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The Wider Economic and Social Impacts of the Economies Exercise at Leeds

March 15, 2010

An exclusive and independent report compiled by Dexter Whitfield at the European Services Strategy Unit makes for sobering reading. The report models the local and wider economic effects of the university management’s Economies Exercise. The report measures the “direct, indirect and induced effect of the planned cuts by Leeds University on the local and regional economy and the wider implications for public finance.”

The report claims that the 20 million pound error in the 2008 financial plan raises “questions about the quality of forecasting and planning” at the University of Leeds (page 8).  Accordingly, UCU suggest that the university management should consider clarifying this 20 million  pound error and comment upon the “questionable quality of the University of Leeds’ financial forecasting and planning”.

The report claims that on the university’s own figures, the Economies Exercise could result in:

  • Between 625-700 university job losses, based on cuts in the unrestricted budget
  • A further loss of between 250-280 jobs in the Yorkshire and Humber regional economy, primarily in private sector suppliers and services
  • A total UK loss of between 1,187-1,330 as a result of the Leeds University cuts
  • If all universities in our region followed the 5%-10% budget cuts, there would be a loss of up to 5,823 jobs in the region

Interestingly, the report indicates that the University’s “short term finances are in relatively good shape,” and therefore raises questions about the need for the university management’s current course of action (page 6).

Accordingly, UCU suggest that the university management should consider and comment upon the potentially economically damaging effects of the Economies Exercise upon our city and region.

The report concludes that a world class university is one that gives “much greater attention to its economic and social impact on the neighbourhoods in which it is located and its role in the city and regional economy” (page 21).

Download the report here

16 Comments leave one →
  1. Mark permalink
    March 15, 2010 7:06 PM

    What is the European Services Strategy Unit?

    This paper seems disorganised and, given that it’s supposed to be independent, the positioning of the UCU and Unite logos seems strange.

    Where did this come from? Was it commissioned? If so, by whom?

  2. March 15, 2010 8:11 PM

    There was a link to the ESSU website in the post so that people could discover who they were.

    The paper is organised in the same way as any report of its kind: Executive summary; introduction; followed by sections on the issues being analysed. We are not sure why this is ‘disorganized’, but are happy to discuss that.

    The paper, if you read it, states quite clearly “Leeds University UCU and UNISON branches commissioned ESSU to carry out the impact study in December 2009.”

  3. Mark permalink
    March 15, 2010 8:35 PM

    Yes, but I found their site to be less than enlightening as to who they actually were. There is little in terms of biographical information. No obvious staff lists. There are their publications, but who has time to read through numerous reports. The only member of staff I saw named (admittedly, it was a quick scan) was Dexter Whitfield who appears to be an “Adjunct Associate Professor” (whatever that is) in Australia. Their website is in the UK and their postal address is in Ireland.

    As for disorganised, its references don’t appeared to be tagged, and it’s difficult to, therefore, unpick its sources without going back to the sources themselves.

    I also don’t understand how this is independent if it’s commissioned. How much did we pay, and does that not potentially undermine its status as “independent”?

  4. March 15, 2010 8:54 PM

    To learn more about the ESSU, their history and their clients, from the NHS to local councils, you can do a google or library search.

    If you are unused to reading such reports, their commonplace, professional format may be disorienting on first contact.

    The research is independent in that no pre-determined outcomes or conditions were set for the researchers. If the University had chosen to pursue the same research, the same outcomes would be reached. The processes are mathematical deductions for the most part. Certainly, UCU believes that the University has a responsibility to the local community to do an impact study on the affect of the ‘economies’ on the local economy. The ESSU are best placed to provide such a study, but if you read it and disagree with any of its conclusions based on the statistics and facts it employs, we’d be happy to have that discussion here.

  5. An academic permalink
    March 15, 2010 8:59 PM

    Mark clearly never reads stuff like this much. Lucky him. But it’s pretty conventional stuff. He obviously hasn’t read it if he has to ask who commissioned it. I thought it was a well structured study that asks the right questions, utilises the data in a straightforward, scholarly way, and makes utterly transparent how it comes to the conclusions it does. The UNiversity say that the £35M equates to 400 job losses, but do they provide their statistics and calculations? No. Does Mark query their methodologies? No. Let’s be reasonable. Mark, are you a student? Is this stuff really all that new to you.

  6. Mark permalink
    March 15, 2010 9:36 PM

    No – I don’t read stuff like this. That isn’t because I’m a student (I’m not), but I’m not a social scientist. If social science typically presents their research without explicitly tying evidence to references, fair enough, but that’s not how research in my discipline is presented; you’d see each number carefully tied to its origin.

    Just to set the record straight:

    Does Mark query the University? Why, yes I do. Oh, sorry, you stated “no”. You must know better, somehow.

    Amazing how some simple questions must degenerate into an attack on an individual. Pitiful.

  7. Mark permalink
    March 15, 2010 9:42 PM

    I did do a search, but found (as I already said) little of interest. I assumed that you would know more.

    I am used to reading reports, but not in social science. I am somewhat unhappy at your implication that I am disoriented by reading a report in a “…commonplace, professional format…”.

    I have no problem with their processes per se, but just wanted to know who they were. Maybe then I’d understand why they are “…best placed…”.

    Context and authority is everything, as anyone in a University should know.

  8. Lawrence permalink
    March 15, 2010 10:43 PM

    Do you know that Mark does not query the management’s methodologies or is that your assumption?

  9. An academic permalink
    March 16, 2010 7:17 AM

    I admit, I made an assumption, but he did seem to be coming from a position of ignorance. He seems to be unhappy that the paper does not follow academic referencing standards, when it is not an academic paper, and perfectly well follows the standards of its own genre. There are thousands of government documents that Mark would be unhappy with on the grounds of not following academic referencing standards. There has been no discussion about the substantial evidence and rigourous methodology of this paper, just waffle about the (well respected) group who have produced it and piffle about the referencing system. This seemed petty to me, so I assumed he was someone who sought at every turn to find even the smallest reason to undermine the union’s excellent work, and so I assumed that he was perfectly happy with the University’s claim of 400 jobs, despite their refusing to give the evidence and methodology they used to come to that seemingly out-of-the-air conclusion. You yourself Lawrence spent a lot of energy accusing the bloggers of deleting comments when they quite clearly have never done so. So, I make assumptions based on distracting behaviour. I’m happy if those assumptions are wrong. Now, do we want to talk about the conclusions drawn in this well-structured and rigourously evidenced paper? Should we be concerned that the University has done no impact study of its own of the effects of its rushed-through cuts, announced ahead of the evidence of the government cuts and outwith the appropriate procedures, on the local economy? Should we not be happy that we have now at least one study? Does that not put the onus on the University to address these concerns or commission a study of their own? Do we have a commitment to local jobs outside the university? Or should we come on here and flaunt our ignorance about an organisation and complain about referencing systems? And why would we do that if we didn’t have a desperate agenda to undermine the UCU at all costs?

    I checked the web site of the privy council. It doesn’t tell me much. I looked for information on the visitor on campusweb. Nothing. Perhaps I should complain that the visitor is a mysterious figure who has no authority to conduct an investigation into the alleged failed procedures. And when his report comes (and quite obviously will not be in an academic style), perhaps the first thing I should do, rather than read and comment on its content, is complain that it seems disorganised because of its referencing system. I ask you!

  10. Sitara Akram permalink
    March 16, 2010 10:06 AM

    I think that Mark has raised some valid points and being a part of a university, we should all get used to the idea of freedom of expression and critical analysis. I particularly did not like the tone adopted by An Academic and also the UCU blogger. There was no need to suggest that Mark is not able to read reports just because he voiced some healthy scepticism.

    I have been checking the ESSU website and the only name that pops up repeatedly is that of Dexter Whitfield, who also wrote the Economic Impact Assessment report uploaded on this blog. The Contact Us page again leads us to Dexter. If you check the older publications, you may come across another person, Alex Nunn, who has worked on some publications. Plus, the ESSU is continuing the work of the Centre for Public Services (CPS). It is possible that only one or two people from the former CPS have chosen to continue the work (and we don’t know what CPS was). So it will be really helpful if UCU, who have commissioned this report, can tell us a bit more about the ESSU. I don’t have a problem accepting Dexter’s analysis but my perception of the strength of his analysis may change a bit once I know a bit more about who Dexter is and what is ESSU.

    As for the content of the report, I have no major issues with the analysis. Some of the source data is easy to find but I agree with Mark that the referencing could have been improved. The ONS data, for example, is difficult to find as the exact report/year of publication is not mentioned. Regardless of the format of the report, clear referencing is good practice.

    Lastly, there are some sections of the report that seem to be the opinions of the writer and can be challenged. For example, on page 8 and 9, the section that explains the accounting error is very weak. What we need to know is the real impact of a £20m forecasting error, which is not explained. The amount of £10m which partly mitigated the error was clearly generated within the financial year (i.e. based on real events) and was not a further £10m error in forecasting (as Dexter alleges). I am happy to change my viewpoint if this is explained to me in more detail.

    What we also need to question is the paragraph on page 9, which talks about the ‘long standing pattern’ of overestimating expenditure and underestimating income. There is no evidence to support this. As I have done some financial modelling myself, I am aware of the fact that it is normal practice amongst business managers and financial analysts to develop ‘conservative’ forecasts. The result is not a windfall. Windfalls emerge as a result of real positive events, and forecasts cannot predict them. This ‘conservative budgeting’ will need to be questioned only if the assumptions behind the forecasts were erroneous, or worse still, deliberately erroneous. Again, we have seen no evidence of that. However, we all deserve a better explanation of the mysterious £20m and how this number, obviously a cumulative number based on a 5-year forecast, effects us now, in today’s numbers.

    Mark, thanks for raising some questions about the report. It is a good report but could be better.

  11. An academic permalink
    March 16, 2010 10:28 AM

    I have no trouble with critical analysis and freedom of expression, but there was no critical analysis of the actual paper, until now (thanks Sitira). I also don’t demand a referencing system in document that usually does not require one that academics usually prefer – I’m not that lost in the academy (otherwise I’d spend all day writing to government bodies asking why they don’t footnote things properly).

    I have no problem with the UCU not explaining who the ESSU is, because they are the obvious body to go to for a report of this nature. Did you know the University visitor was Mandelson until someone in FBS sent a petition to him? Did you know what the function of the visitor was until then? I didn’t. I also think the ESSU website is quite clear, but if the UCU want to add any further information on them, that’s up to them.

    As for your expression that the £10M accounting error is just an opinion, well, it must also be the opinion of the University, because all the report does is take the University’s explanation and repeat it. They doubled a figure in each year of the accounting in error, over five years. When an organisation of this size makes an accounting error of that percentage of their turnover, it seems reasonable to ask questions about the integrity of the accounting process, does it not? So, are you challenging the writer of the report, or the University whose data and information he has used?

    And as for ‘longstanding pattern’ of overestimating expenditure and underestimating income – all the budgets used by the university to justify reviews have an 8% pay increase over three years built into them, and no increase in student fees. Have you heard the University anywhere say they support an 8% increase in our pay? Did you know that the budgets for this year had a 2.5% increase in wages in them until the measly 0.5% was announced? And the original reviews were based on that premise, and other exaggerations, remember. And we know that Michael Arthur supports a lifting of the cap on student fees, so why not have at least one scenario where student fees go up, even by a little? Now, any sound business would project forward using a set of scenarios, including a conservative one. This University, aping business practice badly, has only one scenario, and it is far from conservative. So the evidence that they overestimate costs and underestimate expenditures is under your nose – in the very budgets they use to tell you that you might be out of a job.

  12. Sitara Akram permalink
    March 16, 2010 11:18 AM

    @An Academic

    Thanks for your comments. We are now discussing the content of the report, which should have been the purpose of this discussion in the first instance. I agreed earlier that the referencing does not need to be more detailed. But that it is good practice for it to be, so readers can verify the sources of information. And I am happy to wait for the UCU to tell us something about the ESSU.

    As for the forecasting, you are pointing out what I had asked earlier: that if the assumptions behind the forecast are consistently erroneous, then that needs to be questioned. The ESSU report does not do that in detail. Therefore, the writer’s reference to the long-standing pattern needs more evidence. So I have challenged the writer on this one and it will be great if the University could offer more detail so we can form a reasonable opinion. It will also be great if you acknowledge that the writer needs to give more detail to give weight to his argument, just as you have done yourself.

    My assertion about the writer’s opinion was based on the writer’s words: the VC explains that the £20m error was mitigated to some extent. The writer then says that it is a further 10m forecasting error. Which it clearly isn’t. The writer then does not explain the alleged 30m error in enough detail for me and others to know whether this is the result of a long-standing pattern or an inadvertant mistake, which CAN happen in a financial model of such complexity.

    Another important issue is the ‘real’ effect of those forecasts on the University’s future. How is this error being corrected and what are the implications of this error? May I ask what the source of your information is regarding the financial forecasts? I am not here defending the University management but there may be a perfectly reasonable explanation for the 2.5% wage increase built into the model: it may be that at the time the model was built (start of the year or earlier), the management anticipated, yet again conservatively, that the wage increase may be settled at 2.5%. The models are predictive, so there will always be variances between forecasts and actual results. Deciding on 2.5% does not in itself cast the management in a bad light. A wage settlement of a measly 0.5% also doesn’t invalidate the managament’s assumption because at the time the assumption was made, there may be reason to believe the settlement will be around 2.5%.

    The integrity of the accounting process is being questioned. That’s what we are both doing. But as for the report itself, it is reasonable to ask questions about the content and to expect reasonable replies.

    I am just a member of staff here, with as much right to know this information as any other person. However, we cannot just accept whatever is sent our way. It is also up to us to be fair and level-headed in our analysis and listen to both sides of the story before deciding who is right and who is wrong.

  13. Sitara Akram permalink
    March 16, 2010 11:19 AM

    One last thing: how do we know that the University has only one scenario built in and no sensitivity analysis is EVER done?

  14. An academic permalink
    March 16, 2010 2:51 PM

    Thanks Sitara. Good to be properly discussing the contents.

    No, he doesn’t state the error was to the tune of £30M. Firstly he points out that there was a £20M error, then he points out that the £10M upside was not forecast (so in effect the error for the one financial year was mitigated against by £10M and represented only a £10M loss in that one year(it was still carried forward over a further four years – £80M).

    You’re right to ask questions of the order “How is this error being corrected and what are the implications of this error?” but that is a question for the University, not the report.

    I hope too that there is a perfectly good explanation for the 2.5% fiction in the accounts for this year. But the University has not given one. When that figures was added to the accounts for the IPE last year, the argument was being made for a 0.3% pay increase, not 2.5%. Now, we have the chancellor of the exchequer saying there will be 0% increase in public sector pay over the next three years, but the UNiversity – AFTER that announcement – adds 8% uplift over that period and then uses those budgets to argue for cutting jobs. Smell a rat?

    Ask your finance manager about the financial scenarios managers are given to write their IPE documents. Only one scenario. If they do use other analyses, as you suggest, then they keep them very quiet. Finance managers don’t pass them round. They are not published on the web. Do you read the Council minutes? They’re not in there. So, all evidence is that they plan forward on one single scenario that ignores possible future income and exaggerates costs.

    The report does not answer for the University, but offers its cases. So, for example, it explains why and by which methodology the £35M cuts will result in up to 700 job losses. The University argue, via Vanessa Bridge’s letter to the BBC (not to staff, of course) that £35M equals 400 job losses, but don’t provide their calculations. I’m willing to believe them, if they are willing to show us their calculations. They claim to be transparent. So do UCU. SO far only one side has explained themselves transparently. We can query what they offer, of course, but we should also applaud their will to see what the impact on the local economy might be.

  15. March 16, 2010 2:55 PM

    We are a little bemused as to what further information people would like on the ESSU. We are tied up in important business today (announcement later), but would suggest, in all frankness, looking up the ESSU online and checking the nature of the work they have done for former clients. Perhaps we can help this way – if you can tell us which other organisations we might have gone to for such a report, we can then explain why we chose this one. At the moment, we don’t understand quite why were asked why we went to a baker to buy bread, if you understand the analogy.

  16. Mark permalink
    March 16, 2010 7:19 PM

    Personally, I just wanted to know who they were and why they were (in your opinion) the right people to approach. That they have done similar work in the past doesn’t (necessarily) speak to their authority. If it were the University going to (say) PWC for a financial or regulatory report and simply explained “well, everyone goes to one of the big three auditors for financial projections” we’d (rightly) be sceptical.

    I didn’t mean to provoke the sort of personal attacks I received, but I would still be interested to know the answer.

    Of course, I am not interested in being attacked either.

    On a totally different tack, well done on the agreement reached today!

    Provided it all turns out as expected, this is a good agreement and something on which we can build long-term stability, so many thanks to those who worked long hours thrashing out an agreement. Bravo!

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