UCU threatens ‘unprecedented strikes’ as USS reaches surplus

Around 18 months ago, the USS 2020 valuation showed a deficit of roughly £14bn, which was used as the justification to cut staff benefits, with the USS trustee arguing that without changes it would have to impose “ruinous” contribution rate hikes.

A deal was struck with Universities UK, the group representing USS employers, that saw a moratorium on scheme exits and pledges of greater covenant support in exchange for a governance review and other measures. 

The UCU criticised the deal, which it said would lead to cuts to the benefits of an “average lecturer” of 35 per cent. It refused to support the employers’ proposals, which were passed anyway, with benefit changes coming into force in April this year. 

UUK and vice-chancellors must now make plans to withdraw their cuts, restore benefits and echo our calls for a new, transparent, evidence-based valuation

Jo Grady, UCU

The union has held several strike ballots since then, and its members have held a number of rounds of industrial action. It also warned that a nationwide strike ballot will be held in September unless changes are made and money is reinvested in staff wages and benefits.

Monitoring report is not the final word

The June monitoring report, published on August 18, showed that the £14bn deficit had become a £1.8bn surplus, with the main drivers of the change being asset value recovery and a decreased technical provisions liability.

The report also explained that the future service contribution requirement has decreased due to higher nominal gilt yields, and suggested that total contribution requirements, including deficit contributions, were lower than at the valuation date.

It noted, however, that market conditions remain volatile, and that the assumptions underlying the monitoring report do not go through the same level of assessment as they would at a valuation, meaning they may not “necessarily reflect the risk capacity and appetite of employers at that date”.

Volatilityhas previously been cited as a reason not to read too much into the report’s results showing the scheme’s improving health, with the trustee previously pushing back on the suggestion that its changing financial position could justify interim benefit changes before the next valuation. 

USS chief executive Bill Galvin reiterated this point in a letter to university employers, as reported by the Financial Times’s Josephine Cumbo on Twitter.

He wrote that the surplus “provides a basis from which to start discussions with our stakeholders and advisers about what options might be available should this position prove well-founded”, and if the contribution requirement had indeed decreased, then the Joint Negotiating Committee “may be able to consider some element of reduction to contributions, enhancements to benefits, or a combination of the two”.

However, Galvin cautioned that “increased uncertainty on forward inflation and interest rates has led to much financial market volatility, and care must be taken with any individual reading”, while it remains unclear whether the monitoring report “takes full account of expected inflation”. 

“The valuation programme will provide the analytical framework for fully informed judgments on these and other issues,” he said.

UCU general secretary Jo Grady, however, claimed the result vindicated the union’s opposition to the benefit cuts.

“We have said time and again that the USS is an extremely strong pension scheme with excellent long-term prospects. News that the scheme is in significant surplus is just the latest vindication of our position,” she said.

“The March 2020 valuation and the devastating cuts UUK forced through were acts of theft from hundreds of thousands of workers. UUK and vice-chancellors must now make plans to withdraw their cuts, restore benefits and echo our calls for a new, transparent, evidence-based valuation.”

The USS and UUK have previously resisted calls for a new valuation, while arguing that attempting to make interim changes to benefits would interfere with laying the groundwork for the next scheduled valuation.

It was further argued that the apparent improvement in the scheme’s financial position was not a sufficient evidentiary basis to make interim changes, as the real conditions were not entirely known and may change in any case, while it was also suggested that interim changes could invite extra scrutiny from the Pensions Regulator and set a worrying precedent.

Grady continued, warning that in September, “our members will vote ‘yes’ in a ballot, which will deliver unprecedented strike action across UK universities”. 

“It’s not too late for vice-chancellors to reverse their disgraceful swindle and give staff their deferred wages back. They should do the sensible thing and restore benefits before the UCU forces them to,” she said.

UCU calls for an end to ‘vanity projects’

On August 22, the UCU called for an end to spending on “vanity projects” by universities, which it said had generated “record income” without putting this back into wages and benefits.

Analysing data from each higher education institution in the UK, the union concluded that universities had generated a record £41.1bn and finished 2020-21 with an additional £3.4bn cash “in the bank”, with vice-chancellors planning a £4.6bn spend on “vanity projects” even as staff pay fell by 25 per cent, or £200mn, during 2020-21.

The UCU pointed to confirmation given to the Office for Students that the £4.6bn capital spend amounted to a 36 per cent increase on the previous year.

It argued that, since much of the extra money had been generated by “core operations”, such as teaching, administration and research, the money should instead be reinvested in staff. The union called for some of the cash to be diverted to raising pay, bringing staff on to permanent contracts, and restoring pension benefits.

This would be a way of avoiding the nationwide strike ballot scheduled for September, it said.

Many HE institutions are working hard to avoid redundancies, and others are struggling to balance budgets to maintain staffing levels, while delivering this year’s pay uplift into staff pockets

Raj Jethwa, UCEA

The UCU criticised the 3 per cent pay offer made this year, which it said amounted to another real-terms pay cut given retail price index inflation has hit 12.3 per cent. The employers’ offer would only cost £660mn to implement, and the union argued that this should be raised “significantly” in light of the record income.

It was particularly critical of some of the “vanity projects” universities had already entered into, such as paying significant amounts to keep small campuses running in Dubai and New York, a Malaysian campus that accumulated losses of more than £20mn, and a campus next to an oil refinery that had to be closed because the university in question had not applied for planning permission or performed adequate health and safety checks.

Grady said: “Our analysis shows clear as day that the university sector is not only hoarding billions of pounds in cash, but also planning an eye-watering spending spree on shiny new vanity projects — all while holding down staff pay, cutting pensions and plunging thousands into hardship in a cost of living crisis. It is inconceivable and insulting.

“Universities generate their income because of staff who deliver excellent teaching, effective administration and produce world-class research. It is beyond unacceptable for employers to then cream extra cash off the top of their hard work and then plead poverty.”

She argued that it was time for the sector to reassess its priorities, adding: “Falling pay, devastating cuts to pension and insecure contracts are not a fact of nature but the consequences of spending decisions made by vice-chancellors. 

“University staff are clear that they have had enough, and unless urgent action is taken to raise pay, restore pensions and address their wider concerns, they will be voting to take strike action this autumn.”

Meanwhile, Raj Jethwa, chief executive of the Universities and Colleges Employers Association, said: “It is ironic that the UCU quotes from the latest [Office for Students] update, while ignoring the risks it highlights, including a forecast decline in overall financial performance and the significant cost pressures which could accentuate this.

“Aggregate financial performance also masks the considerable variation between HE institutions, including the numbers of ‘home’ and international students and the staffing profiles necessary to deliver different curricula. Each institution has a legal duty to balance its books and the nationally negotiated pay uplift has to be affordable for all 145 institutions,” he continued.

“Many HE institutions are working hard to avoid redundancies, and others are struggling to balance budgets to maintain staffing levels, while delivering this year’s pay uplift into staff pockets.”

Jethwa argued that targeting capital investment is “disingenuous”, as UCU “knows that it accounts for less than 10 per cent of total spending and suffered significant cutbacks during the pandemic in order to devote resources to supporting staff and students”.

“Our pay uplift provides for up to 9 per cent for staff on the lowest pay points who are most affected by inflation, and a minimum increase of 3 per cent for all staff. It was important for staff to receive the uplift from the start of the financial year on August 1, and many will also receive a 3 per cent incremental rise,” he said.

“The UCU knows better than to suggest that a handful of institutions can somehow cross-subsidise a 7.9 per cent increase in pay for staff at all institutions.”

A spokesperson for USS employers said: “Employers have repeatedly said that their current contributions to the pension scheme — which rose to 21.6 per cent of salary in April — are among the highest in the country and at the very limits of collective affordability and sustainability.”