Cuts Could Kill Our University
Peter Mathieson’s proposed cuts are massive, out of proportion, and will mean redundancies and cutting our income
The University of Edinburgh management has announced a goal of cutting £140m in expenditure, equivalent to 10% of income in the last financial year (FY 2023-24), over the next 18 months. In our view, £140m is a truly staggering figure, completely out of proportion to the financial pressures on Britain’s third wealthiest university, and out of sync with approaches taken at other universities. It has been proposed without evidence or justification offered, and it follows months of misleading financial figures and statements from management.
The cuts are enormous for a surplus-making university
There is no deficit at the University of Edinburgh (despite mis-reporting by some media). Edinburgh makes money, unlike most universities. Our operational surplus last year was positive at 5.8% (measured by EBITDA, meaning that the University operations generated £86m more than they cost, a surplus which represents 5.8% of our overall income), but below the 7-9% target set by Court as a key performance indicator for senior management. Management is forecasting a deficit, but they have not provided any clarity on their forecasting models. Moreover, they are not forecasting a deficit of £140m; this is simply the amount of money they want to ‘save.’
The cuts are out of proportion compared to other universities
In the Principal’s most recent email, he says that a cut amounting to 10% of annual turnover “is a similar percentage to the position of many other universities.” This is not true: as the chart below shows, Edinburgh is proposing disproportionately high cuts. As a percentage of our income, these cuts are twice the size of the cuts announced by Cardiff.
Cuts as a percentage of income for the University of Edinburgh and other comparable institutions. The University of Edinburgh’s proposed cuts are nearly double proposals at comparative institutions. Note: neither Manchester nor Glasgow have announced such structural changes, though Edinburgh is offering a precedent.
This disproportion is even stronger when compared to the financial situation of each institution. In FY 2023-24, York recorded a small budget deficit, while the University of Newcastle recorded a modest surplus, excluding USS provision changes. That same year, our University recorded a strong surplus, whether this is measured in operational surplus (£86m) or in net surplus (£25m). Of all these institutions, our University is also the wealthiest and the net value of its assets have increased by £1bn over the past 5 years, as we previously reported. Whereas we do better financially than most of our peers, Peter Mathieson is imposing the most brutal cuts by far.
The cuts are not transparent
The rationale for these cuts remains unclear. The £140m target seems to have been set arbitrarily. If we were to achieve such a target with no negative effect on our income, the University would reach a level of profitability far above the target of the University Court: our operational surplus (EBITDA) would jump to 15.8% of our income, whereas the Court recommends that it is 7-9% of our income. In previous blogs, we have documented a troubling lack of transparency, and failure to answer questions from unions, governance bodies and staff. These continue apace: the modelling and justifications for the £140m figure remain shrouded in secrecy.
Furthermore, data problems are cascading down the University. We already have reports from across Colleges of faulty numbers being used to decide where to cut. Student-staff ratios, revenue from programmes, even the sizes of subject areas are meaningfully imprecise. Due to the secretive ways these decisions are being made — hierarchically passed from College to Heads of School down to Subject Areas and other groups of staff — there is very little chance to actually use proper evidence to guide decision-making.
The cuts do not address the capital expenditures problem that we have
While the main threat to our long-term financial safety remains Peter Mathieson’s unreasonable capital expenditures policy, our Principal does not address this issue. In his all-staff email, he replied to our last post, asserting that “although recent publicity has focused on our capital expenditure, reducing this would only be a short-term measure”, not a “recurrent savings.” This is misleading: buying and constructing buildings locks Edinburgh into huge maintenance costs. As we previously documented, the proliferating prestige projects have tied up cash on a recurring basis. Due to vanity projects being built, recurring maintenance costs have increased by 50% between 2019 and FY2023-2024, from £60m to £91m per year (as measured by depreciation and amortisation). Yes: we need buildings to teach in. But due to vanity capital expenditures projects, our real estate bill has grown disproportionately and this is what our senior management should focus on. Stopping new real estate projects and selling vanity buildings would bring us cash, while reducing our maintenance costs in a significant manner. Our concern is that these cuts will reduce our staff base to sustain the current excessive real estate investment spree.
The cuts will require laying off colleagues
By pursuing arbitrarily high budget cuts - out of proportion of what is needed for sustainability - and then cascading those numbers down to Schools, management is trying to make job cuts inevitable. Within the teaching schools, the vast majority of costs are staff. When cuts of up to 15% or more are said to be required, these will have to fall on staff. But this is in part because all sorts of ‘overhead’ expenditures—like maintenance and electricity, IT and library services—are arbitrarily kept ‘off books’ for teaching Schools (and instead held by Corporate Services and the Information Services Group).
These enormous cuts will negatively affect our income
If the cuts come to staff at the levels £140m implies, it will inevitably restrict what we can teach. This will undermine our income generation—closing programmes closes revenue. Rather than financial prudence, the approach taken by management is itself a fiduciary risk. If they succeed in eliminating £140m in costs, they will not boost operational surplus by £140m. It will instead undermine the sustainable sources of revenue at the university, undermine teaching and research, and negatively impact student experience. Already, admitted students are raising concerns about whether they should come to Edinburgh. Donors are likewise wondering if Edinburgh is the best steward for their gifts. Such massive cuts will undercut student experience. And research output will suffer.
Management is courting a death spiral, where cuts in the name of sustainability actually undermine that which they are meant to save. The city of Edinburgh, Scotland, and the UK will be worse off, handicapped by decisions taken far from the classroom and laboratory, without proper scrutiny or accountability.
Joint Unions Finances Working Group
