Officials at the Department for Education and Employment have told Gillian Shephard, the Secretary of State, that spending per student has fallen by one-third since 1989 and will fall by a further fifth in the next three years if new money is not found. The universities hope she will use the evidence to argue their case in this year's public expenditure round, but the report, which has been passed to the Independent, is bound to embarrass her.
She has maintained that cuts of 50 per cent in capital funding over three years could be largely restored through business sponsorship and that most of the cuts of 5 per cent (in real terms) of overall spending, announced in last November's Budget, could be absorbed through efficiency gains.
The report, the result of a joint working group between officials and the universities, reveals that the number of students per lecturer has gone up from 10 in 1986 to 16 today.
It maintains that quality has not yet been affected by cash shortages, with the percentage of students gaining a 2:1 or a first rising from 48 to 50 per cent between 1991 and 1994. However, vice-chancellors fear that quality will be hit before the end of the century if the Chancellor does not reverse the cuts.
Although most universities will try to reduce jobs through natural wastage and redeployment, the majority will be unable to make the necessary cuts without compulsory redundancies. Five per cent of the total 60,000 academic staff in universities and higher education colleges will have to go if they are to balance their books.
Each member of staff has 40 per cent more students than in 1989 and the level is set to continue to rise. The universities' assets are set to decline by pounds 90m in the next four years, leaving them with no financial cushion at all, the report says. Spending on equipment, which stood at pounds 260m in 1994-95, will drop by 70 per cent in the current financial year, it says.
Diana Warwick, chief executive of the Committee of Vice Chancellors and Principals, said: "There is a weight of evidence here that it will be difficult to ignore." A Department for Education spokesman said the views in the reports were those of the universities, although they had been written jointly with officials. "We will certainly take account of what the reports say as part of the public expenditure round. It is up to universities and colleges to manage their own affairs."
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