Notes to the accounts

Academics really should read the accounts of their institutions; They can be wonderfully illuminating. In the case of King’s College London, they are particularly so.

The question which hovers over its decision to go ahead with cuts is – why so quickly? A few other institutions have made moves to cut back already, but these are, for the most part, small and particularly vulnerable to the way the government is targetting its reductions. King’s is not – or should not be – in this category.

Except, that is, for its debts, which seem to be surprisingly high. Footnote 16 on page 38 of the notes to the 2008/9 accounts helps out here. Long-term debts total £173 million. A note to the note explains that the bulk of this was borrowed in two tranches -- £60 million at 6.22% in 2001, and a further £60 million in May 2008 at 4.855%. A further £42.2 million is repayable in installments between 2010 and 2027. Until it is repaid, this attracts interest payments of between 6.75% and 9.60%. The debt is secured on property which is now sinking in value.

For comparison UCL has debts of £81.5 million, on an income 50% higher. Imperial’s long-term debts are comparable, but again its income is much greater.

Interest payable on this is now £12.665 million a year (up from £10.866 million the year before). In addition, there is repayment of principal of £2.87 million and repayment of the capital element of finance leases of a further £2.43 million – a total of £17.955 million.

What this all means is that in 2008, when it was already clear that a recession was coming and a squeeze was near certain, King’s took on new debts requiring annual payments of £2.91 million a year, in anticipation of government grants and donations – it wanted to spend the money now, not wait until it actually had it. (For comparison, it wants to save £2.4 million from the humanities). A cautious management might have put this entire programme on hold at this point, but King’s did not.

The problem is that these anticipated grants and donations to pay off the debt may no longer be forthcoming. Essentially, to meet the cost of its development programme, King’s is now cutting back on teaching and research to make ends meet. A bit like the government itself, the management of King’s bet that the good times would roll on forever. They didn’t.

-- Iain Pears