What should institutions report for the REF?

Or more exactly, whom should they report?

Earlier this month Times Higher Education carried an article about the REF, suggesting that institutions should be required to submit all relevant staff to the REF, rather than selecting a subset - presumably the best researchers - in order to get a high score when the rankings are published in 2014. The online article included some readers' comments, some agreeing, others describing the article's view as complete nonsense. So there's evidently an issue here that perhaps needs a bit more elaboration, which is what I shall try to do now.

The article I'm referring to above was actually published on January 5th, but this has been such a busy month - with a visit to Kuwait (see previous post), one to Galway (see next post), and lots of work on a multi-partner research funding application to the EU - that I'm only rather belatedly finding time to comment. Life as a retired academic is proving quite strange these days, and sometimes I do wonder how I found time, not so long ago,  to do a 'proper' job! Luckily, most of what I'm doing is extremely interesting and/or fun.

Now, back to the REF.

Current guidelines do allow institutions, in any given subject area (unit of assessment, or UoA), to submit whichever academics they wish to the REF. The normal expectation is that these will be academics able to offer four research publications over the assessment period, but some people can be submitted with fewer than this, e.g. new academics, and women whose research has been interrupted by maternity leave, etc.

However, institutions know that a low rating is worth virtually nothing in financial terms, as the funding councils only provide a research stream of funding for subject areas achieving an average rating of two stars or above, and it is likely the threshold will soon rise to three stars. Hence there is a clear incentive to submit only the strongest research performers, to make sure the unit gets some research funding. There is potentially a trade off here, of course, as submitting fewer academics reduces the volume measure used to calculate the research grant; but submitting lots of people and getting a low score provides a big volume measure but a low quality measure, and that could easily end up securing a zero research contribution if average quality falls below the threshold.

Submitting a subset of academics to the REF, therefore, is the way to get a high quality rating and hence secure some research funding from the funding council. It is also likely to score well in reputational terms, as institutions with a high research rating - even if based on a subset of academic staff - can be expected to advertise the fact widely. And it will no doubt help both staff recruitment and student recruitment.

The downside, though, is that the resulting scores for research are supposedly not so great in terms of  the accountability of an institution to the funding public. However, personally, I don't find this line of argument at all compelling, not least because we have plenty of channels through which the accountability function is already pretty well served, so I can't imagine that many people will worry over much if research is being measured in an allegedly 'distorting' manner that only takes account of some academic staff rather than all of them.

Visiting Kuwait, an unusual economy!

Earlier this week I was in Kuwait for a few days, doing some work for the Kuwait Institute for Scientific Research (KISR). The Institute is huge, occupying several buildings on a large campus beside Kuwait University, and within KISR there is a small economics division. That's where I was working. The first picture below shows the entrance area of the main KISR building, and the second shows me standing outside, waiting for the car to take me back to my hotel on the other side of town.



The work I was doing for the economics division involved writing a report about their planned research on private sector development, advising how best to develop this area and implement various projects. I presented my thoughts about all this and then had extensive discussions, partly in a group setting, partly with individual researchers from the division. Everyone was very open and friendly, so the whole visit was enormously interesting. My revised report needs to be completed by early next month, not too hard to manage.

What really struck me, though, is just how much fresh thinking - and some tough decisions - is needed to get Kuwait's private sector into better shape. At present the private sector accounts for under a third of the economy, and although privatization is under active discussion, it's not easy to implement because so many state sector prices are heavily subsidised. For the moment this is feasible as the country has huge trade and budget surpluses, so the government can afford the subsidies. But in the longer term, it wants the private sector to expand to provide jobs for more and more Kuwaitis (most of whom are currently employed in the public sector). At the moment, the private sector is not investing enough to generate the required number of new jobs, and privatization, when it eventually happens, will probably result in some job losses.

Hence although the current position seems pretty comfortable, it's not expected to last, and no one has quite figured out how to bring about the needed changes to ensure that lots more jobs are indeed created. I'm not sure I can do that either, though I guess I'm expected to provide some helpful pointers. That's what I shall try to do, anyway!

Are Universities starting to resemble Banks?

Traditionally, universities experiencing financial difficulty in the UK have been 'rescued' by the relevant Funding Council. Such rescues have sometimes taken the form of an emergency loan (from the banks) to tide the ailing institution over a difficult period while it restructures itself and cuts its costs, possibly accompanied by some changes in top management;  more often, the financially troubled institution has been forcibly merged with another institution in better financial shape. In effect, the UK university system has 'guaranteed' institutional survival in some form or another, something that has been great for students, as none have experienced sudden institutional closure that would disrupt their studies. Interestingly, the rescue methods used have been strikingly similar to those used to rescue failing enterprises under old-style central planning in the Soviet Union. All of this is also exactly in line with how we handled the failing banks, as the financial crisis unfolded!

There are signs, though, notably in England, that recent higher education reforms might well change this nice, secure picture quite substantially. A fascinating article by Simon Baker in last week's Times Higher Education explains the nature of the problem. Essentially, the riskiness of the sector is expected to increase, as several factors come together:

• The shift to funding through higher student fees and reduced direct grants from HEFCE makes institutional income much more sensitive to home and EU student numbers - and hence success in recruiting students - than was the case in the past;
• The new UK visa regime, combined with tougher competition from other providers, makes recruitment of overseas students harder and riskier than it was before;
• Demographic trends are not all that favourable, with the UK population of 'student age' declining in the coming years; of course, numbers can made up by recruiting mature students and by offering more flexible degree programmes, but there is nevertheless a risk factor here;
• HEFCE's role in regulating and monitoring universities is under review, and with less income flowing to universities through HEFCE in the future it is unclear how far HEFCE could underwrite all our higher education institutions as it is perceived to do at present.

Taken together, these points add up to a massive shift in the perceived riskiness of higher education. 

Apparently this is already being picked up by the banks. Instead of funding all institutions at pretty much the same low interest rate, as was the practice for decades, there is now a widening institutional spread, with highly rated institutions perceived as 'safer' and attracting a low interest rate; and lower rated institutions being considered 'riskier', having to pay a higher interest rate. Followers of the Eurozone crisis will recognise this evolution right away, since at the start all Eurozone members were perceived as equally 'safe' and could finance themselves by issuing bonds with very low interest rates. But by now, no one believes any longer that there is an open-ended guarantee for all the member states of the zone, with the result that there are now huge differences in funding costs for the different countries. The trouble is, the countries already struggling to manage their finances are the ones now having to pay the highest interest rates, and that makes it even harder for them to manage without default.

The interesting question is, could something like this happen in our universities? Clearly, unlike our major banks, universities are not too big to fail. But if one or more get into serious difficulties, they might be too big for HEFCE to rescue. Once one or two institutions failed, moreover, the banks would immediately react by differentiating interest rates even more than they are already doing, and that could push more universities closer to the edge of financial survival, a sort of contagion effect as Simon Baker put it.

For the highly rated and/or financially strong institutions, none of this worrying material amounts to much. But for financially weaker universities, and those facing potential recruitment problems on a large scale, the prospects look rather frightening. Will some institutions simply have to close down (i.e., in business terms, 'cease trading'), or will there be a scramble to organise defensive mergers to stave off collapse? We shall see.