17 January 2024 
Amanda Darley, Head of Operations and Engagement
Happy new year to all our readers (if it’s not getting too late to say that now!) and welcome to the first BUFDG Digest of 2024. It’s almost a month since the last Digest so there’s a lot to report, so grab a cuppa and settle in…
BUFDG
You can now book your FREE place at the online BUFDG Finance Festival on Monday 11th to Wednesday 13th March! An extravaganza of all things H E finance and procurement, with 28 sessions covering everything from overseas tax to campus sustainability, and from credit ratings to financial planning. It’s an all you can eat, free event for you and your team – we hope you will come along and tuck in, but booking is essential.
A reminder that we have created a discussion board especially for finance technology, software, and systems queries and chats. You can filter onto this discussion board by selecting ‘Finance Technology’ under Other Interests in the left-hand menu, and you can make sure the discussions are included in your daily discussion email by adding ‘Finance Technology’ to your interests on your BUFDG profile.
SECTOR
Strengthify has recently published a report on H E employee engagement with data from 700 H E employees, showing that ‘compared with other sectors, employee feedback indicates a disproportionately high likelihood of employees leaving if suitable opportunities arise. Higher education employees … were also less likely to agree that they were able to ‘consistently do what they do best’ at work”. As well as setting out the survey results, the report sets out some key recommendations to help improve employee engagement and ‘get the best’ from your team. Strengthify is also running a set of free one-day, H E focused discovery workshops around the UK between 6 February and 19 March, to help understand and harness individuals’ personal strengths.
FINANCIAL SUSTAINABILITY
H E commentary over the past week has been dominated by coverage of the UUK/PwC report on the Financial Sustainability of UK universities, based on information provided by 84 HEPs in England, Scotland, and Northern Ireland (there were insufficient returns from Wales, so they were excluded from the forecast analysis, though the broad picture is likely to be similar for Wales). The purpose of the report is somewhat irreverently described by Research Professional News as ‘If you’ve been saying for years that you’re skint and now you really, really are but you’re mistrusted as too woke and too leftie, it’s wise to get someone with gravitas to make the case on your behalf… Universities UK therefore commissioned a report from PwC…’
The report sets out the current state of the sector, and the outlook for the sector as a ‘base case’ and then modelled on various different sensitivities. The report was covered in the FT (£) (using its own graphs which help visualise some of the modelling), which garners some unsympathetic below the line comments; the Times Higher, which leads with the headline that 4/5 of UK providers will be in deficit if overseas income tumbles; and even as far afield as Business Day, ‘Nigeria’s leader in business and financial news’ (though it may be less than helpful that a report on the financial struggles of UK universities has reached one of the key markets for international students). Nick Hillman’s blog, At Amber: The financial position of UK universities is a very good read, and of course Wonkhe has plenty of insightful commentary too.
The report is not ground-breaking for those deeply embedded in university finances, with Wonkhe’s Monday Briefing summarising the position as ‘Fundamentally, though universities need to make money to survive, most of what universities do does not make money, or even break even, in the case of home undergraduate tuition or government-funded research’. But it provides some useful talking points, brings out some differences between the outlook for the Scottish system compared to the English/NI system, and hopefully highlights the issues for those not so deeply embedded. DK’s piece for Wonkhe makes some suggestions, with contributions from Sam Sanders at KPMG, on what universities do instead of closing, including the assertion that ‘There are many processes and practices in university professional services that could be streamlined with minimal detriment to the way they are experienced for the most part’. It may not always feel that way at the coalface. But perhaps the systems that are supposed to make us more efficient could be improved, and if you have any successes in the area of improvements and efficiencies in processes and practices, please share them on the BUFDG discussion boards, or let us know and we can find ways to share the best practice across the sector.
There’s a Wonkhe blog by Public First that tries to explore what might happen if a large university runs out of money, contending that ‘attempts by the OfS and the government to play market hardball on this may not survive contact with reality’. And Jim Dickinson’s piece on how wholesale provider collapse should be the least of student worries, looks at the effect some rationalisations have on the student population – ‘facilities, services, pathways and programmes that get rationalised as times get tighter’. He concludes that ‘under the surface, there has been a lot of “market exit” in higher education over the past few years, and there will likely be a lot more in the months and years to come. The type I’m talking about might make sense if we were still collectivising all fees into “free education” … But when we decided … to individualise most of the contributions for higher education into upfront or delayed-payment fees, we should have shifted into making it more difficult to make these sorts of changes… as well as loading individual students with much more of the responsibility to pay for H E, we’ve also loaded significantly more risk onto them that their choice will have turned out badly.’
And then there’s the M word – Mergers – or a lesser version such as sharing back office services and resource sharing, referenced in the DK/Sam Sanders piece. DK points out that ‘mergers and collaborations generally work better in the abstract rather than in reality. Mergers are hard – in any environment’. But do they have to be impossible? City, University of London and St George’s announced earlier this year that they are exploring the opportunity to ‘join forces’, so we will watch with interest. And here at BUFDG we’re currently arranging a date for a Time to Talk session from NCG to look at what has worked with their successful mergers in the FE sector on 1 March – the date is hot off the press this morning, so look out for the booking details on our website soon…
REGULATION / FUNDING
English universities should perhaps read the UUK/PwC report alongside the Office for Students annual review, which includes commentary from OfS chief executive, Susan Lapworth, key milestones for the OfS in 2023, and a statistical overview of the sector. Lapworth’s commentary focuses on three areas: quality and standards; equality of opportunity; and financial sustainability. On financial sustainability she says that although ‘many universities and colleges are actively working to mitigate future financial risks, others are not fully assessing and managing these, and are having to respond reactively when they start to materialise’. And there is mention of ‘optimism bias’ as we’ve seen before, with projected growth in student numbers that may seem reasonable at individual provider level, but when totalled across the higher education sector in England as a whole, may be unrealistic.
The OfS continues to monitor risks and take a risk-based approach and has ‘begun new engagement activity, including convening roundtable sessions with finance leaders from across the sector to discuss financial sustainability and the particular risks they are facing. This includes hearing from universities that are not experiencing financial difficulties, and using our engagement activity to set expectations about how universities should be assessing their own financial risks given the pressures they face’.
The OfS is running a webinar this afternoon (2:30pm), Introduction to the Office for Students: a webinar for all higher education staff, if you’d like to hear more about their work.
£12m additional funding for degree apprenticeships in 51 HEPs, as the result of a competitive bidding process, was announced by the OfS this morning.
The principles of the Lifelong Learning Entitlement are being trialled through an OfS pilot, and the first evaluation of this LLE trial has now been published. It’s hard to know what it tells us as take up was so low (due to low applications, just 17 courses at 10 providers actually ran, out of 100 courses developed by 22 HEPs), and this low take up is analysed in this Wonkhe piece.
The Institute for Fiscal Studies has published a report on higher long term interest rates and the cost of student loans, also reported in the Guardian with the headline ‘Government to lose money on all student loans – even those repaid in full’. According to the IFS, the increase in government borrowing costs due to interest rate rises, ‘translates to an increase in the expected cost of student loans including financing costs of more than £10 billion per year’, resulting in the expected net profit of £3.2 billion on student loans from the 2023 university cohort changing to an expected loss of £7.3 billion for the government.
SUSTAINABILITY
We’re holding a Time to Talk session on Climate-related engagements with banks and fund managers tomorrow (18 January) at 2-4pm, presented by University of Cambridge CFO Anthony Odgers, Head of Group Treasury Heather Davis, and Anthony's Special Adviser on Responsible Investment, Dr Ellen Quigley. Find out more about Cambridge’s work to incentivise banking and fund management institutions to make positive moves towards avoiding contributing primary market financing to firms that are engaging in fossil fuel expansion. The hope is to encourage policy and practical changes, enabling the H E sector to contribute directly to climate change mitigation through influence or 'handprint', and reducing the need to switch away from existing banking arrangements.
We’ve also got an online surgery on 22 January to support those using the Cost of Net Zero Calculator, with delivery partners Energise on hand to offer technical support. The surgery will be useful if you have recently downloaded the calculator for the first time, or are actively using it within your organisation, and have questions on specific figures or fields, technical queries not covered in the regularly updated FAQs, or to share particular insights or experiences with the designers and/or other users.
Universities UK’s online event on universities, sustainability, and the climate emergency is taking place all day tomorrow (18 January) but bookings are still open if you want to book on.
AUDE and EAUC released the 2023 Sustainability Leadership Scorecard (SLS) Annual Report in December. The report shares insights into the current statistics and recent developments of the SLS, examines what these results suggest about the sector’s strategic approach to sustainability, and makes recommendations that support a shift towards more inclusive strategic sustainability action in the sector. The report emphasises the need for a whole-institution approach, as an impactful mechanism for ensuring solutions support all job levels, specialist areas, and faculties. The purpose of the SLS is to measure the sustainability performance within higher and further education institutions and provide a framework for continued sustainability effort. This can then be used to drive innovation and encourage knowledge transfer within the sector.
SCOTLAND
The Scottish Government presented the Scottish Budget for 2024/25 to the Scottish Parliament on 19 December, and Andrea and Julia provided tax-focused analysis for BUFDG members and Universities Scotland responded to the Budget the following day. Describing it as ‘a tough budget for higher education’, Universities Scotland explained that the Budget means a 5.9% (£48.5m) cash cut to university resource budgets (primarily hitting the cost of teaching Scottish domiciled students), a 4.7% (£16.2m) increase to universities capital budgets for research, innovation, and buildings, with a total public funding decrease of 2.8% (£32.3m) in cash terms for universities. Wonkhe covers off some of the impacts, and also questions whether ‘moving to a three year norm’ for degrees would be one way to improve the finance situation, with the Scottish four year degree robustly defended by a handful of people in the Comments section (along with the suggestion that reducing this probably just moves the requirement for funding from universities to schools).
The main tax headline was changes to Income Tax rates from 1 April 2024, with the introduction of a new Advanced Rate of 45% applying to income over £75,000, and an additional 1% added to the Top Rate (increasing from 47% to 48%) on income over £125,140.
New taxes being considered by the Scottish Government include an Infrastructure Levy (planned to be implemented by Spring 2026) and a Carbon Emissions Land Tax. According the John Muir Trust paper proposing the Carbon Emissions Land Tax, if ‘all land managers maximised carbon sequestration of peatlands and woodlands across Scotland, we could reduce our national carbon emissions by up to 13 Mt CO2e a year – equivalent to removing every single vehicle from our roads’. The initial proposal by the Trust is that all large landowners (with >1,000 hectares) would be assessed for actual and potential carbon emissions and sequestration and would then be placed in a graduated carbon emissions land tax banding scheme administered by local authorities, building upon existing systems for collecting non-domestic rates for sports shooting.
Coming so close on the heels of the Budget, the SFC’s report on the Financial Sustainability of Universities in Scotland 2020-21 to 2024-25 does not include any impacts from the Budget. It reports that whilst the Scottish sector is forecasting an underlying operating surplus of £226.5m for 2022-23, this ‘declines sharply’ to a deficit of £3.3m in 2023-24, before partial recovery in 2024-25 to a £44m surplus. However, as the report explains, the ‘sector position is skewed by the financial results of the two largest universities. While the sector normally reports an aggregate underlying surplus, five universities reported underlying deficits in 2021-22, increasing to between six and ten universities projecting underlying operating deficits in the following three years’. And as we see elsewhere, the SFC also comments that while international fee income ‘increased sharply in recent years’ it is ‘an area of significant fluctuation’ and ‘early data on international recruitment shows a less positive position in 2023-24 than expected’.
WALES
The draft Welsh Budget for 2024/25 was presented to the Senedd on 19 December. Wonkhe has some commentary on the budget proposals including the possibility of a tuition fee increase which was included alongside the possibility of charges for some public services such as NHS dental care and domiciliary care. But Wonkhe notes that the real-terms value of loan and grant mix will fall again as the household income threshold remains frozen. Postgraduate support will switch to loans only from the 2024-25 academic year, and £3.2m of incentive bursaries for Welsh-domiciled postgraduate students is gone, and £1.6m for the Taith international mobility programme is being ‘redirected’. And there’s also a further cut of £11m to HEFCW’s funding. In response to the draft budget, Universities Wales points out that, worryingly, the ‘gap in participation between Wales and the rest of the UK is growing’.
PROCUREMENT
A recording of the Cabinet Office update at the December Heads of Procurement meetings is now available to watch, along with the slides from the presentation.
The Responsible Procurement Group has released an updated version of the Higher Education Supply Chain Emissions Tool (HESCET), along with accompanying notes.
To find out some of the latest developments in future domestic procurement policy, check out Ashley’s notes from his recent meeting with the Cabinet Office on the discussion board.
TAX AND PAYROLL
Version 2 of the BUFDG Tax, Payroll and Resource Benchmarking Report has been published. This updated version includes an additional section on resource benchmarking.
A reminder of the BUFDG report summarising HMRC’s expectations regarding off-payroll working, issued in December, which also sets out the various BUFDG resources that can help you in this area, including the popular Employment Status surgeries (next date 15 February).
PENSIONS
USS has published the latest Schedule of Contributions, effective from 1 January 2024, and members are discussing how they represent the change and the unwinding of the provision in their management accounts etc.
GENERAL
Minutes from the October Financial Reporting Group (FRG) meeting can now be found on our website.
A quick pointer to the Discussion Boards for a reminder about an email with a survey from the TDG about the MSI calculation. The email should have come to your HEP on 20 December via the OfS, and is from the TRAC Development Group (Andrew Bush from KPMG). It included a survey to complete, so this is just to bring that to your attention and remind you to complete the survey/make sure the right people in your HEP have the survey to complete please. Check the discussion board for more details.
BUFDG EVENTS
We are delighted to be running a Time to Talk with We Fight Fraud to explore their Crooks on Campus film and focus on Anti Money Laundering (AML) in the H E sector. We will be joined by Dr Nicola Harding, CEO, and Tony Sales, Co-Founder, on Tuesday 23 January 2024 at 2pm via MS Teams. Book your free place here!
Next week also sees the Midlands Tax Group meeting, an Employment Tax Surgery and a Time to Talk Credit Control – all free to attend and all being held online.
Our popular Finance Business Partnering Foundations course takes place online, in two parts on 20 and 21 February. It costs £260 (plus VAT). This is for you if you wish to establish yourself in a Finance Business Partnering role and to set solid foundations for success. It includes what true business partnering is, core partnering skills and mindsets, and tips and tools that can be used in practice at work to develop your role. It is aimed at new and aspiring finance business partners, as well as management accountants wanting to develop more of a partnership approach, and existing business partners looking to refresh and track their progress.
We’ve also got the Time to Talk on Climate-related engagement with banks and fund managers (tomorrow!) from the University of Cambridge, and the Calculating the Cost of Net Zero tool surgery on 22 January, both mentioned in more detail in the Sustainability section above.
And these are just a handful of the 24 great events we are providing before the end of March, so have a look at see what might be useful for you.
BUFDG ADVOCACY AND COLLABORATIVE WORK
The results of the BUFDG review highlighted that many members were not aware of much of the advocacy work undertaken by BUFDG, or the collaborative work we undertake with other H E organisations. So we’ll be providing brief updates in the Digest so you have a clearer picture of what we are working on, on your behalf.
Rachel and Joni continue to represent members on the subject of Timesheets and Reporting for research assurance, working with members of the ARMA Special Interest Group, and will be corresponding with UKRI in the coming months.
Joni attended a UBS Charities round table on the subject of 'fossil fuels – to invest or divest' on behalf of the Investment Management and Practice working group. And the team continues to work closely with EAUC, Energise, and AUDE to maximise the benefits of the Net Zero calculator for the sector. Most recently Joni has met with the Energy Systems Catapult to explore how we can collaborate on public sector decarbonisation initiatives.
The HEPA/EAUC Responsible Procurement Group met earlier this month, supported by colleagues from across HEPA and EAUC’s memberships, as well as UKUPC and UKRI:
JOB(S) OF THE FORTNIGHT
The University of Salford is advertising for an Indirect Tax Manager to provide expert advice and guidance with respect to indirect taxes (primarily VAT), and to act as the first point of contact for all international tax issues. Reporting directly to the Head of Financial Accounting, you will be responsible for the completion and submission of the group VAT return, ensuring compliance with relevant tax legislation, including imports and exports. You’ll need to be a proactive team player with knowledge of VAT and partial exemption, and a strong communicator to build good relationships and increase understanding of complex tax matters with a range of colleagues across the organisation.
If you are looking for a broader than finance role, the University of Oxford’s Department of Politics and International Relations is looking for a Head of Administration and Finance - an outstanding opportunity to join the senior management of a thriving department (one of the largest and most successful departments in its field in the world). The department is looking for a leader of the professional services team who will play a central role in the management of the Department, taking responsibility for implementation of departmental strategy and oversight of major departmental projects. You will be responsible for the effective and efficient non-academic management and administration of the Department, supporting its academic mission.
