs to be the message we put forward.
  • And, as a sector, we have proven adept at delivering on efficiency. Even before the financial crisis, we were delivering efficiency. When the crisis came along and became evermore serious, again as a sector we delivered. Over £1.3 billion in savings between 2005-2011 – we exceeded our targets by about £150 million In the last year for which we have data, HEFCE estimated that the sector saved around £481m (2011/12)Set alongside our efforts in research, where we are on course to hit the Wakeham savings targets and – to quote Sarah Jackson, from here excellent report to BIS – we are on course for a ten-year track record of delivering on efficiency and value for money. This shows our capacity for innovation and our ability to engage with the efficiency and value for money agendas.
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  • Vince Cable spoke to the UUK conference and noted that the message had got through to colleagues in government, HM treasury, etc.Pressures will remain. Recent announcements at party conferences make it clear that public funding will remain tight well in to the next parliament. Conservative aim to return to surplus could mean a spending freeze across the whole of the public sector until 2020.
  • HEFCE grant letter arrived on 10 February 2014The grant allocation makes it clear that there are reductions in the grant element over and above those anticipated and beyond what is replaced by student contributionsThese reductions will be challenging to manage hence we need to redouble our efforts.[FYI – UUK analysis shows that the 2014-15 recurrent teaching grant has been reduced by £45m between the amount estimated in the 2013 grant letter and the actual amount allocated in the 2014 letter. However, as more items have now been included in the recurrent teaching grant in the 2014 letter, “the scale of overall cuts to teaching grant are much larger than the £45m figure would indicate.” A very significant reduction of £246m is also indicated for the recurrent teaching grant in 2015-16]The detail of the grant letter [annex 1] highlights the importance of cementing the progress made in the Diamond and Wakeham reviews, and building on this to deliver more. It places efficiency – and in particular collaboration and sharing – at the heart of this.Also – we should not think that the message on efficiency has not “got through” [cf. Vince Cable – previous slide] in light of this letter – but the reality is that government finances are precarious and we need to work within the parameters that have now been set
  • As identified by BIS, in dialogue with UUK
  • Working for a smarter, stronger sector - Professor Sir Ian Diamond

    1. 1. Working for a smarter, stronger sector New approaches to efficiency and value for money Professor Sir Ian Diamond Principal and Vice-Chancellor, University of Aberdeen Chair, Efficiency and Modernisation Oversight Panel
    2. 2. Universities are… • Major economic actors in their own right • Huge drivers of growth and innovation • Research power-houses on the global stage • Efficient and effective – UK as “top performer”
    3. 3. …however “Higher education in the United Kingdom is undergoing a period of significant change. This is being driven by a number of factors: political, cultural, economic, and technological. The trends are global in their scope, and far reaching in their impact. They affect every aspect of university provision, the environment in which universities operate, what they will be required to deliver in future, and how they will be structured and funded…” Source: Universities UK (2012) Futures for higher education: Analysing trends
    4. 4. Funding higher education: key challenges • Austerity and public finances • Tuition fee income & inflation • Growth in the international student market • Revaluation of USS pension scheme • …and the need to invest in the future
    5. 5. Universities continue to invest in our future success 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2009-10 (actual) 2010-11 (actual) 2011-12 (actual) 2012-13 (forecast) 2013-14 (forecast) 2014-15 (forecast) 2015-16 (forecast) £millions Funding breakdown of capital expenditure 2009-10 to 2015-16 Receipts from sale of tangible assets Deferred capital grants received Mortgages and loans acquired Net capital to be financed from internal cash
    6. 6. Meeting the challenge: Our efforts so far Reporting period Target (£m) Delivered (£m) 2005/06 151 134 2006/07 150 150 2007/08 198 202 2008/09 126 159 2009/10 241 273 2010/11 363 462 Total 1,229 1,380 CSR savings in the HE sector Source: HEFCE • £1.38bn savings over CSR04 & CSR07 • £481m efficiency & VfM savings, 2011/12 • On track for over £400m savings in research
    7. 7. Efficiency and effectiveness in higher education: Phase I • UUK Task Group reported in 2011 • Progress report published in 2013 • Strong evidence of good progress in the sector • However – also set the agenda for future work
    8. 8. State of play • Progress recognised by government: “the message on efficiency has got through” • Continued engagement and enthusiasm: recent achievements show momentum throughout the sector • No end to austerity: spending decisions to be taken in 2015/16 will be made in a challenging fiscal environment • Universities must continue to invest: human, physical, digital capital key to competitiveness
    9. 9. HEFCE grant letter • Tim Melville-Ross: “...the funding settlement … incorporate significant reductions…” • Clear drive to embed efficiency and to maximise value for money for students • Greater collaboration and sharing, and better use of our resources, are critical to our future success
    10. 10. Efficiency, effectiveness and value for money: Phase II • Minister for Universities and Science recommended a second phase of work • Broad scope agreed, November 2013 • UUK identified sector partners and established working groups in core areas • To report findings and recommendations: February 2015
    11. 11. The challenges Key challenges to address are in six areas: – space and infrastructure utilisation, and asset sharing – the higher education workforce – the sector’s ability to record, quantify and analyse efficiency gains, and demonstrate the use to which these are being put – investment strategy and operational plans of institutions – academic practices and processes – open data and efficiency
    12. 12. Working together to deliver success • UUK will coordinate work but sector partners have been invited to lead projects – Asset sharing and the efficiency in research – Delivering value from the HE estate – Evidencing success – HR challenges and the HE workforce – Open data and efficiency
    13. 13. Timetable for delivery 2014 May Project symposium July Interim progress report from UUK October Final reports from working groups 2015 February Final report published – with implementation plans
    14. 14. Concluding remarks • The funding environment and fiscal pressures are not going to get any easier • We must continue to set a challenging agenda for the HE sector • The whole sector needs be far better at communicating our progress