Guest Post: Ten reasons why USS is a scandal waiting to bite back

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Sam Marsh, Sheffield UCU, follows up on his earlier post for HE Marketisation (6 November 2017), giving 10 reasons why USS is a “scandal waiting to bite back”. The University and College Union will announce the results of its national ballot for strike action in response to the threat from universities to end guaranteed pension benefits on 19 January. 

 

If you’re reading this, you probably know that there’s a lot of fuss over the Universities Superannuation Scheme (USS), the pension fund for academic and related staff at some of the biggest universities in the country. You’ve probably heard that things aren’t as black and white as some would lead you to believe. But what is it that’s getting people upset? Quite simply, the process of determining the health of the fund appears to be rotten. Here are ten reasons why you might consider what’s happening to be close to scandalous.

 

Reason 1: a huge best-estimate surplus

As part of their 2017 valuation, USS included a `best-estimate’ of the fund’s health. The result was quite startling. On this measure, they hold a huge surplus, significantly over £8bn. That’s more than £20k for every USS member. And this figure is up on 2014, where it has recently been admitted that the scheme held a £3.5bn best-estimate surplus.

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Source: USS 2017 Actuarial Valuation, September 2017

 

Reason 2: we’re probably overpaying for the current benefits

The 2017 valuation also included a best-estimate for how much of our salaries needs putting aside to secure the current benefits. Our current contributions of 18% for employers and 8% for employees turn out to be a significant over-payment, with USS estimating that 22.5% in total would be sufficient.

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Source: USS 2017 Actuarial Valuation, September 2017

 

Reason 3: ‘de-risking’ causes all the problems

Much has been made by USS of the need to de-risk the scheme, with plans to sell off growth assets (equities, property etc) and replace them with low return investments such as government bonds, in order to ‘match liabilities’’ Much less has been made of the fact that this de-risking is responsible for almost all of the deficit, and that canceling it would allow benefits to remain unchanged at the current contribution rate.

Source: Letter to Sir Keith Burnett by Sheffield UCU, 29 November 2017

 

Reason 4: de-risking is hugely expensive

Using USS’s projections for investment returns, we can compare the asset growth both with and without the de-risking plans. And the results aren’t pretty. The de-risking is expected to cost universities an eye-watering £11bn over the next 20 years. This will come in the form of increased employer contributions, and will almost certainly be found by squeezing the amount being paid towards future pension benefits.

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Source: data based on figures from USS’s Actuarial Valuations, available on Sheffield UCU’s USS: 2017 valuation resources page

 

Reason 5: the de-risking doesn’t reduce risk!

The most shocking thing about the plans to de-risk investments comes from the graphs below, taken from a USS presentation to Imperial College. The graphs show that, 10 years into the future, the de-risking offers almost no protection against adverse events. Here, the figures for the worst 1% of possibilities (next to the ‘99%’ arrow) are extremely similar whether de-risking or not. In other words, the risk has barely been reduced by the costly change to investment plans. Inexplicably, universities had not been shown this information when they were consulted on how much de-risking they thought appropriate.

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Source: USS presentation to Imperial, November 2017

 

Reason 6: USS have been resistant to showing their workings

In September, USS sent its draft valuation to universities, but had no plans to release it publicly. After significant pressure from USS members, including a petition signed by almost 2,000, the draft valuation finally entered the public domain, courtesy of the University of Sheffield. Unfortunately, the document still left plenty of unanswered questions, with the justifications for the assumptions offered way below academic standards.

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Source: ‘Academics urge universities’ pension fund to explain shortfall‘, Josephine Cumbo, Financial Times, 19 September 2017

 

Reason 7: the Pensions Regulator intervened at a crucial point

Just as USS started consulting with universities over the draft valuation, the Pensions Regulator wrote an explosive letter to the USS trustee board questioning their assessment of the robustness of the university sector. This intervention, while not publicly released, was passed to universities as they were forming their responses, and is mentioned explicitly in some of their submissions. It may well have contributed to the calls for increased de-risking that Universities UK (UUK) say characterised the responses.

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Source: ‘UK universities retirement fund `weaker’ than claimed, fears watchdog‘, Josephine Cumbo, Financial Times, 11 October 2017

 

Reason 8: closing the defined benefit scheme could cause spiraling costs

Counter-intuitively, USS is more stable as an ongoing scheme than if its defined benefit section is closed. Presently, USS has more coming in each month than it pays out (positive cash flow), and is forecast to do so far into the future. Closing the scheme will quickly push it into negative cash flow, at which point assets must be cashed in to pay benefits. The result will be increasing pressure to de-risk as the scheme winds down, which will lead to increasing costs. Warnings of taking such an approach have come from Ros Altman (former pensions minister) and Brian Souter (President of the Institute of Chartered Accountants of Scotland) among others.

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Source: Sir Brian Souter, BBC Today Programme, 4 December

 

Reason 9: UUK tried to spin the effects of their proposal on income

After Universities UK tabled a proposal in November to close the defined benefit section of USS, it was inevitable that people would want to know the effect on their retirement income. After a significant delay, UUK released modelling in December which, they claimed, showed that people would receive 80-90% of what they would under the previous arrangements. Unfortunately, this modelling was a masterpiece in spin, with investment forecasts used which were significantly higher than those in the USS valuation (and which would show a surplus if applied there!) along with a host of other sleights of hand. Un-spinning the proposals shows that 50-75% would have been a more accurate claim.

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Source: UUK can’t transform a sow’s ear into a silk purse, Mike Otsuka, 13 December 2017

 

Reason 10: much better solutions are available

Even accepting some of the dubious calculations and de-risking plans, there are much, much better solutions than that which Universities UK is painting as the only option. Defined benefits could be retained with a small increase in contributions subject to slightly reduced terms. UUK could rethink their requests for heavy de-risking and hence keep the costs down. Thinking longer-term, solutions could be found which look towards collective defined contribution, a way of fairly apportioning all proceeds of a fund’s growth to the members of the scheme. It is worth noting that this final approach seems to have broken a deadlock in the dispute over pensions in Royal Mail, which for a long time appeared to be heading nowhere.

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Source: ‘How UUK’s pension proposal could be greatly improved on, at no cost or risk to employers‘, Mike Otsuka, 26 November 2017

 

So there we have it. Whether or not this valuation ends up widely acknowledged as a scandal, time will tell. But Universities UK have done serious damage to their reputation by attempting to pull the wool over the eyes of their staff. And it’s hard to see how that won’t bite them back.

 

More resources

The Sheffield UCU 2017 Valuation Resources page: http://ucu.group.shef.ac.uk/campaigns/pensions/uss-2017-valuation-resources/

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Governance as trade union strategy: Interview with Bath UCU’s Michael Carley

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Building a focus on governance into local trade union strategy is a good way to create leverage for existing campaigns and bring them together under an over-arching narrative of democratisation, according to University of Bath University and College Union (UCU) branch president Michael Carley.

In an exclusive interview with HE Marketisation, Carley described how he has led his branch in fighting a long and highly successful governance campaign at Bath University, which recently resulted in the resignation of vice chancellor (VC) Professor Dame Glynis Breakwell.

Breakwell took early retirement after Bath UCU – working closely together with Unison and the Students’ Union branches at the University, as well as local politicians – revealed that she had not only been a member of the renumeration committee that approved her eye-watering £468,000 a year pay package, but had also tried to stop information about how her pay had been decided coming to light (HE Marketisation, 2 December 2017; 4 October 2017).

By requesting information through the 2000 Freedom of Information Act (FOI) and putting motions through the University’s Court – the statutory body representing the interests of the University’s internal and external constituencies – trade unions have been able to uncover shortcomings in governance.

Reflecting on the strategy behind the campaign at the University of Bath and what could be applied to similar campaigns at other HE institutions, Carley said activists and trade unionists should “look for contradictions” in governance and for when institutions were “not following their own rules.”

“Just pretend that governance really works and see how far you get,” Carley recommended. “And when you do you’ll run up against a brick wall in various places and then you see how it doesn’t function. If you make progress that’s great, but if you get blocked you can still use that as propaganda.”

 

Role of trade unions

The governance campaign at Bath University began with a Bath UCU ‘High Earners‘ report in June 2012, Carley noted.

In the report, Bath UCU pointed to the fact that Breakwell – who was appointed vice chancellor in 2001 – had received an “extra two pounds for every pound” staff had gained over the years in pay rises.

At the time of the report, Breakwell was ranked only 15th in the VC pay league table of UK higher education, compared to the number one position she held just before announcing her retirement.

The report also pointed to a lack of transparency at the level of governance.

In 2011, Bath UCU had sent a letter to chair of the University’s renumeration committee – which sets senior management pay – asking for the minutes of meetings for this committee, and for there to be ordinary members of staff on the membership of this committee.

The University refused Bath UCU’s request. Four months later, Bath UCU found out that the renumeration committee had approved an aggregate pay rise of 5.76% for senior management, 10 times the rise that the rest of staff had received during the same period.

The problem, for Bath UCU, was that the renumeration committee acted on “delegated authority”, which meant that the full Council did not make the decision about senior pay, but rather handed over full authority to some of its members on a Council subcommittee.

It was this discovery that the renumeration committee was operating with no oversight from the council that led Bath UCU into what Carley described as the “rabbit hole” of governance.

Furthermore, while this subcommittee “reported a decision”, Carley added, it did so “without any real minutes”.

“You have a serious problem with governance when governors – people in charge of running the university who have a legal responsibility for doing what they do – can’t do their job properly because the governing body refuses to provide the information justifying its decisions.”

In the absence of such information, Carley argued that trade unions could play a crucial role in occupying the democratic space vacated by faulty governing bodies.

Reports and pamphlets analysing finances and governance processes are not just useful for raising awareness of potential issues with union members, but also for bringing together the “meat and potatoes” work of a trade union branch within a wider political narrative, Carley added.

“The fact that we were putting a pamphlet together, getting the work done, putting the numbers together,” Carley said, “began laying the groundwork for the governance campaign at Bath.”

Pamphlets and reports can also be supported with innovative promotional campaigns.

For example, Bath UCU created a tear off postcard to promote its ‘High Earners’ report, which could be used to write to the chair of Bath University’s governing council – who was also the chair of the renumeration committee – asking for transparency and the publication of minutes of the committee.

“Because the postcard was printed on yellow paper,” Carley added, “our Unison colleagues in the post room were able to tell us roughly how many were going through, because they just stood out in the internal mail.”

 

Freedom of Information

The Freedom of Information Act 2000 also became an important weapon for Bath UCU in its developing governance campaign, Carley said.

“We started learning how to use FOI Act well,” Carley added. “It’s a useful skill, especially using refusal to give information as well as the information you get. If you chase through an Freedom of Information (FOI) request to the very end you’ll always dig up something.”

The Freedom of Information Act gives the public the right to see all kinds of information held by public authorities – a category that still includes colleges and universities – and activists can use the Act to uncover information not necessarily published as a matter of course.

The Act states that public authorities must maintain a ‘publication scheme’, which lists all the classes of information an authority voluntarily makes public, how this information is made available and details of any charges made to this information.

However, if the information needed is not available via an institution’s publication scheme, the second provision of the Act allows information to be requested in the public interest.

Public authorities are then required to respond within 20 working days, confirming or denying whether the information requested is held, and either providing the information or explaining why it has not been provided, quoting one or more of the exemptions in the Act (e.g. that disclosure would damage commercial interests, or prejudice health and safety).

But even if the information is claimed by an institution to be exempt from the Act, activists and trade unionists can still apply to the Information Commissioner for a review, and in some cases exempt information may have to be disclosed in the public interest.

“It takes a lot of time, you need patience,” Carley warned.

“Universities try to play silly games when they send stuff back, they might for example answer precisely the question you asked very pedantically, but they know damned well what you are asking for,” he added. “So the way you phrase your questions and the way you break your requests down into very tight categories is really important. And you just keep digging away at it.”

“For example, I was informed that council was seeing misled about the implementation of the living wage, and they were being told that it couldn’t be done because it would be breaking out of the national framework agreement – which was just not true.”

“I asked as a member of the governing body for the evidence that was presented and was told that I wasn’t going to get that information, so I went to the information commissioner and then I ended up going right up to the tribunal.”

“When you appeal to the information commissioner they make a decision, but when you appeal that decision you are taking the information commissioner to court. At this point you get this bundle of evidence sent to you in the post, with all the internal documents that were used to justify why the University would not release the information.”

 

Joint union work

Carley also pointed to the importance of working with other recognised unions, such as Unison and Unite, and also the local Students’ Union (SU).

“We’ve always had good relations with the other unions here,” Carley noted. “There have never been any conflicts of interest with the other unions because we represent different staff groups.”

“We always try to meet together with the other unions before going in to a joint negotiating committee (JNC) meeting with management. If we present a united line, even if we are not all getting exactly what we want, we will all be a lot better off than if we let management split us off.”

“Management generally try to ignore us, but by working together with the other unions we have lines of communication that get us pretty much everywhere, so we try to put out joint statements that can go out to all staff groups where possible.”

When the governance campaign started to take off at Bath University and reach the national public sphere, Bath SU also began to get involved.

“Up until recently the SU at Bath was fairly neutral – Bath has never been a very political campus,” Carley noted. “However, in the last month or so they have been consulting the membership on governance issues.”

“The SU takes its mandate very seriously, so when we had the no confidence vote at the University’s Senate [the supreme academic authority responsible for regulating and directing the academic work of the University], we had four student representatives there and they said “we’ve been mandated, we’ve consulted, and we vote no confidence in the VC”.”

Before this, Bath UCU had been building links with students ever since the introduction of £9000 tuition fees in 2010. Carley said that it was at this point that students began to “align themselves consciously” with staff, as there was a shared and growing resentment towards and political consciousness about the marketisation of higher education.

However, many SUs remain a-political and in some cases even reactionary.

As Rachel Brooks, Kate Byford and Katherine Sela have argued – based on a UK-wide survey of students’ union officers and two focus groups at each of ten case-study higher education institutions – the role of SUs has changed significantly over the last few decades.

Within the context of marketisation in particular, SUs have moved from an adversarial relationship with senior management to a “co-operative” one, while at the same time taking on a “representative” rather than “activist” function for student members.

“The evidence provides some support for the arguments made by scholars that the student voice has become increasingly ‘domesticated’,” Brooks and colleagues concluded. “By focusing on representation, students’ union officers inevitably foreground issues that affect the day-to-day lives of students rather than broader political or social concerns that may be more aligned with an ‘activist’ agenda.”

“Moreover, the increasing convergence between the values and priorities of students’ unions and senior management (as a result of similar pressures coming to bear on both parties),” they added, “suggests that fewer spaces are now available within higher education institutions from which to offer a radical challenge to either local or national policy.”

In such situations where SUs are unsympathetic, Carley recommended that UCU branches could “build relationships with campaigning student groups”, which can then push forward solidarity agendas through formal student representative structures.

However, SUs and UCU branches must remain politically independent. “We don’t want to be interfering in the operations of students’ unions,” Carley stressed.

 

Bath goes public 

The governance campaign at Bath began to escalate significantly as local politicians became involved.

Councillor Joe Rayment –  Labour Party Deputy Group Leader for the Bath and North East Somerset (BNES) region – was a strong and consistently critical voice throughout the governance campaign at Bath University.

Cllr Rayment had worked at the University, was active in the Unison branch there and was also a UCU member, Carley pointed out. He had been pursuing the governance issue while at the University, and once elected to the BNES Council, continued to push the issue through local government channels.

When Bath UCU discovered that the University was paying £20,000 a year towards the upkeep of Prof Glynnis’ flat in Landsdown Cresent in the city of Bath, Cllr Rayment put in an FOI.

“It was a stroke of luck,” Carley commented. “Basically someone discovered that Bath University had paid employees at Landsdown Cresent, which was odd because there was no campus there, and then when Cllr Rayment put in an FOI all the stuff about the housekeeper etc came out.”

While living at the Landsdown Cresent property rent-free, Breakwell not only claimed £8,738 for a housekeeping and laundry service, but also claimed back £2 for a pack of biscuits.

“We knew about the house, but we did not know it was costing £20k a year in biscuits and gas,” he added. “That’s what took it up to another level.”

Significantly, this was also when the local Bath Chronicle newspaper began to take up the story and run with it. As a result of its coverage of the issue, the Chronicle was the only local paper nominated for national scoop of the year at the 2017 British Journalism awards.

Commenting on the nomination, Bath Chronicle reporter Sam Petherick said he was “over the moon” that a judging panel of more than 50 experienced journalists saw his story “as one of the biggest scoops of the year”.

“It has been an enormously rewarding story to work on over the past 12 months,” he added. “I’d like to say a huge thanks to my outstanding contacts who have provided countless quotes, Freedom of Information responses, tip-offs and encouragement.”

Bath Chronicle editor Gavin Thompson added: “This nomination for the Chronicle reiterates the important work done in local newsrooms on holding those in positions of power to account.”

 

Enter Adonis

The next thing that happened was the “notorious” meeting of the Bath University Court in February this year, Carley said.

In August, Dame Glynis Breakwell was accused of a ‘cover-up’ after a motion arguing for increased transparency on the university board’s renumeration committee was voted down by a margin of 33-30 (HE Marketisation, 4 October 2017).

Following the meeting, in a letter to the Higher Education Funding Council for England (Hefce), Cllr Rayment had blown the whistle on what he described as “questionable” events that took place at the board meeting.

“Among those 33 voting against were: the vice chancellor, at least five others whose pay is set by the remuneration committee, and two other members of the remuneration committee,” Cllr Rayment revealed.

Reflecting on what happened, Carley noted that although the Court – the stakeholders’ body consisting of people from the institutions that accredit Bath University’s degrees, the emeritus professors, staff and student representatives – has “no real power”, one of its functions is to receive the University’s accounts.

A member of the Court had submitted a motion to “receive the accounts with concern”, Carley reported, because of the lack of transparency and the lack of justification with regards to how the VC’s pay for the year had been decided.

“You could see them visibly panic,” Carley remembered. “The meeting was appallingly chaired, it was dreadful.”

“Although the motion was defeated, we twigged afterwards that there were a whole bunch of people there who were either on the renumeration committee or were paid by it,” he added.

“By any other standing orders at the university they would have been expected to leave the room. Not just for the vote but leave the room while it was being discussed. They certainly would have had to declare an interest.”

At this point Lord Andrew Adonis intervened after noticing Bath University’s vice chancellor was the highest paid in the English higher education sector.

Despite describing himself as a “moving force” behind increase in fees to £3,000 when he was an adviser to Tony Blair in 2003, Lord Adonis has recently been on the warpath against the leaders of higher education institutions for “forming a cartel” and charging as much as the Government would allow.

Alongside Cllr Rayment’s letter, Adonis also complained to Hefce regarding what had happened at the meeting, calling for an investigation into allegations that the university overrode internal objections to Breakwell’s pay level.

“If the VC’s pay had been held down even by 1 or 2% over the last few years, none of this would have happened,” Carley commented. “A tiny bit of restraint would have been all it needed. But as it was, Adonis went for it.”

“A number of people were already feeding Adonis information,” Carley added. “When he found out what happened at the meeting, he thought “I’ll have them” and he shopped them to Hefce.”

“I think there are very worrying things that he is pushing for with universities, for example wanting to make post-92 universities into polytechnics again,” Carley warned. “But he’s absolutely right about this.”

Hefce published its report on 20 November. The report concluded: “While the remuneration committee meets the basic requirements of Hefce and the guidance issued by the Committee of University Chairs, the university has a significant distance to travel to open the [renumeration] committee’s work to legitimate scrutiny through enhancing its use of various measures of transparency.”

Crucially, the report pointed out that the University had been in breach of its own statutes – which provide the constitutional framework allowing universities to govern their own affairs independently – for 50 years.

“They probably thought it would never matter,” Carley reflected. “That is why it is worth treating the governance structures as if they really work.”

“I always liked the Charter 77 thing in Czechoslovakia,” he said, referring to a petition drawn up by a Czechoslovakian writers and intellectuals in 1989 demanding that the country’s Communist government recognise basic human rights.

“Formally you have all these rights and are covered by this governance structure, so why not just pretend that they really work and see how far you get?”

“Hefce actually noted this in their conclusions,” he added. “They noted that people had in good faith made representations for years through the proper channels and had been ignored.”

 

Democratisation

The University of Bath is now undertaking an “effectiveness review of governance”, Carley revealed, something the University had already committed to but was now being expanded in light of the Hefce report.

“They have to do it every few years,” he said. “The last one found that governance was ‘unsatisfactory’, so the University is now going to hire someone to do an independent assessment.”

As part of this independent review, Bath University announced that the academic senate would be involved, and could make recommendations to the University’s council.

However, Bath UCU intends to run its own “commission” in parallel to this management initiative, Carley revealed.

“We intend to hold hearings, take evidence and seek submissions and basically produce a detailed proposal for a set of governance structures,” Carley said. “That’s in the medium term.”

Realistically this process wouldn’t start that until the new year, Carley added. In the mean time Bath UCU are still conducting their own investigation into what actually happened with governance – particularly now that Breakwell is set to receive full pay until the start of March 2019 and a car loan write-off worth £31,000 as part of her retirmenet package (HE Marketisation, 2 December 2017).

“I think they still believe that they have some authority and they still believe that by going through a mechanical process they can go on doing what they are doing,” Carley commented. “What they do not understand is they have completely lost their authority – moral and formal authority. People are just not going to do what they are told.”

Protest at BCU over restructure plans

Yesterday lunchtime the Birmingham City University University and College Union (UCU) branch protested plans by Birmingham City University (BCU) to force academic staff in its Education Development Service (EDS) to apply for lower paid non-academic jobs.

“Over 50 demonstrated noisily outside the vice chancellor’s office,” reported Nita Sanghera, UCU national executive officer, “before marching around the campus to give the message that staff are united and will resit any attack on UCU members.”

EDS staff provide courses for BCU teaching staff to develop and reflect on their teaching practice – including the increasingly compulsory HE teaching qualification, the Postgraduate Certificate in Teaching and Learning (PGcert).

BCU UCU told HE Marketisation that the EDS was facing a “restructure and a 34% budget cut”, with “no guarantee there will be no redundancies” for over 20 members of staff concerned and senior lecturers in the Service facing a pay cut of £3000-£5000 per year.

“This restructure has serious consequences for the lives and livelihoods of our members,” commented BCU UCU chair Kirsten Forkert. “New staff who are at the beginning of their academic careers are questioning their futures at BCU because research will no longer be part of their workloads. This is how we lose good people.”

It was ironic, BCU UCU added, that the planned restructure came at a time when the University was trying to get a Gold rating on the next Teaching Excellence Framework (TEF). Not only is the PgCert now a requirement for many HE academic posts, it is also the main way to become a member of the Higher Education Academy (HEA), the “national body which champions teaching excellence”.

In response to the last TEF exercise, the HEA said it “continued to propose teaching qualifications and continuing professional development (CPD) as measures of teaching excellence”. More importantly, the HEA encourages teacher trainers in HE to undertake research, and recognises that such research by teacher trainers provides the foundation for teaching qualifications and CPD.

“It’s very disturbing that in the future we will be taught these qualifications by staff who will no longer enjoy academic freedom or have the time and resources to carry out research,” Forkert argued.

“We don’t want HE teacher training which is about a stripped down, “compliance culture” model of pedagogy taught by low-paid staff with no proper resources,” she added. “It’s not in the best interests of staff or students.”

BCU UCU is calling on BCU senior management to “save quality teaching provision in the EDS, and reconsider plans for teacher education on the cheap”. Messages of solidarity and support can be sent to: bcuucu@gmail.com

No confidence at Bath University

“They’ve lost all authority, they command no confidence”, was the message from hundreds of students and staff demonstrating outside a University of Bath Council meeting last Thursday, according to University of Bath University and College Union (UCU) branch president Michael Carley.

The demonstration had been organised by Bath Students Against Fees and Cuts before Professor Dame Glynis Breakwell – who has been at the centre of a scandal concerning her bloated pay and benefits package, as well as failure of governance at Bath University (HE Marketisation, 18 November 2017) – announced she would retire next year.

Demonstrators gathered to protest Breakwell’s generous retirement package, which proposes that she continues on full pay until the start of March 2019, and that a car loan made to her by the University worth £31,000 would also be written off.

One placard read “Buy your own bloody biscuits”, following news that the £20,000-worth of expenses Breakwell had claimed for her university-owned house in Bath included £2 for biscuits. Biscuits were also thrown at windows during the Council meeting, Carley reported.

“The demonstration yesterday was unbelievable,” he added. “They brought in private security and security from the University of West England. They were defending themselves from their own staff and students.”

 

Retirement or sabbatical?

Professor Breakwell will receive more than £230,000 for six months’ academic research while she takes a sabbatical, according to the Bath Chronicle.

“A university spokesman said the long-serving leader will receive full pay between 31 August 2018 when she stands down and 28 February 2019 after a semester’s sabbatical”, the paper reported.

“I think the university don’t want to embarrassment of some kind of unfair dismissal,” Carley commented. “I think they are trying to dodge anything that might be called a severance payment, as there’s now Higher Education Funding Council for England (Hefce) guidance on severance payments, and they are trying to get round that.”

“But I think what they’ve done now is even worse,” he added. “They’ve exposed the sabbatical, it’s a joke. There are people now asking who approved this sabbatical, where the research proposal is and what the outcome is going to be.”

HE Marketisation asked whether Professor Breakwell will be required to produce a ‘REFable’ output out of the sabbatical. Carley responded: “I have no idea, but we are going to ask and keep asking.”

“You can’t go on sabbatical when you are retiring, you just can’t,” argued Carley. “The point of a sabbatical is you go somewhere, come back and contribute something to the research strategy of the university.”

 

Dodgy governance

Last month the Bath Chronicle also revealed that Dame Breakwell had been given an interest-free loan of more than £31,000 to spend on a car.

According to Carley, the loan was an “efficient” way for the University to provide Breakwell with a car – to which she was contractually entitled. However, as part of Breakwell’s retirement package, it was revealed that not only will the loan will be written off, but that this was the arrangement from the beginning.

“That’s the problem – this is not a loan, a loan is something you have to pay back,” Carley pointed out. “Some of us are on cycle schemes that come out of our wages every month, and if we leave we have to pay off the balance.”

The way that the University’s Council – the University’s governing body responsible for its finances and investments, as well as for the protection of the University’s reputation – made this decision was also problematic, argued Carley.

“It was agreed by email two days before a scheduled full meeting of the Council,” he revealed. “Everyone was emailed and told 75% of members had to agree to the proposed retirement package, and had until 15:45 that day to respond.”

“It’s dodgy governance again,” he added, “so a complaint has already gone back to Hefce about it”.

Hefce has just released a damning report on governance at Bath University, after Lord Andrew Adonis had raised concerns following the release of details of how Breakwell’s renumeration had been decided.

Brighton UCU strike over redundancies

Source: Brighton and Hove News

On 23 and 24 November, Brighton University and College Union (UCU) will begin its strike action against compulsory redundancies with a “whole day strike” and a “mass walkout”.

The strike follows yet another impressive ballot result for the union in defiance of the Trade Union Bill, with the branch reporting that members had “voted overwhelmingly in support of industrial action”, with “85% in favour of strike action, and 92% in favour of action short of strike”. The result at Brighton follows other successful industrial action ballots at Manchester UCU and Leeds UCU branches, both of which have now been out on strike.

In September, University of Brighton management announced that it intended to make five academic staff compulsorily redundant, including lecturers in Modern Foreign Languages and researchers in the Schools of PABS and Education.

According to Brighton UCU, university management are trying to increase the surplus achieved by the university through reductions in staff costs. Brighton University has been told by the bank that it must increase its surplus in order to borrow money – which it intends to use for expansion, particularly investment in new buildings – the branch claim.

“The university management seem determined to try to force people out of their jobs despite alternatives being possible,” Brighton UCU said in a message to Brighton University students. “As your lecturers, the last thing we wish to do is disrupt your education, but we are concerned that if we do not oppose these redundancies, many more job losses will follow to the detriment of the education we can provide.”

In spite of 90 staff taking voluntary redundancy, two members of staff – both UCU members – remain under threat of compulsory redundancy, Brighton UCU pointed out.

“There is no justification for these redundancies,” it added. “Senior management want to cut the wage bill, but 90 members of staff have already left the university recently under a voluntary scheme. This has increased the pressure on workloads of many of your lecturers.”

What can be done for USS? By Sam Marsh

UCU-pension-placard
Source: Wadler’s Blog

 

Sam Marsh gives background to the current dispute between the University and College Union (UCU) and Universities UK (UUK) regarding the Universities Superannuation Scheme (USS) – a ‘defined benefits’ private pension scheme covering the majority of staff the older ‘pre-92 universities’, including Oxford, Cambridge, and Manchester Universities. Last month, 87% of pre-1992 university UCU members who voted in a consultative ballot supported industrial action to protect the existing benefits of the USS pension scheme.

As Sam Marsh explains: “The existence of the USS as a means for providing a secure, predictable income for staff from pre-92 universities is hanging in the balance, with talk of severe downgrades to benefit levels or closure of the scheme altogether.”

“Much has been written of soaring deficits and unaffordable commitments,” he adds. “And while this pervasive story of a fund in crisis seems hard to shake, many, including USS themselves, find the fund is healthier than ever.”

In the following article, Sam – a teacher in the School of Mathematics and Statistics at the University of Sheffield and Communications Officer for the Sheffield UCU branch (previously holding the role of Pensions Officer) – asks “What is going on?”

 

What is a defined benefit scheme?

Defined benefit pension schemes such as USS offer a good degree of certainty on the income to be received in retirement. This certainty comes from a promised benefit payment based on the salary of the contributing member. In USS, those earning less than £55,000 will, for every year they work and pay into the scheme, be promised 1/75th of that year’s salary to be paid annually in retirement.

The pension promises made by USS must, by law, be funded. That is, the scheme must hold sufficient assets as to cover the promises that have been made to date. To make sure that defined benefit schemes are doing this properly, the government’s Pensions Regulator requires that they undergo a valuation every three years.

 

The valuation and a best-estimate of USS’s health

A valuation for a defined benefit scheme like USS involves three parts:

  1. Totalling the scheme’s assets (built up from the contributions received);
  2. Comparing these to an estimate of the fund’s liabilities (the benefit payments
    which have already been promised);
  3. Estimating the contribution rate required to allow the scheme’s future promises to be fully funded given no change to the benefit structure.

The above involve predictions about the future, including how invested assets and wages will grow, what will happen to interest rates, how long people will live and more. The assets should be larger than the liabilities (a surplus); a shortfall is known as a deficit. But the problem that arises here is that, with the future unknown, any prediction will be an estimate. There are no right answers to numbers 2 and 3.

So what does the USS trustee make of the scheme’s prospects? The answer is in their draft valuation, where they state their best-estimate of the scheme’s health. And it is good news! To pay the benefits accrued to date, their £60 billion of assets correspond to a surplus of £8.3 billion. This is a huge amount, around a tenth of the government’s annual spend on education.

Not only that, but to continue to provide the current benefit structure, employers and employees are required to put aside a total of just 22.5% of salary, lower than the 26% (18% employer and 8% employee) contributions currently being made.

USS
Figure 1; Source: Universities Superannuation Scheme, 2017 Actuarial Valuation

And things get even better: USS’s best-estimate position is based on some fairly pessimistic views of the future, involving ten years of almost total stagnation in their investment growth, before a modest assumption of investment returns picking up. The most likely scenario, if things are left unchanged, is that the current large surplus will continue to grow over time. This is already evident: USS have recently revealed that their current position is up from that of 2014, where they had a smaller, £3.5 billion best estimate surplus.

 

Prudence

Before you celebrate too soon, you need to bear in mind the following important point: the Pensions Regulator does not accept a best-estimate approach to valuations, instead requiring a buffer in case the assumptions turn out to have been over-optimistic. This is known as prudence, and it is not, in itself, a bad thing: it is in nobody’s interests to have a fund that might fail if things turn out worse than expected.

But there is more good news! On a prudent basis, figures con- firmed by USS show that the fund has a small (approximately £0.5 billion) deficit, and the contribution rate required for future promises remains at 26%. So things are OK, right?

Unfortunately not. The figures that USS are actually reporting to the Pensions Regulator are of a £5.1 billion deficit and, more worryingly, a contribution rate of 32.6% needed to allow the scheme to continue in its current form. Why? This is where things get messy, and what’s happening behind the scenes becomes important.

 

The pressure to ’de-risk’

The real source of USS’s woes, it turns out, is a proposed change in their investment strategy, which they refer to as “de-risking”. This de-risking involves a plan to sell a large chunk of their growth-assets (equities, property etc) and replace them with gilts (government bonds). Unlike like equities, gilts guarantee a fixed annual income and, for this reason, are seen as safe investments.

The downside is that they are expected to give significantly lower returns, on average, than the equivalent amount of growth-assets. So, if USS shifts its investments towards gilts they expect to make lower returns from their assets in doing so, and this pushes up the price of providing pensions. Not only that, but the gilt market is seen by many, including USS, as overpriced at present; investing in gilts now is almost guaranteed to end up with USS losing money in real terms over the coming years.

So why would USS want to de-risk its investments in this way?

Actuarial groupthink. Firstly, de-risking is just the way that the pensions industry does things nowadays. Investing in the productive economy has become unfashionable for pensions funds, with the actuarial profession now solidly of the mindset that pensions should be funded by securing benefits with gilts. That this will lead to funded defined benefit schemes being pushed out of existence does not concern those actuaries. Why would it? Thankfully, there is an increasing amount being written about why this groupthink may be harmful, not only to pension scheme members and sponsoring employers, but also to the economy as a whole.

Misguided risk-management. Secondly, Universities UK have been at best ambivalent and at worst encouraging of the approach proposed by USS. Their reasoning could be summarised as a concern around downside risk. That is, they are asking themselves: what if things go really, really wrong and we have to pick up the pieces? They are managing to convince themselves that running a defined benefit scheme is just too risky, unless it is made ultra-safe by investing predominantly in gilts. This is in spite of the extremely healthy best-estimate position of USS, in spite of the fact that USS has more money coming in each year than it pays out, and in spite of the fact that the investment returns required to fully fund the scheme in the future are very modest compared to historical performance.

External pressure. Finally, and probably most importantly, USS is advocating de-risking to appease the Pensions Regulator. Because of its duty to ensure that benefits already promised will be paid, and because BHS is still in the back of its mind, the Pensions Regulator is pushing hard for the safest way to make sure USS’s promised benefits are secure. But the Pensions Regulator is not at all interested making sure that future generations are treated well: for them, the ideal situation is that the defined benefit scheme ceases and past promises are secured by buying an adequate quantity of gilts. Satisfying the regulator will make it very hard for USS to continue to offer attractive defined benefits for a reasonable cost.

 

What is the solution?

UCU have spent the three years since the 2014 valuation working with Universities UK, and individual institutions, discussing alternative viewpoints on the health nof USS, hoping that when given close scrutiny both parties would agree that the nvaluation was giving a misleading impression of the situation. It has now become clear that this has had only limited success, and it seems that Universities UK are unable to look past their worries over financial risk to consider progressive solutions.

It is also clear that the Pensions Regulator has no interest in supporting defined benefit schemes. The methods of valuation it endorses are narrowly focussed on gilt-rates and market-derived figures, and these methods in the current economic climate make it very hard for defined benefit schemes to prove themselves to be healthy. It seems that the Pensions Regulator will not allow USS to demonstrate its health by non-standard means.

This leaves UCU in a difficult position. But there is hope! The recent consultative ballot over willingness to strike to defend pensions was overwhelming a vote in favour. This gives UCU’s negotiators a strong position: any viable solution that they propose must be given a good hearing by Universities UK and USS. But UCU’s negotiators must bear in mind that the potential for strike action will have little effect on the Pensions Regulator.

 

UCU’s priorities

It is of utmost importance that we resist any further move towards a defined contribution scheme: such schemes place all risk on individuals, with no guaranteed level of annual income in retirement. We should also be wary of asking universities to pay more into the fund. We don’t believe that the fund needs higher contribution rates as it is already shown to be healthy.

Instead, our priorities should be to look for collective approaches to providing pensions, ideally ones which are defined benefit in nature, and ones which have a chance of satisfying all parties concerned. Once we have found such a viable model, Universities UK cannot afford to write it off without a fair hearing, as doing so could risk substantial disruption.

 

A scheme to satisfy all parties?

One approach for a solution comes from looking at the pensions stand-off at Royal Mail. The Communication Workers Union are currently involved in a dispute to save their defined benefit scheme. What they are proposing is that it be changed to a ’Wage in Retirement Scheme’, a form of defined benefit scheme devised by the First Actuarial: the same actuaries who advise UCU.

The Wage in Retirement Scheme manages investments collectively and guarantees a modest level of benefits in retirement, allowing for and expecting benefits to be increased when the future investment performance actually becomes known. This approach would mitigate a large amount of the risk which Universities UK are concerned about, and in doing so should appease the Pensions Regulator.

The Wage in Retirement Scheme must be looked into by UCU urgently. If we believe that USS is as healthy as the best-estimates say it is then we have nothing to lose by moving to such a scheme. In fact, we potentially have an awful lot to gain.

 

References

Universities Superannuation Scheme, 2017 Actuarial Valuation, 1 September 2017, available here.

Universities Superannuation Scheme, 2017 Annual Report, July 2017, available here

UCU helps Newcastle University raise the bar

Newcastle University University and College Union (UCU) branch has released a report describing how, through a successful but “painful” campaign that ended in a marking boycott, it convinced university management to drop a top-down and coercive performance management system called ‘Raising the Bar’ in favour of a “collaborative, bottom-up approach to improving research”.

Significantly for higher education activists and trade unionists, through the dispute Newcastle UCU showed that “academic staff are intrinsically motivated to perform well”. The “Newcastle experience” – backed up by a “substantive body of research” – forcefully points to the fact “that attempts to extrinsically motivate those who are already intrinsically motivated, is counterproductive because it actually produces a reduction in overall motivation and job satisfaction”.

According to the report, ‘Raising the Bar’ (RTB) was Newcastle University management’s attempt to “‘game’ key metric exercises of the REF and international reputational league tables”. The report describes how management introduced “targeted” Units of Assessment deemed “best-placed” to rise up the tables and introduced an ‘Outcomes-Based Management’ (OBPM) system, which attempted to “embed a range of ‘Research and Performance Expectations’ (RiPE) targets in personnel management”.

“It was this second aspect of RTB that was the most controversial,” Newcastle UCU reported, “leading to widespread divisive unhappiness, upset and opposition, culminating in industrial action taken by UCU in June 2016.” Newcastle UCU’s ‘Action Short of a Strike’ (ASOS) took the form of a marking boycott, and was backed up by a “solidarity motion” passed at UCU Congress – which recognised the issue at Newcastle University as “a local dispute of national significance” – as well as a survey on change.org that gave the dispute international exposure,

The report recounts how, just as industrial action began in June that year, Newcastle University vice chancellor Chris Brink, with the support of the University’s Heads of Academic Units (HoAUs) and in negotiation with Newcastle UCU, “agreed to abandon RiPE and to ditch the RTB terminology”. In its place, a framework for a “common understanding in moving forwards” was agreed between the University and UCU: the ‘Academic Framework for Research Improvement’ (AFRI).

“This agreement recognises that funding structures mean it is necessary to be seen to perform well in what we accept are flawed and limited key metric tables,” the report said, “but that we seek to do that by improving research in a collegial and bottom-up, non-coercive manner.”

“It recognises that an uncritical focus on quantitative targets is ‘problematic’,” it added. “Scholarly ‘performance’ cannot be artificially managed by a topdown coercive tool, but research is to be improved by creating a conducive working environment to allow creativity, and recruit and retain staff.”

Newcastle UCU has made the full report available on its website, which goes on to describe the lessons learned from this successful dispute for management and UCU. The report is recommended reading for activists and trade unionists in higher education (HE), as such top-down and coercive performance management is becoming the norm in a sector besieged by market reform.

New vice chancellor Chris Day has also released a statement accepting all recommendations proposed by the Newcastle UCU report, which can be found here.

Tensions rise at University of Birmingham

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University and College Union (UCU) members at the University of Birmingham are moving towards a formal ballot in an escalating dispute with management over a new workload allocation model (WAM), top-down performance management and proposed changes to disciplinary proceedings.

Birmingham University UCU (BUCU) branch intend to run a formal ballot for industrial action next month, following a consultative ballot earlier this year in which members showed a willingness to take action regarding these issues. If members vote positively in the formal ballot, BUCU aim to begin strike action at the beginning of Spring term 2018.

Escalation follows a number of attempts by the UCU branch to “engage in a constructive way” with Birmingham University management. After a series of meetings that led nowhere, it concluded that the university “intentionally maintained regular meetings with BUCU in order to mislead BUCU”.

“As such, this branch does not believe any longer that the University has been negotiating with BUCU in good faith to resolve the issues around performance management at the University of Birmingham but has breached the implied duty of trust and confidence,” BUCU concluded.

Commenting on the situation, Roland Brandstaetter, BUCU president said:”It appears that the University of Birmingham is reluctant to appoint a sufficient number of staff, despite multi-million surpluses every year, and intends to make up for a shortfall in staff by increasing the workload of the existing staff.”

BUCU claims that the new workload allocation model would add an extra two months for academic staff. To highlight the issue, BUCU held a demonstration (see picture) during which members held up mock calendar placards featuring two new months “Drainuary” and “Stresstember”.

“Those who work at the University of Birmingham already frequently work above the 48 hour European recommended limit and suffer from the symptoms of stress,” Brandstaetter added. “The already excessive workloads provide insufficient time to conduct proper teaching and research and this impacts on the wellbeing and work-life balance of staff in an unacceptable way.”

Birmingham University has also been in the papers recently for being one of the universities with the most ‘zero hour’ contracts in the country and also one of the highest numbers of settlement payments.

Messages of solidarity can be sent to: admin@birminghamucu.org