For those of us who pay tuition to attend university, it’s easy to wonder what exactly our money goes to once we send off our fees at the start of term. Unless you’re an international student calculating the cost of your degree per hour of contact time and questioning the fundamental value of your education, you’re probably not often spending much time considering the running costs of an institution like the University of St Andrews. But, as a registered charity, the University’s financial statements and investments are publicly available. It also periodically hosts open forum meetings to give staff and students an opportunity to learn more about the goals and direction of the University and ask senior administrative members questions.
At the most recent of the open fora, I learnt more about from what sources the University receives its funding and how this money is spent. On two separate dates in October, Principal Sally Mapstone and the Quaestor and Factor Derek Watson led presentations on the finances and future of the University and explained that in the 2019-20 financial year, the University of St Andrews has budgeted a £5 million deficit. Needless to say, the University needs our international tuition fees more than ever.
Higher education has seen a 12% reduction in funding
The University operates as an independent charity and receives 20% of its funding from the Scottish Government via the Scottish Further and Higher Education Funding Council, more commonly referred to as the Scottish Funding Council, a non-departmental public body in charge of funding all of Scotland’s 26 colleges and 19 universities. This money pays for the free tuition for Scottish and EU undergraduates. The rest of the funding comes from various sources, including 18% from government and private research grants, 9% from tuition fees from the rest of the UK, 25% from non-EU tuition fees, and 28% from other sources. Recently, the University’s income has stagnated at £251 million in both 2017-18 and
2018-19. Despite an increased expenditure in 2018-19, non-recurring items, such as capital receipts and donations, helped the University avoid a deficit last year.
This year, however, the University budget identifies a £5 million deficit based on an estimated £247 million in income. A combination of factors and sector-wide financial pressure has contributed to this development. A recent Audit Scotland review of the sector found that higher education has seen a 12% reduction in funding since 2010-11. Across the sector, many universities have been significantly impacted; last year, 10 out of 19 SHEIs reported a deficit, including six which have reported deficits for the last four years. The fact that with a £5 million deficit the University is actually in line with the majority of other Scottish universities’ finances speaks to the sector-wide challenges faced by institutions of higher education.
Flat income combined with inflation costs have led to tight budgets in recent years. For example, tuition fees for the rest of the UK were set by the government in 2011 at £9,000 per year and in the past eight years, fees have only gone up £250 despite inflation. In
addition, the government has also increasingly moved its capital funding from grants to loans, which means the University receives a smaller amount of money upfront and has to borrow money instead. This prevents the University from making additional income on savings and investments.
To put this all in perspective, the Quaestor was keen to set a historical precedent for the University’s financial woes. He began his presentation by sharing quotes from documents dated to 1663 and 1749 that showed Scottish Higher Education Institutions (SHEI) grumbling about a lack of money and asking for additional funding to pay staff wages and fix university buildings. Whether it’s comforting that universities have been trying to squeeze the government for additional funding since the seventeenth century is a matter of debate, but it made it clear that the sector has always walked a fine line between being in the red and black.
The University spends the bulk of its income on costs related to staff at 55%, or £139.7 million. In descending order, the other major expenditures include property (17%), other costs (9%), scholarships (6%), and IT and library (3%) for a total of £252.3 million despite an anticipated £247 million in income. The Quaestor explained there is a historic 1% surplus across the higher education sector, and due to recent funding trends, the deficit in the University’s budget for 2019-20 is unsurprising. “If there’s one message I’d ask you to take from today, it’s that it’s a bit tight. Don’t panic. Carry on,” said the Quaestor. “We are a world leading university and we will be successful because we’ll maintain ourselves as a world leading university.”
Despite the University’s notable status, it’s worth considering that, as the principal pointed out, the University’s endowment is very small for an institution of its age and standing. Although the University of St Andrews was ranked second to Cambridge in the UK in Guardian University Guide 2020 and received the title of UK University of the Year in The Times and Sunday Times Good University Guide 2020, the University is leagues away from other top universities when it comes to funding. According to the most recently available financial statements from 2018, the University’s endowment is £77.8 million, which is on par with Newcastle and Leeds but a far cry from Oxbridge’s endowments of over £6 billion each.
Beyond the troubling financial health of the higher education sector, the political turbulence surrounding Brexit hangs over the future of the University as well. Given that over 45% of the University’s population is made up of students and staff from outside the UK, the administration’s mantra of Brexit-preparedness can only go so far in the face of continued political uncertainty. Today, around £93 million is provided by the Scottish government for funding EU university students, and it’s unknown whether this funding will continue once the UK withdraws from the EU. In addition, universities are unsure whether Brexit will adversely impact the recruitment process of international students which make up a substantial proportion of additional income.
The £5 million deficit is in line with most other Scottish Universities
Despite presenting a grim financial situation, both the Principal and the Quaestor repeatedly emphasised the need for long term investment in teaching and university property as outlined in the 2018-2023 University Strategy. As such, included in this year’s budget is an extra £3 million per year plan for additional investments over the next three years. The University recognises the need to renovate the Purdie, mathematics, and chemistry buildings, which were built in the 1960s, alongside the current renovation of Younger Hall and the expansion opportunity in the Madras property.
On both days, the vast majority of attendees at the open forum appeared to be staff. At the end of the presentation, many attendees asked questions not focusing on the £5 million deficit, but concerning the University’s long-term strategy, with a particular focus on the renovation of buildings in the North Haugh, the strain of increasing the size of the student body, and the University’s plan to address climate change and reduce its carbon
Despite a bleak financial outlook across the higher education sector in Scotland, the University continues to look forward.