Financial fears remain hidden

The University of Essex is not alone in its anger over the Government's funding of higher education. But while many universities have been hard hit by the current financial squeeze, the cap on student numbers, and the necessity for some to make academics redundant, few are willing to discuss their accounts openly, writes Lesley Gerard.

Any whiff of financial insecurity is seen to pose a risk to student recruitment and future investment.

When the Higher Education Funding Council for England (HEFCE) refused to name six institutions that were on its "at-risk list'' it cited commercial confidentiality as justification. The number has now fallen to four and Essex is not on this list. But it is prepared to alert its staff to the fact that it faces a fight against going into deficit.

Privately, academics and vice-chancellors admit that Essex is the norm rather than the exception and an increasing number are questioning in public whether the system can sustain any more cutbacks.

Student numbers at universities have soared since 1989 when Kenneth Baker, the then Secretary of State for Education, launched the expansion drive.

To achieve a goal of one in three young people in higher education, the method of funding was changed. Institutions received more of their money in the form of a tuition fee for each student rather as a lump-sum grant as before.

The more students enrolled the more money universities received, even though in real terms cost per student was being driven down. The Committee for Vice-Chancellors and College Principals estimates a 26 per cent decrease over five years, a cut in unit costs that many commercial enterprises would have difficulty sustaining.

But the incentive worked - too well. By 1993 the target had been reached seven years ahead of schedule. The Government's problem now was how to stop a costly expansion that it could no longer fund.

A cap was put on student numbers and universities were warned that they would be fined for overshooting. In the last Budget universities were told they would be expected to make efficiency gains of 9 per cent over the next three years.

Some have reacted by "staff restructuring''. At London Guildhall, for example, around 80 members of staff have taken voluntary redundancy.

Professor Roderick Floud, provost of London Guildhall, said: "We were running into deficit and realised we had to take action. It was a situation exacerbated by an unexpected fall in part-time student numbers due to the recession.''

Even univerisities with substantial reserves are worried. They have their reserves as an insurance. Gillian Shephard, the Secretary of State for Education, would never tell voters not to save for a rainy day, and yet she criticised schools and universities for doing so.

"We will see the adverse effects of funding cuts in universities over the next two or three years," Professor Floud said. "People cannot keep cutting back. More and more of our students have to have part-time jobs to survive financially. Student and staff do a heroic job to maintain quality of output under such circumstances.''

A spokesman for the HEFCE said: "Since 1990 the sector has improved its financial position against a backdrop of great change.''

The total recurrent grant to be announced by the funding council on Thursday is expected to be £3.3bn.