To the signatories of an Open Letter to University of York Vice-Chancellor

Dear signatories

Thank you for sending me the Open Letter. I appreciate its constructive tone and am responding with this message. I don't normally respond in this way (I get a lot of letters and petitions!), but I also share the sense of exasperation that the sector finds itself in continuing industrial dispute. To move beyond this situation will need all those involved to take a different approach. As I read it, your Open Letter appears also to signal that need. I will return to this point at the end of my response. 

Pay, casualisation and pay gaps

But let me first address the three suggestions you make. Let me begin by addressing the second and third of these suggestions, as my response to them is a straightforward ‘yes’. 

As some of you will know, I have been canvassing support over the last couple of months for a proposal on how to approach the issues raised in the UCU dispute with UCEA on pay and conditions (the ‘four fights’) in a new way. Until now UCEA has not been mandated by employers to negotiate on anything but pay levels, therefore excluding from national negotiations the other issues -  casualisation and pay gaps - you raise in your second and third suggestions. Since conversations about this year’s pay round began in earnest early this year, I have been arguing for a packaged negotiation which would have three strands:

1. On pay, we do need to recognise that the pressures on take-home pay driven by increases in the cost of living have to be part of the discussion on the pay settlement this year. I am also in favour of negotiating a carefully designed, multi-year settlement, which would give us much-needed stability.
2. I am in favour of including the other three ‘fights’ - on casualisation, pay gaps and workload - in national negotiations, with a view to establishing a framework of principles which would draw on the good practice that exists in the sector. Our collaborative approach at York has enabled us to make real progress on casualisation, led to a better, shared understanding of drivers of pay gaps so we can now take effective action, and begun to shape a conversation on workload. There is more to be done, but what we have done can, I think, help to define principles that could be used across the sector. 
3. I also think there needs to be a third strand of discussion. The Government recently announced that home tuition fees will remain frozen. With inflation at its current rates this means a very significant real-terms cut in university income. This puts pressure on university budgets generally, as inflation raises their costs, but especially in universities where home tuition makes up a large proportion of income. Some universities will have difficulty affording any pay rise. So I think the third part of the national package needs to include a commitment at the local level to discussions on cost containment. I have suggested space usage as a promising area to look at. Buildings are generally the second-biggest cost universities have after pay. We have come to use our buildings differently because of Covid, and all universities will need to think carefully about space usage to meet their environmental targets. All this can help contain costs - so let’s put that on the table too.

A three-strand negotiation can help bring more to the table than a narrow discussion on pay alone, and enable common ground linking across different headings to be identified - perhaps opening up a route to a more easily agreed, shared outcome. 

These are ideas that I have discussed over the last couple of months in my regular engagement with local UCU representatives, in associated conversations with the other campus unions at York, in my latest round of open meetings in departments, and in conversations with a range of student groups. The response has generally been very positive. 

I have also proposed them in conversations with UCEA and with other Vice Chancellors at UUK and Russell Group meetings, and will continue to do so. I will also look for opportunities to promote these ideas in national sector media.

USS

My response to your first point on pensions is more complex. The outcome to the 2020 valuation agreed at the JNC will be implemented as of 1 April. It will reduce benefits. I understand that this is a painful outcome which has caused considerable anxiety and anger, not least because the package of proposals put forward by UCU nationally appeared to make a different outcome possible. 

I considered those proposals in detail, along with the other associated materials produced by USS and UUK. I came to the conclusion that the assumptions underlying those proposals were not robust enough to contain the risks they presented to both employers and members. 

Let me take this opportunity to explain my reasoning, before moving below to look ahead to the USS question over the next year or so.

The table below sets out the three elements of UCU’s proposal and - in my words - the assumptions they made.

Turning to the first part of the proposal, neither UUK nor UCU can compel USS to conduct a valuation. To quote USS in a document made available to UUK and UCU, “We do though note that, it is the Trustee (rather than either stakeholder or the JNC) that has power under the legislation to call a valuation.” So there was never a guarantee that a March 2022 valuation could go ahead - and, to be clear, UUK has no more access to and influence over USS to suggest valuations than UCU does.

On the second part of the proposal USS clarified in the same document that were a valuation nonetheless to go ahead “our initial assessment is that it would be extremely challenging to complete the required processes for a 31 March 2022 valuation in time to intercept the contribution increases that would otherwise apply from 1 April 2023 onwards.” So the timescale suggested in the UCU proposals was never secure.

There is also important additional context to the third part of the proposal. UCU published a USS update on the asset base of the scheme on 20 January which estimated a significant improvement of around £25B. This I know was received positively by many as it appeared to confirm that the timing of the 2020 valuation - at the start of the Covid pandemic - was unfortunate, understated the real strength of the scheme, and justified the call for a further valuation at a less exceptional moment.

However - and I do feel USS was deeply unhelpful here - the USS did not publish an update on the other side of the equation, that is the costs of existing and future pensions, until 16 February. To quote from that document:

“ … assets are just one part of the overall picture.

While our assets have increased in value, so too has the cost of funding the pensions already promised to members (our liabilities) – and so has the cost of funding new pension promises (the ‘future service cost’).

That’s largely because:

• expectations for future investment returns are now lower (meaning that more contributions have to go in to get the same amount out at the end); and
• inflation is now expected to be higher (and the pensions promised to USS members are currently increased every year broadly in line with inflation).”

In other words, with the full information published on 16 February, a March 2022 valuation might not have led to a substantially better outcome than the 2020 valuation (the ramifications for finance markets of the appalling situation following Russia’s invasion of Ukraine also suggest that March 2022 is not a propitious moment for a new valuation).

So even if USS decided to conduct a 2022 valuation, its outcome could well have left us all in more or less the same position as the 2020 valuation, with one exception: we would be at least two and possibly more steps up the contributions escalator by the time this became clear. And with a similar valuation outcome in prospect there was no guarantee that UUK and UCU would agree on a course of action, risking further steps up that escalator towards the maximum level of 29.1% employer and 13.9% member contributions, which would have been extremely difficult for either to bear. 

In those circumstances there would be real risk of some employers withdrawing covenant support and of higher opt-out rates among members. Either would raise questions about the viability of the scheme. For me the risk of this happening was too great for this University to give support to the UCU proposals. 

I hope these clarifications are helpful.

Looking ahead

The onus for me is now to look ahead. I would like to share a number of thoughts, which push beyond those you raise in the Open Letter. These are thoughts which, again, I have been discussing with UCU branch officers, in departmental meetings, and with student groups. 

The next scheduled USS scheme valuation is March 2023, in twelve months time. My first suggestion is to commit now that any upside compared to the 2020 valuation is used to increase benefits. I am happy to make this commitment - and understand that UUK negotiators have made the same commitment to national UCU negotiators.

But I think more needs to be done in that 12-month period. Let’s use those twelve months to break out of the cycle of repeated dispute we have seen on USS.

We won’t do that just by rehearsing the same old arguments. All parties need to be ready to break from how they have looked at things in the past. We need to work together, across all the current divides, to get a better grip on USS. 

I’m a fan of the Joint Expert Panel and especially of the point in its first report when it basically said we run the risk of the sector being run in the interests of its pension scheme, rather than the pension scheme reflecting the interests of those who fund it: members and employers.

That will not easily change until representatives of members and employers, UCU and UUK, are able to articulate a joint view on how the scheme should work. That’s partly a question of accountability. Many in the sector - employers and members - feel the USS has no real accountability to them. As a result USS has lost trust. UUK and UCU need to put that right by together setting clearer expectations for USS to respond to, and then to make sure it does.

And we need to be open to thinking about scheme design in ways which might free us from the triennial turbulence we currently endure. Is conditional indexation the answer? Well, there are enough in UUK and UCU who think it might be for us to look at it carefully. So let’s do it, and quickly.

And there are also plenty (pretty much everyone?) in UUK and UCU who think it more than wrong that so many lower paid colleagues have opted out and continue to opt out of USS. These are colleagues who are most likely not making other pension provision. We absolutely have to introduce a lower cost option to get them back into the scheme, and to ensure future colleagues feel able to join.

None of this should wait. All of it needs urgent work now. We can’t leave it till after the next valuation, because it can help shape the next valuation. And if we work together to shape the next valuation, we might all be more easily ready to respond to its outcome without another cycle of dispute, division and disruption.

Who’s up for that? I think we should all be - and I think that our tradition of constructive local industrial relations here at York gives us an opportunity: to offer leadership by doing what we can through our respective channels to influence national-level debates in constructive directions.

Best Wishes, 

Charlie