Stay of Execution
Another beautiful summer’s day here in Cardiff just happened to be the day when the new ConDem government unleashed its much-feared budget. I suppose we were all expecting some combination of tax rises and spending cuts but nodody I know had managed to predict the details. A big rise in VAT (to 20%) is the headline figure most of the newspapers seem to be running with, but the other side is the one that caught my eye; average cuts of 25% in “unprotected” Whitehall departments. That means basically everything outside Health and Education, and “Education” doesn’t include Higher Education which falls within the remit of the Department of Business Innovation and Skills. Universities (in England; Scotland, Wales and Northern Ireland run their own budgets for HE) and the Research Councils are therefore bracing themselves for cuts of 25% or even more; if some departments are cut less than this average, then some will be cut more…
For informed comment, see here and here.
However, the details of how these cuts will be implemented – and, of particular relevance to me, how much the Science and Technology Facilities Council will be chopped – will have to wait until the Comprehensive Spending Review to be announced in October 2010. No doubt the STFC Executive will be using all their political skills and powers of persuasion to argue for a positive settlement. Like they did last time. In other words, we’re doomed.
Incidentally, you can hear Lord Rees’ scathing comments about the inept management of STFC here, although to so involves shaking hands with the devil that is iTunes.
There’s also a two-year freeze on public sector salaries – again, not entirely unexpected – but obviously that will only apply to those who keep their jobs after the departmental budgets are cut by a quarter.
Anyway, no point in griping. We all knew this was coming. The big question now is whether the increases in unemployment and tax rises will stop our feeble economic recovery in its tracks, and how badly the cuts in investment will jeoparside future growth. I’m not sufficiently knowledgeable about economics to comment sensibly on this.
Coincidentally today was also the day that STFC Council met here in Cardiff. Of course they did so behind closed doors, but they also had a quick tour of the buildings and a briefing by our Head of School, Swiss Tony Walter Gear. I’m told one of the Council members asked “Excuse me, but what is Planck?”. Apparently the question was posed by one of the non-scientists on STFC Council. So that’s alright then.
Still, there’s always the elimination of France from the World Cup to gladden the heart of an Englishman. Like STFC, the England football team will learn its fate soon eough …
In the Dark 
June 22, 2010 at 7:03 pm
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June 23, 2010 at 12:15 am
“I’m not sufficiently knowledgeable about economics to comment sensibly on this.”
Go on Peter, thart’s never stopped anybody else (including economists).
Anton
June 23, 2010 at 8:14 am
Anton,
Basic parameters of the economy (such as the inflation rate) have defied the predictions of economists over the last couple of years, so I don’t trust anyone who says they can predict the effect on growth of an unprecedented combination of tax rises and spending cuts. The latter will have a strong effect in regions where the public sector is a major employer, but will also impact on private businesses that support public agencies and rely on them for income. Unemployment rising to around 3,000,000 is something I hoped never to see again in my lifetime and if inflation carries on at a strangely high level while wages are frozen and taxes go up one can see considerable unrest ahead. The biggest danger of all is that we head straight back into recession as consumer demand collapses. I don’t know how likely this is.
Peter
June 23, 2010 at 12:21 am
“What is Planck?”
The sheer ignorance is astounding. Surely the question should be
“Who was Planck?”
I’m glad that my sabbatical in the UK ends in December and so I can get back to the comfort of the Ozzie 10% GST before Blighty’s 20% VAT kicks in!
June 23, 2010 at 11:58 am
Peter: I don’t disagree. But the last government overspent to the extent that the IMF might have been needed, and this time might not have responded, with equally catastrophic effects. This is the third time since the war that Labour has been kicked out leaving very deep economic problems behind, and on two of those occasions they inherited a healthy economy. Lets’s hope that a coalition of non-Labs can get it right, for everybody’s sake.
The deeper point is that economics is, to borrow 18th century terminology, a ‘moral science’ rather than a ‘natural science’. In physics the variables of interest can be expressed quantitatively, and it is assumed that equations exist which inter-relate them. This supposition has led to the superb edifice of knowledge that is modern physics. In economics the variables of interest are also quantitative – inflation rate, interest rate, tax rates etc – but these are also influenced by variables that are intrinsically non-quantifiable such as market confidence, political decisions etc. So it seems to me that a closed set of equations for econometric variables cannot exist. The best you can do is pattern recognition and crossed fingers. That is why I regard qualitative economic discussion as potentially valuable, but believe that most economic modelling is a waste of paper and/or computing resources.
Anton
June 23, 2010 at 4:55 pm
Phillip: Never mind about economists, how about fortune tellers? I believe that such things are better not tinkered with, but you can be certain that any fortune teller who is eking out a living in a seaside stall can’t do it – or they would be massively rich from their winnings at betting.
Anton
June 23, 2010 at 6:53 pm
I knew you were going to ask that.
June 23, 2010 at 9:48 pm
Well, I’m going to make a prediction. I predict that if cuts of 25% are imposed over four years on the higher education budget, we shall see some universities reaching the edge of bankruptcy. Most of these will be new universities, but one or two older universities will also find themselves in that predicament. The infrastructure of most of these will survive by being merged with other universities, saving courses of most of the students affected, but there will be large-scale losses of university staff in these institutions. One or two may close outright.
I write from experience: I remember the financial crisis that almost destroyed University College Cardiff in the late 1980s. It looked for a while that my attempts to get a Ph.D. would fail because of the collapse of the institution.
June 23, 2010 at 10:26 pm
Bryn,
It remains to be see what happens to higher education. However, what seems more likely to me than a straight 25% cut in core funding is a big reduction in student support and much higher tuition fees. Net income to universities will probably be cut quite a lot, but not as much as 25% because students will have to pay more. We’ve already seen the student loan company is to be flogged off so students will have to pay a commercial rate of interest rather than the current subsidised level.
Given that backdrop I think many universities will be closing departments and making redundancies to stave off bankruptcy. That process has already started, in fact.
Peter
June 24, 2010 at 10:24 am
Peter,
Yes, I agree that the Government will try to make large cuts to its higher education spending by shifting the funding of universities more to student fees. As you pointed out, the intention may be to cut Government funding by 25% while providing extra income to compensate by increasing fees.
A central problem with this policy is that young people may be much more reluctant to participate in higher education if fees are significantly higher. Student numbers may fall as a result, producing financial crises in those universities which have expanded rapidly over the past decade on the basis of attracting students from sectors of society that had previously had low participation in higher education. This will hit new universities particularly hard.
Bryn.
June 24, 2010 at 10:57 am
Bryn
It’s difficult to see how it will work out. The “elite” institutions will presumably raise their fees to the highest level allowed and will still fill their places, although probably with an even higher proportion of students with wealthy parents. Alternatively, many of the newer universities would probably prefer to hold their fees down, but unless they can vastly increase the number of students they will have to economise drastically.
It’s in the in-between institutions where the most difficult decisions will be made. Do you try to charge more in the hope that people think you’re better, or try to persuade students through the door with lower fees?
Peter