Leading article: Oxford plan makes sense

Finally, Oxford University is getting its head around the dire state of its finances. That is why it produced a Green Paper this week calling for the number of overseas students to be increased at the expense of home students. It is all credit to John Hood, Oxford's new vice-chancellor, that Oxford is taking such a hard look at how it operates, and coming up with some sensible solutions. The fact is that the university has been growing steadily for the past 50-odd years at an average rate of 1.5 per cent a year. In contrast, as the Green Paper explains, staff numbers have remained static. In the 20 years between 1979 and 1999, the staff-student ratio deteriorated from 9.5 to 13.2. The size of the student body - 11,000 - is much bigger than an American Ivy League university.

Teaching all these students is very expensive, especially when you're using the Oxford tutorial system. And academics are under immense pressure. Teaching and administrative loads are significantly heavier than in Berkeley, Harvard and Princeton. And those workloads affect staff performance and make it difficult to keep good researchers. Oxford needs to compete with the best and maintain its world-class status. That is why it has to get a grip on its finances. Increasing overseas students, from 7-8 per cent to 12-15 per cent, is a modest proposal when compared with the 50 per cent of overseas students at the London School of Economics. Overseas students bring in a good deal more money than home students and keep institutions solvent. All universities, including former polytechnics and technological powerhouses like Imperial College London, are doing the same thing.

Hood deserves congratulation for asking the right questions and hiring a firm like McKinsey (on a pro bono basis) to come up with the answers. He has done the job amazingly speedily considering he arrived only last autumn. His action shows what can be done if you hire a vice-chancellor from outside the system - especially when that man has a background of running New Zealand's second biggest conglomerate. Hood knows about cash flows and the importance of calculating budgets for the depreciation of new labs. Cambridge may find itself having to take similar action. The signs are that Hood has only just begun the great project of transforming Oxford for the 21st century. The Green Paper mentions the need to reform the university's decision-making machinery to make it less bureaucratic and cumbersome. That could be an even bigger job.