Can employers afford the higher pay and pensions contributions UCU has asked for?

Your manifesto claims that ‘all Higher Education employers can afford to meet recent national pay and pensions claims made by UCU, and more’. How can you justify this statement?

This question was put to me in a long, politely-worded email from a very senior manager at a pre-92 university. They are still a member of UCU and they were replying to my first all-member email, which went out on Monday 29 April and linked to my manifesto. Their main argument was that universities’ main source of income, tuition fees, has failed to increase in line with inflation, and it was therefore necessary to cut staff pay relative to inflation as well. We decided to ‘agree to disagree’ after their second reply to me, but here is the gist of my argument:

Employers have imposed real-terms pay cuts on staff nearly every year since the financial crisis. They did this even after their per-student funding increased very significantly, when £9,000 fees were introduced—not just when the fees were capped and funding stopped rising with inflation. The fact is that employers have repeatedly paid staff less when they could afford to pay them more. But instead of doing that, they chose to increase their capital expenditure and borrowing, while amassing substantial unrestricted reserves.

Either of UCU’s most recent pay claims—a 7.5% salary increase last year, and an increase of 3% + RPI this year (which will almost certainly turn out lower than 7.5%)—still would not bring pay back in line with inflation, if implemented. Look at the annual accounts of most universities today, pre- or post-92, and you’ll see a net cash inflow from operating activities which is more than big enough to fund that 7.5% increase on its own. Most universities, to put it in plainer terms, have enough money in their back pocket to fund a significant increase in staff costs. But even those that don’t have the cash upfront can still afford it. Universities now tend to have a ratio of unrestricted reserves to annual income which is far higher than the norm for the charitable and non-profit sector. Our demands are reasonable and the money is there.

The same is true for the USS pension scheme: as information released by the Joint Expert Panel (JEP) has demonstrated, independent reviews by two accounting firms (PwC and EY Parthenon) found that all but one USS employer could increase their contributions from 18% to 21% without making any cuts in other areas of expenditure. And yet throughout the USS strike, employers insisted they had to close the pension scheme because they couldn’t afford to pay to maintain even a half-decent benefit package. In the 12 March Acas deal which UCU branches rejected, employers still only offered us 19.3%. Similar issues are occurring with TPS, too: post-92 universities are already claiming they need to make staff redundant in order to be able to soak up an impending 7% contribution increase, when their accounts are pretty healthy and they haven’t provided the evidence to justify their case, as I point out in my manifesto. So in the case of pensions, just like pay, we simply cannot trust employers when they tell us what they can and can’t afford.*

Another thing that makes it hard for staff to trust their managers is the lack of transparency and, in many cases, good judgement in the ways universities have been spending their money. Most institutions disclose very little to their staff, students, or the general public about their capital expenditure, borrowing activities, cross-subsidies, and the use of external consultancies and other private-sector collaborations.

I think it’s worth bearing the larger political context in mind, too. It really is extremely disappointing to witness just how complicit some of the most powerful figures in UK Higher Education have been in the Coalition Government’s disastrous tuition fee ‘reforms’. There was a reason why I cited the example of vice-chancellors secretly lobbying Labour to keep the current system in my manifesto. That sort of behaviour comes across really badly in the eyes of staff. There is a fundamental divide here: between staff who want a publicly funded tertiary education system, and managers who don’t.

*Of course, in the case of USS, the JEP and subsequent developments have made clear that if USS were governed in a responsible and evidence-based way, staff and employers could enjoy the current benefits at a rate equal to or lower than the one agreed at the 2014 valuation—no need for any of the contribution increases USS has imposed on us. Employers should have joined forces with UCU some time ago, before last year’s strike and before the JEP was convened, to try to make the necessary changes. The fact that they didn’t is their fault, not UCU’s, and I believe it’s fair that employers should soak up the costs associated with tolerating USS’s dysfunctional management for as long as they have.