Report shows university budget winners and losers in austerity-driven era

A study of the impact of austerity-driven policies on universities in 13 countries across Europe shows a divergence between clear winners and losers, with southern European countries generally but not exclusively faring worst.

Finland is leading the pack of countries expanding university education budgets while the most savage impact of cuts is being felt in Italy and Portugal.

The Europaeum – an organisation representing 10 élite universities across Europe – has updated an earlier assessment of the impact of the Eurozone crisis.

This latest report catalogues the effects of government austerity measures on 13 countries where its members and partner institutions are located and assesses the extent to which universities are affected. The countries are Austria, Belgium, Czech Republic, Finland, France, Germany, Ireland, Italy, The Netherlands, Spain, Switzerland, Portugal and the UK.

It concludes that the economic downturn has, on the whole, had a negative short-term impact upon public higher education programmes.

European universities are being affected in many different ways during the current economic crisis – with winners and losers already emerging, and the differences set to be multiplied over the coming years depending on how the winners use their comparative advantage, and how the losers can best mitigate the effects of cuts through so-called efficiency savings or by raising new sources of income.

More and more countries have passed extensive austerity packages as part of the general Eurozone crisis, in an attempt to slash their fiscal deficits. The Europaeum highlights the savage cuts in higher education budgets in the southern European countries, with 20% budget reductions in Italy and Portugal, and a similar impact expected in Spain.

But the loss of public funding is not confined to the south, or to the Eurozone. The report points to the UK government’s 40% budget reduction for the next years, offset by promises of increases in other earmarked areas and through the new tuition fee system.

In The Netherlands, too, universities face cuts of about 20%, but again with a new tuition fee system being introduced.

The Czech Republic is hit as well, with the European University Association estimating reductions of 2% to 4%.

The Europaeum report points to a raft of countries where university budgets are protected or even increasing.

Finland is one of the three countries included in the survey that the Europaeum says could be regarded as faring relatively well in the crisis (the others are Switzerland and Germany). Between 2010 and 2011, the budget allocation for university education increased by 12%, to €2.927 billion (US$3.9 billion).

Over the past two years, Finnish universities have undergone significant systemic reforms: the new Universities Bill of 2009 has transformed institutions from branches of government into independent legal entities. Universities now face fewer restrictions in raising revenue via private donations and bequests. Initial private fundraising activities were slow to pay off, largely because of the sluggish economy, which affected the flow of corporate donations. However, the report says, since 2009 the Finish government has introduced a tax deduction of corporate donations for up to €250,000 until the end of 2012 and these donations have significantly strengthened the budgets of universities.

Switzerland, with a 3% budget increase, remains aloof from the Eurozone crisis, while Germany, with a 2% increase, is committed to federal support for higher education. A likely change in government is not expected to threaten that commitment.

Some countries have – possibly for electoral reasons – promised to keep investing in higher education. France has seen a 3% increase in 2011 but the country’s downgrading by the ratings agencies may mean that universities, heavily dependent on the markets, may eventually be affected by austerity measures. Further uncertainty stems from the current presidential elections.

In Poland a 5% increase since 2010 has been followed by a commitment from its new government to a further increase.

“It remains to be seen, however, whether these countries can maintain their position, facing ongoing economic difficulties and upcoming elections.“

The survey also covers three countries – Austria, Belgium and Ireland – where the Europaeum has partner institutions.

While Austria is likely to experience a small increase (0.1%), the other two are less well placed. Universities in Belgium, which is required to reduce a 2.8% budget deficit to satisfy bond markets, expect cuts in line with the overall cut. Irish universities suffered a cut of 9.4% in 2010 on the heels of a 5.4% cut in 2009.

The Europaeum warns that assessment of the effects of cuts must be approached with caution “as there are so many factors that can impinge on how a cut actually affects an institution, and so much depends on the underlying position and on leadership”.