University finance departments braced themselves for a horrendous 2020/21 financial year, due to Covid – but for most, thankfully, the nightmare scenarios have not materialised. Leeds Beckett finance director Phil Harrison has worked within HE for three decades, and is also a director of the provider’s subsidiary company Leeds Beckett University Enterprises Ltd. He tells University Business what’s in his in-tray, and his take on the biggest issues facing him and his peers in the sector right now.
There was good news from Hesa and the OfS earlier this summer, their figures showing university finances are in “broadly good order” despite the pandemic. Is this the case at Leeds Beckett and if so, to what do you attribute your institution’s resilience during this period?
Yes, I believe our finances are in good order. Both our financial performance, measured through the operating cash that we generate, and our resilience, measured through liquidity, are near or above the sector averages.
Whilst we had expected this year to be very difficult, and had planned accordingly, the reality has been different. Instead of experiencing a sharp decline in student numbers that Universities UK predicted at the start of the year, we have seen overall numbers remain broadly stable. This has meant that we’ve been able to maintain good financial health despite the loss of much commercial income.
How is your department navigating the post-pandemic landscape, and what are your most pressing issues right now?
Every member of the financial services department has been working from home since the start of the pandemic and will continue to do so for the foreseeable future.
Whilst students will return to campus in September, to relieve the pressure on our colleagues who are flat out preparing for that, we’ll stay off campus, certainly until the end of this calendar year. Beyond Christmas, as a university, we are working with our colleagues to identify the benefits of more remote and flexible working. We will take this academic year to consider what we have learned that might improve working conditions for all our colleagues in the future.
Our most pressing issue is preparing for the challenges that government funding and regulatory reforms are likely to create when they start to be announced in the autumn. Whilst uncertain, their impact is likely to be transformative. Ensuring that all of the university’s teams and operations are appropriately aligned and deliver value for money will become ever more important.
To help navigate the post pandemic landscape, we’ve recently restructured some of our debt. As well as reducing debt servicing costs it’s also enabling us to dispose of some poor performing student accommodation.
I can only hope that should [OfS financial penalties] ever be applied then it will be as a last resort under a process that is fully transparent, follows significant engagement with the institution concerned, and takes full account of the impact on the students.
USS pensions battle – as the latest UUK consolation with employers ends, what are your hopes for what will happen next?
I should start by pointing out that at Leeds Beckett we have less skin in the game than many other employers on account of having very few active members in the USS. The majority of our academic staff participate in the teachers’ pension scheme. That said, I hope that the Joint Negotiating Committee back the latest USS proposal which I see as the least worst option. The alternative of a substantial increase in contributions is unsustainable and would mean that today’s students would be contributing to pensions that they themselves are unlikely to ever enjoy.
Whilst the USS proposals represent a significant shift from defined benefit to defined contribution pensions, it’s an inevitable direction of travel, one which we’re acutely aware is likely to infect the other pension schemes that we participate in. So whilst the direct impact on us of the USS changes might be limited, we’re watching the situation closely.
The OfS recently set out its approach to financial penalties but many universities have raised concerns. Do you have any such concerns?
Whilst as regulator the OfS clearly need tools at their disposal, I’m certainly not a fan of such a penalty regime. Whilst the aim may be to never apply them, if they are then it will be students, the very people that the OfS are there to protect, who will be most impacted. As not-for-profit organisations usually have minimal reserves, a penalised institution will typically have little contingency other than to cut back on recurrent expenditure.
I can only hope that should they ever be applied then it will be as a last resort under a process that is fully transparent, follows significant engagement with the institution concerned, and takes full account of the impact on the students.
Philanthropy – is it part of your remit, and what’s the relationship between your finance and alumni teams?
Whilst we’ve received some notable donations which we use to provide targeted student support, and for which we are very grateful, we don’t carry significant endowments at Leeds Beckett. Our alumni relations team, which is part of our external relations department rather than the financial services department, reflects its primary purpose of maintaining relationships rather than fund raising. We encourage our graduates to contribute in a range of ways by providing support, employment opportunities and other practical benefits to our student community.
Universities can be targets for individuals, organisations and states wishing to launder their reputations. What’s your advice to peers in the sector on accepting foreign gifts?
I would advise anyone in any business, whether that’s in higher education or somewhere else, not to accept gifts from any business contact, wherever they’re located. Whether intended or not, accepting a gift obliges the recipient to provide something in return and that’s not healthy.
Having said that, there will be occasions where it could be considered offensive not to accept a small gift, but even then it’s important that the gift is declared and there is full transparency. It’s something we regulate tightly at Leeds Beckett, to protect both the individual and the university.
Cybercurrency: a handful of universities around the world have started accepting it as a form of payment, in certain situations. Does Leeds Beckett, or would it? What’s your thinking on the issue?
It would be a huge gamble. Currently if something goes wrong there is no-one to turn to. The Bank of England have said that cryptocurrencies have no intrinsic value and those who invest in them should be prepared to lose all of their money! So with this sort of warning I don’t see Leeds Beckett engaging with cyber currencies in their current form whatsoever.
However, were they somehow to become mainstream, well-regulated, stable and universal such that we could pay for goods and services as well as pay our staff and taxes without exposure to any exchange risk or volatility, then I’m sure we’d use them along with everyone else. It would need to be under a very different financial system than currently exists.
I am fully aware of my responsibility to the students: their learning and wider student experience. My team, and the wider leadership recognise our responsibility in stewarding our finances so that we can not only provide the best education for our students but are able to re-invest in the facilities that they access in the future.