2009 University of Ulster Belfast Development; University Autonomy, How Far Should It Go?

 

 

Professor Gerry McKenna

 

The recent announcement by the University of Ulster of an investment of some £250 million to expand its activities in Belfast’s Cathedral Quarter must have felt to many like a glow of warm light on an otherwise dark and dismal economic landscape. Here, at a stroke, a publically funded university was pumping huge sums into the local economy with the beleaguered building and property sector being the main beneficiary. More spending has been promised, rightly, for the North-West. This immediately raises the question: if UU can do this, why aren’t other publically funded institutions doing likewise? Queen’s University with its greater assets could surely raise even greater sums than UU. Other public sector institutions could take similar action. Further extrapolation of this thinking could result in Northern Ireland facing, not the dismal prospects of recession, but another property-led boom.

 

At this point healthy scepticism takes hold. Those with memories of the 1930s and those who have studied that period recognise that, ultimately, bills have to be paid. For those without such historical or academic perspectives, the current global economic and financial crisis should bring daily reinforcement of this truism. UK universities are funded almost entirely from the public purse and from student fees. They are not funded to be profitable and most Vice Chancellors claim that they are significantly underfunded. UU, with its multi-campus distribution, struggles to maintain high quality teaching and research within its available resources. At best, and subject to no unanticipated or planned extra costs, it does well to post an annual modest surplus on its recurrent account. It has little cash reserves, so funding for the proposed additional spend of £250 million will have to be found elsewhere. If this is to be met by borrowing, and with a repayment schedule over 25 years, it would cost up to £20 million in annual repayments. This would have to come from severe cuts in the teaching, research or staffing budgets; most likely all three. The cost of annual repayment could not be met by diverting other annual capital spend; this is required for maintenance, upgrading and equipment across all the campuses. An alternative would be to dispose of existing assets; land at Jordanstown e.g. the additional 50 acres purchased in 2003, or assets elsewhere, could be sold for development. However, if this was part of the thinking when the ‘plan’ was originally devised, the asset values would have to be revised sharply downwards in light of the collapse in property prices. In any event, such sales would yield only a fraction of £250 million.

 

One of the reasons given for the abandonment of Jordanstown is that the York Street campus is proving popular with students. However, Jordanstown, has always been and remains heavily oversubscribed. The second reason given is that the Jordanstown buildings are nearing the end of their natural life and it would cost nearly as much to rebuild them as to ‘buy and build’ inBelfast. Doubtless this has been confirmed by consultants. It is noteworthy that the question of rebuild has surfaced only recently. Previously, it was planned to carry out refurbishment along similar lines to that undertaken for the slightly older buildings at Coleraine. This cost a fraction of what is now proposed. The obvious question is: how many university or former polytechnic campuses throughout the UK which were built at the same time or slightly earlier than Jordanstown, are due for demolition? Was Jordanstown built to a much lower standard than other campuses. If so, this is news to me and many others.

 

Universities are frequently targeted by those engaged in selling property or those with elaborate financing schemes. These involve superficially attractive proposals such as public-private partnerships and, more worrying, sale and lease-back arrangements. All involve major recurrent payments and/or transfer of assets. They have the added seduction that, due to the vagaries of accounting practise, they don’t show up as debt or borrowings in annual accounts. Indeed, I recall as Vice Chancellor receiving at least 8 such approaches. These ranged from the genuinely benign to those which were clearly inappropriate for various reasons. They varied geographically from proposed developments in Belfast to Fermanagh. All had to be weighed against the strategic plans of the University. Despite going ahead with strategic major capital developments at all four campuses, all such ‘novel’ funding schemes were rejected with the exception of three public-private partnerships which funded new halls of residence at the Magee, Coleraine and Jordanstown campuses, respectively. These were deemed to be of acceptable risk. In light of the University’s plans to largely vacate Jordanstown, it is worth noting that as recently as 2003 the campus was expanded by nearly 50% through the purchase of an additional 50 acres. The available farmland was landlocked by the University, and thus was purchased for a very reasonable sum, which would still be attractive at today’s prices. The rationale was that this would allow for all future development plans for what was, and is, the University’s most successful campus in financial ‘income and expenditure’ terms.

 

It remains unclear as to what method or methods the University intends to employ in attempting to fund these latest ventures. What is certain is that the laws of arithmetic will continue to apply. As a publicly funded institution, it is incumbent on the University to clarify how, exactly, it intends to finance the proposed developments and what, if any, arrangements are being entered into with the private sector. Will any existing university assets, including lands or buildings, be transferred into private ownership as part of the process?  What are the planned borrowing requirements?

 

UK, Irish and US universities have considerable autonomy and this has served them well. International ranking tables bear this out. Their boards of governors, in the case of UU, the Council, have jealously protected them from external interference, particularly short-term political whims. The input of academics to all decisions affecting the academic priorities of universities has long been considered crucial to their long term health and sustainability.  The resistance against external pressure should also extend, with even greater resolve, to other external and unaccountable influences on any aspect of governance or finance.

 

 Autonomy brings responsibility, the burden of which is shared between senior management and the governing body. In announcing an unfunded and academically unnecessary £250 million development project in Belfast, the University is, in effect, taking out a mortgage on its future development which will be left to successive generations of students and staff to attempt to repay. This ought to have required an intense and prolonged degree of scrutiny and internal and external discussion. How many senior staff or Council members could give a coherent explanation of the financial arrangements required to underpin the proposed expenditure? If the answer to this is – ‘very few’; how have they, individually or collectively, discharged their statutory obligations to satisfy themselves that all the financial and other implications are fully understood and that there is no risk to the University’s future academic and research viability and independence?

 

 Despite the arguments for retention of university autonomy, the Department for Employment and Learning (DEL), as the chief UU paymaster, has an overriding responsibility to ensure UU’s viability and good governance. All major initiatives, particularly acquisition or shedding of assets and long-term major financial commitments, require DEL approval. DEL should not attempt to take cover under the defence that expensive, and possibly reckless, adventures are simply a matter for the University and its newly appointed Council. In the infamous words of George W. Bush prior to the first banking sector ‘bail-out’ of 2008, ‘this sucker could go down’. The University of Ulster has served Northern Ireland and its people well. It is in all our interests that it does not, and is not allowed to, compromise its ability to continue to do so.

 

Original version of an article published in the Irish News, February 2009

 

 

 

  

 

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