On the 6 October I sent a message to all staff before the announcement of Government’s Comprehensive Spending Review. Within this I expressed my frustration about the lack of clarity in our sector in terms of its likely future financial standing. Over the last few weeks the position has started to become clearer. There is still much detail to be worked out, but we know some of the important basics.

The financial landscape has changed rapidly and so I thought it helpful to replay briefly the events of the last year. 

First, in December 2009, the Labour Government announced over £1 billion of cuts to the public funding of universities. Shortly after the election, the Government announced further immediate cuts of around £200 million to the Higher Education budget – this encompassed a £118 million reduction in previously announced additional 'modernisation' funding, together with a £82 million reduction in existing funding. Then, in June, the Government announced an increase in VAT from 17.5 per cent to 20 per cent. This alone added an additional £1 million to £2 million per annum to our costs.

Following this, on 20 October, the Government unveiled its Comprehensive Spending Review. Significantly, it was announced that the overall budget for Higher Education, excluding research funding, would reduce from £7.1 billion to £4.2 billion, representing a 40 per cent reduction by 2014-15.

Within the Comprehensive Spending Review it was also announced that funding would continue for the teaching of Science, Technology, Engineering and Mathematics (STEM) subjects and that the research budget for science would be maintained in cash terms, meaning a ring fenced budget of £4.6 billion per year across the Spending Review period up to 2014-15.

Lastly, on 3 November, the Government announced its proposals for University funding, following the recommendations set out in Lord Browne’s review. As you are probably aware, the key points are, assuming that the proposals are approved by parliament, that universities will be able to charge up to £9,000 per year for undergraduate home and EU students and that any university wishing to charge above £6,000 will need to undertake specific measures to encourage students from poorer backgrounds. This could include bursaries, outreach programmes and summer schools. Within the proposals, the Government would continue to provide a student loan. The new income threshold for repayment of the loan would be £21,000; this is somewhat higher than the current threshold of £15,000.

These cuts have not fallen equally on the budgets within the sector and £3.2 billion will be cut from the £3.9 billion teaching budget – a fall of 82%. This represents an unprecedented level of cuts to teaching funding within our sector and will lead to no public funding of teaching in many subjects. It will be obvious to all that such cuts are unsustainable unless a new income stream was created and this is where the rise in fees counterbalances the cuts. 

Many colleagues have contacted me to say that they consider this to be an unacceptable abrogation of the state’s role in the public funding of teaching in Higher Education. It was clear from the actions of the previous Labour Government and from the statements of this administration that cuts in public funding of this level were inevitable. Although both the Chairman of the Russell Group and the President of Universities UK and many others of us lobbied privately and stated in public their anxieties about the nature of the changes and the effects of Higher Education, we have not prevailed. We are witnessing a paradigm shift in the funding of teaching in universities from the state to the individual. To be balanced, other commentators would argue that substantial public funding continues – it is just that the state has given it to the student in the form of loans rather than directly to the universities.

Whatever people’s individual views, given the scale of the cuts to the funding of Higher Education I have highlighted above, these counterbalancing Browne proposals are clearly welcome news.

Turning to our own financial situation: much work has been done and continues in order to reduce our operating costs. The combination of our Academic and Support Process Reviews, along with the voluntary severance and early retirement schemes, are all contributing to ensuring we are in the best position to navigate this significantly challenging financial landscape.

It is clear that the world in which we operate is likely to be a markedly different one, based on the scale of change we have seen in under a year. Work is under way to establish Bristol’s position now that we have the majority of the facts before us and I, and senior colleagues across the University, are fully engaged in that process. 

As I mentioned in my message in October, I, Derek Pretty and David Clarke will be arranging open meetings in all areas of the University to outline the way forward and its implications. These will be arranged through Deans with Heads of Schools and with Directors for support staff.

Meanwhile, it is important to remember the relative strength of our position due to our academic strengths and world-wide reputation, as well as the measures we have in place to control our costs.  As I have said before, this University maintains its course, surviving challenges and taking strategic opportunities.