BUFDG Digest - 6 November 2024

BUFDGET

The big news this week is of course the Budget and the first Labour attempt for 14 years. While there were not many explicit mentions of universities, there’s plenty in there that will have a substantial impact on the sector. Andrea and Julia have summarised all the major areas in a special edition of TaxHE, with some of these being:

Research - A £21bn research pot including £13.9 billion for DSIT to invest in R&D in 2025-26, with at least £6.1 billion for core research, and £2.7 billion for association to EU research programmes and partnerships and the costs of the Horizon Europe guarantee scheme. Specific, longer-term allocations include £975 million for aerospace, £2 billion for automotive, and £520 million for a new Life Sciences Innovative Manufacturing Fund. The NCUB welcome the commitment, but worry that the tax environment might put off private investment.

Employment – The big hit to university budgets and planning comes from Employer NIC which gets a double whammy – an increase of 1.2%, plus a decrease in the payment threshold. On a salary of £34k, it’s an increase of nearly £1k per year leading to some eye-watering extra staff cost figures. On this occasion, universities are not public sector organisations and will therefore not benefit from the exemption from the rise enjoyed by the NHS and other public sector.  We will just have to wait to see if any of the [almost] £100bn education budget somehow finds its way to the sector.

Wages - Confirmed prior to the budget, National Minimum/Living Wage rates will increase across all bands, getting closer to the Real Living Wage that most universities sign up to.

VAT - The introduction of VAT on private school fees will go ahead, as expected, from 1 January 2025 and business rates charitable rate relief will be removed from April 2025. Further commentary on how HEPs have been excluded from this change can be found here.

Scotland, Wales, NI – The Treasury has also taken the step of releasing specific reports on Budget day that look at the impact on Scotland, Wales, and Northern Ireland.

Along with Andrea and Julia’s TaxHE special, there’s excellent analysis as usual from the IFS, and from colleagues at Wonkhe.

TUITION FEES

We’ve just digested yesterday’s announcement of a 3.1% increase in tuition fees and maintenance loans in England – a first increase since 2017. The changes apply to both approved and approved (fee cap) providers, meaning the max tuition fee will rise to £9,535 for standard full-time courses. There’s a summary blog post on the DfE’s ‘Education Hub’, and an explanatory press release. The latter hints at what we can expect in the coming months: “Universities must deliver better value for money for students and taxpayers: that is why this investment must come with a major package of reforms so they can drive growth around the country and serve the communities they are rooted in.” The announcement was welcomed by UUK, the NCUB, and David Willetts, but not the SNP, who are concerned about Scottish Labour’s commitment to its current ‘no fee’ policy.  

There’s widespread commentary and analysis, including from Kate Ogden at the IFS, who notes that “less than a third of [18 year-old in 2025] borrowers will see any difference in their loan repayments before they reach the age of 40. They might then continue making loan repayments for a few more months than they otherwise would have. Around one in five borrowers will never repay any more, as they would never clear their loans even if the freeze continued.”

The team at Wonkhe have some detailed analysis of their own, including what the announcement might mean at provider-level, more on what we might expect from that ‘major package of reforms’, and why the maintenance loan announcement isn’t quite as generous as it seems. And here are summary takes from the Guardian, the BBC,

OTHER SECTOR

As part of the budget statement came the announcement of another delay to the LLE, seeing it come into effect for learners starting modules from January 2027 onwards. The government’s overview has been updated to reflect the new arrangements, as has the explainer on the SLC website. GuildHE has welcomed the commitment to LLE, and BUFDG members can discuss the details and implications with planning colleagues on this discussion thread.

We just missed it with the last Digest, but there has been a HEPI paper looking at demographic changes and student demand in Englands – showing a sharp decline in the number of 18 year olds from 2030 onwards, and the implications for the sector. It’s a fascinating read, and one that is explored and critiqued in an equally-interesting article from David Kernohan for Wonkhe, arguing there is enough political willpower and low-hanging fruit on participation rates that talk of sector decline may be premature. This is a point backed up by John Cope, former Executive Director of UCAS in a HEPI reply, who predicts the LLE will do some heavy lifting on shifting the balance towards adult learning.

A survey and report from HEPI has asked what students think of the possibility of their institution going bust, and what they would like to happen if it did. Almost a third are ‘quite’ or ‘very worried’ by the prospect, and half think that public ownership would be the most favourable outcome should a provider fail.

Alex Berka, QS Insights Manager, has summarised the findings from the latest QS International Student Survey, in an article for HEPI. It finds that careers are still the priority, with 54% of students saying the most important factor for their university choice is “a university with proven outcomes and a good record for getting students into the careers they want”. However, 63% of prospective international students also said that environmental sustainability “is very or extremely important to them”, and “want to see exactly how universities are embedding sustainability into their research, teaching and civic duties”.

KPMG's Justine Andrew and Wonkhe editor Debbie McVitty have an article calling for universities to 'sieze the moment' on regional collaboration, and think pragmatically about how they can work with each other to drive down costs and deliver government objectives. The ideas come from a high-level working group convened over the summer, and there's also mentions of student passports / credit transfer, sharing of back-office functions and systems, and regulatory change. 

There’s a final article on HEPI that queries the extent to which universities saw the sharp increase in international students up to 2022/23 as the ‘new baseline for international student demand’, rather than just a short-term blip. Vincenzo Raimo, an International Higher Education Consultant and Visiting Fellow at the University of Reading, and Janet Ilieva, Founder and Director of Education Insight, query whether the path now leads to continued decline in demand, or just slower, but steady long-term growth.

TAXES

In case you’ve jumped straight to this section, Andrea and Julia have launched a special ‘TaxHE budget special’, containing a summary of all the important HE and adjacent news from last week’s announcement.

If you’re here for all the other tax news as usual, you’ll be interested to know we’ve launched three new resources in the last fortnight – these are:

Making Education Digital spreadsheet - this has been updated and now includes KPMG analysis on education exemption available to UK universities in 13 EU member states.

BUFDG Online learning and overseas VAT liability steps paper - this is a new paper.  It sets out the steps that need to be worked through to help establish if a UK not for profit university has an overseas VAT liability, when delivering online learning to students located outside the UK.

Online technical analysis questionnaire - thanks to the member who shared this with me.  It is a questionnaire to be sent to advisers for completion, when the university thinks that it has a tax exposure in-country.

Andrea and Julia’s clones have also published a non-Budget TaxHE that includes, among other things, details of all the forthcoming tax and employment events, news on the Employment Rights Bill, and information on how the process for getting in touch with Andrea and Julia has changed.

MA / TRAC

This is our last call out for bookings for Management Accountants’ Week, taking place online from 19-22 November. The schedule includes a broad mix of topics from tech and tools, to general H E updates, and the personal skills you need to succeed, including: the H E landscape under the new government; practical applications of AI; how to use dashboards effectively; Power BI; handling difficult conversations; the macroeconomic climate post-Budget; prioritising in tough times; and much more! You can find out more and book your place here.

Alex Wilshaw at Liverpool John Moores University has put his head above the parapet and had a go at calculating how much a course costs to run, in an article for Wonkhe. In doing so, he outlines the difference between Value, Price, and Cost, and exposes the complexity of working out whether or not students get the hallowed ‘Value for Money’. The answer is ‘it depends’, of course, but it’s a worthwhile contribution to the challenge of communicating fees, funding, and value - not just to students but all university stakeholders.

SCOTLAND

As mentioned above, the Treasury, in conjunction with the Minister for Scotland, has produced a press release highlighting the Scottish impact of the Budget. Along with Scotland-specific breakdowns of national measures like changes to the NMW and the funding increase through the Barnett formula, it also includes details of projects including Investment Zones and Freeports, and two electrolytic hydrogen projects.

The Scottish Funding Council (SFC) has announced Francesca Osowska OBE FRSE as its new Chief Executive. Francesca joins in mid-January from NatureScot, with the full details in this press release.

SFC has also called for financial statements to be submitted by 31 December at the latest, along with details of significant deterioration in the financial position for the current Academic Year (2024-25) compared to that set out in the 2024 Strategic Plan Forecast.  

Universities Scotland Director Claire McPherson has an article in Wonkhe discussing what the Scottish government might be considering as it crunches the numbers in advance of its own Budget in December. While acknowledging that the Scottish government has ended up with a settlement closer to the ‘best case scenario’ it has modelled, significant challenges remain, as highlighted in Universities Scotland’s submission to the Scottish government’s 2025–26 Budget, which calls for, among other things, a 1% real-term increase to the Scottish Funding Council (SFC) higher education resource budget. The Scottish Budget will be announced on 4 December.

WALES

Similar to in Scotland, the Treasury and Minister for Wales have published a press release on the impact of the Budget on the country. It highlights an extra £1.7bn for the Welsh Budget through the Barnett formula, £250mn of which is capital investment. Separate projects include £80mn for Tata Steel transition, and confirmation of the Celtic Freeport. It comes as Wales Online details the financial challenges affecting the nation’s universities, and the BBC wonders whether the Welsh government will put up tuition fees in a reciprocal fashion.

In related news, Universities Wales and Chairs of Universities Wales have published a joint response to Medr’s consultation on its strategic plan. Whilst generally supportive, the submission calls for an ‘increased emphasis on internationalisation’, with a “dedicated strategic aim focused on promoting a global outlook, recognising the value of international students and staff, global education and research partnerships, and staff and student mobility”.  

PROCUREMENT

There’s been an October update from the Cabinet Office on the Transforming Public Procurement programme. Ash has all the details in this article. It includes a number of new guidance documents (including for suppliers), and some L&D updates, among other things.

We are delighted to be running another Time to Talk with The Energy Consortium (TEC) on energy markets.  The webinar will take place online on Tuesday 12 November 2024 at 10AM, and is open to all members.  Registration is free of charge, and you can find out more about the event and secure your place here.

As part of their aim to reach net zero for their estates by 2040, Imperial College are exploring ways to improve sustainability in research labs through a Sustainability Symposium. A recent workshop with members of Environmental Association for Universities and Colleges (EAUC) and HEPA’s Responsible Procurement group highlighted ways to improve lab sustainability and gathered useful insights that will be taken forward by a lab supply chain working group under the responsible procurement initiative, chaired by Harriet Wallace, Imperial’s Sustainability Director.

Joel Arber has recently been appointed Chief Executive of SUMS Consulting Group. Joel succeeds long-standing Chief Executive, Bernarde, who is retiring after 32 years with the organisation. Bernarde will transition to the role of Executive Adviser.

OTHER

We have received a copy of the new Teachers' Pension Scheme disclosure note from UCEA today.

In case you missed it last time around, BUFDG produced a blog post summarising some of our recent sustainability-related resources and activities. We understand the urgency of the climate crisis and, like the universities we support, we want to play our part in helping to live and work more sustainably, and prevent environmental breakdown. If there is anything else that you think we should, or could be doing, to make your sustainability journeys easier please drop Matt an email.

BUFDG, RINU, and Snowball are running a webinar on Tuesday 26 November looking at distinctions between ESG (Environmental, Social, Governance) and impact investing, and using case studies to demonstrate the role of impact investing in driving meaningful social and environmental change. This session will be ideal for finance leaders, endowment managers and those working in treasury in a Higher Education setting, to provide practical insights and tools for integrating impact investment principles into university portfolios.

BUFDG’s first Research Finance Forum takes place on Monday 18 November 2024, 2-4pm. This session is open to all members, and will be an opportunity to meet the new co-chairs, agree priorities for this newly formed group, discuss key issues, and connect with other BUFDG members working in similar roles. When booking, please specify discussion points or topics you would find useful, and we will shape the session around popular themes. A draft Terms of Reference for this new group can be found here.

In related news, UKRI has published a circular letter for English HEPs with clarity on what it considers to be ‘significant events’ for the purpose of incident reporting. These events are provider decisions or actions that ‘may effect the funding provided by Research England’, including ‘information about major changes in research and knowledge exchange strategies’.

While focus is on the HE sector since the tuition fee announcement, the IFS has also published analysis of the state of college finances in England. It’s not pretty reading, showing over a third of colleges still operating in deficit, and may shed some light on what we can expect on the tertiary reforms announcement, when it arrives.

The AUDE Awards have just launched for this year, and are a great way to demonstrate the real impact Estates colleagues have on their institutions. The deadline for completed nominations is 17 January 2025. If you have any queries, colleagues can contact the AUDE team here. The winners will be announced during AUDE’s Annual Conference at Cardiff University on the evening of 30 April.

Our Job of the Fortnight is for a Strategic Procurement Manager at the University of Edinburgh. The successful candidate “will be responsible for the tendering, award and contract management of a range of procurement projects; as well as strategic initiatives stemming from market engagement and spend analyses”. The deadline for applications is 14^th November.

As usual, lots of other HE finance vacancies can be found on the BUFDG jobs page.