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The budget first-aid box and a research feeding frenzy


Publication of the ‘Budget’ earlier today caused some surprise because of the extent of spending planned and the borrowing associated with it. The full Budget 2020: policy costings are also available. The cost of tackling the Coronavirus outbreak dominated much of the early news, but this was expected. The WHO has this evening formally declared it a ‘pandemic’ and its Director-General pulled few punches with “We cannot say this loudly enough, or clearly enough, or often enough: all countries can still change the course of this pandemic” yet “Some countries are struggling with a lack of resolve”. The Government may yet find the direct costs escalating and revenues declining as Coronavirus spreads. The funds deployed in the budget today may be the start of even greater financial stress. However, this has not deterred them from announcing large scale spending elsewhere and apparent expansion of state intervention in the economy. However, we wait to see who really benefits from this. Some financial mitigation arising from the budget means that the least well off may gain small improvements, but lost pay and employment due to the pandemic may still affect the most precarious. Many working students (up to around 13 hours per week) do not earn enough to qualify for statutory sick pay. This includes students who could see their pay decline, losing their job with hard-pressed employers, classes closing and even illness stopping studies, earnings and employment. Universities will need to bolster their hardship funds with some urgency.

Responses and a feeding frenzy.

WONKHE has the fastest and best overall analysis so far on the impact of today’s budget on universities with ‘What’s in the Budget for universities and research?’. It will be interesting to see how the Higher Education Policy Institute (HEPI) and the NUS respond as the week progresses. At the time of writing, UniversitiesUK and the Million Plus Universities have not responded. They perhaps fear the increase in spending planned for Further Education Colleges. This may herald a  move to divert future students into technical education; something that would help supply a technical workforce for large scale projects in the absence of skilled migrants.

The main beneficiaries of the research boost, the Russell Group Universities,  reacted fast with ‘Russell Group response to the 2020 Budget’. Naturally, they were very positive and no doubt relieved that a cut in fees seems more distant. They, of course, called for the additional funding to be “through quality-related “QR” research funding and its equivalents across the UK must be a priority” and this will probably happen. But they might be a little over-optimistic with “We understand that £850 million in additional new funding for R&D will be made available for the coming financial year” and “£22 billion per year commitment by 2024-25 should allow the UK to associate fully to Horizon Europe”. The Government may have other ideas. Their call “We will also be challenging the Government to cover more of the full economic costs of research it funds” might fall on deaf ears.

The increase in research funding is very large and there will be fierce competition to get at the funds. There are no details about how it will be shared out and this will have to be decided before the comprehensive spending review later this year. In the meantime, we might expect a ‘feeding frenzy’ amongst the most research-active universities. I can almost sense and touch the plotting and planning in the meeting rooms of these universities as they seek to take control of as much of the process as possible. No doubt the successful VCs will also see their pay rise even further. Overall, there are “plans to increase public R&D investment to £22 billion per year by 2024-25”. It will be interesting to see how the funding will support “world-leading research in all regions and nations of the UK, including by cutting bureaucracy, experimenting with new funding models, and establishing a new funding agency”. Basic research, physical sciences and mathematics are stressed alongside the need to “attract the very best global talent”. It is also confirmed that there are plans in all but name for a new ARPA (Advanced Research Projects Agency). The aim is to “focus on high-risk, high-reward research” as if we don’t already have this capability. This idea has come in for much criticism as it might see ministers and advisors seize control from the UK Research and Innovation (UKRI) Research Councils and deflect funding into No 10’s pet projects. (see Times Higher Education last November with ‘Why shouldn’t the UK’s Darpa be within UKRI?’ and TEFS 14th February 2020 ‘Meet the new boss, same as the old boss? New University and Science Minster(s)’)

Because there will be “£200 million in equity commitments to support the UK’s most innovative health and life sciences firms over the next five years” and “over £900 million to ensure UK businesses are leading the way in high-potential technologies” we can expect more university spin-out companies to spring up fast to join in the feeding frenzy.

The effects on students.


There was little to find in the budget that might improve the conditions for the least advantaged students. The likelihood of a cut in fees and bringing back maintenance grants seems further away today. Many would-be students will be disappointed that the recommendation by Augar last year to cut fees to £7,500 per year has not emerged. The worst off will be doubly disappointed that there is no mention of the need for bringing back maintenance grants. This is the most pressing concern for those hardest pressed. They also might not be overly impressed by the planned review of the consumer price index (CPI) calculations that might impact on loan repayments into the future. A move to the CPI rather than the usually higher retail price index (RPI) would seem well beyond their horizon. They only see their immediate needs and financial pressures.

TEFS has pushed hard for greater recognition of the inequalities caused by students having to work many hours in term time (e.g. see TEFS 23rd August 2019 ‘Students working in term-time: Commuter students and their working patterns’). The increase of the National Living Wage from £8.21 to £8.72 per hour from this April may help but will largely affect workers over 21 years old. The idea of zero-rate VAT on e-publications will help a bit but will only kick in later in December. Freezing duty on alcoholic drinks will not affect those that cannot afford them, but it might mean that people continue coming to the bars they work in.

The government may not have realised that raising the National Insurance threshold to £9,500 from April 2020 will assist some students in the short term. This may help the students working around 15-20 hours per week in term-time and then full-time in the vacations. However, not paying National Insurance for several years may have longer-term consequences.

Also hiding in the budget is rolling out of rule IR35. This is calculated to raise a further £1.3bn a year by 2023-24. This is a review of changes to the off-payroll working rules (commonly known as IR35) and the taxation rollout will move from the public sector to apply in the private and third sectors from this April. Students working in this way for themselves or for agencies could see their pay decline. Also, large employers must determine the status of those working for them as “Failure to do so will result in the worker’s tax and National Insurance contributions becoming your responsibility.” The rules are complex and they state that “You must take reasonable care when you make a determination about the employment status of a worker” and “From 6 April 2020, you must provide the worker and the agency, or other organisation you contract with, your determination. Do this whether your determination shows that the off-payroll working rules will apply or not”. It seems inevitable that even more student employment will dive underground into the murky ‘cash in hand’ hidden economy. This makes employment very precarious with no chance of sick pay or other benefits as the Coronavirus crisis spreads. For those in more stable employment, relaxing of the time off to qualify for Statutory Sick Pay might seem to offer some hope. However, the threshold of average earnings per week to qualify for this payment is still at the National Insurance payment threshold, currently around £118 per week. This should go up a bit, but part-time working students will fall below this if they work for less than around 13 hours per week. Such a loss of earnings, in my experience, can be the final straw that means they have to leave higher education. Many students also tend to work for small businesses and they might expect to see some benefit from the mitigating budget payout to such enterprises. However, a cynic might expect that most employees will see little of this going to help them if they cannot work.

The difference from the Labour policies is who benefits.

The above observation about where the small business support is likely to go also holds for much of the rest of the massive budget plans. Labour intended to go further by increasing state intervention to the nationalisation of much of the infrastructure. In their world, the increased investment would go directly to these operations and into the pay of the employees. The Conservatives seem to have returned the book on Adam Smith to the library and taken out one about Keynes. However, they may do similar things to Labour, but instead, plan to deploy private enterprise almost exclusively to stimulate the economy. The result will be a huge transfer of funds to the profits of the private sector. Expect a different kind of feeding frenzy emerging to get hold of the contracts. Sadly, much of the public funding will end up in off-shore accounts despite the Budget plan to “provide £3 million of funding for face-to-face training and assessment of staff across government who manage the most important contracts. By further upskilling key staff, government can improve the efficiency and performance of its largest contracts”. This is an admission that the government is not very adept at managing such business deals despite taking on HS2. There is a plan to vet contractors more closely to make sure they pay the correct taxes, but this may not be enough to avoid leakage of funds and excessive profits.

Then again there is the mantra ‘levelling up’. To the Conservatives, it means spreading investment more evenly across the country. But the same wealthy leaders of private enterprise will simply start to make their money further north. They will even have expensive north-south trains to get them there faster and in greater comfort. The Labour goal is to level up the opportunities of all individuals wherever they are. This is a fundamentally different aim.

The conclusion is that elite universities will see a huge boost from research income. The intervention of a larger state in boosting infrastructure and research will also tend to benefit private enterprise who will swoop to maximise their profits. There may be more jobs around, but we wait to see how much goes to the people who do the work on the ground. The Coronavirus pandemic will see students locked out of classes.  Many will be hit by a loss of earnings, loss of a job and illness combined. It is hoped that university hardship funds will be bolstered to meet the demand and this will be done with urgency.

Mike Larkin, retired from Queen's University Belfast after 37 years teaching Microbiology, Biochemistry and Genetics

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