A Financial History of Cambridge - Comments

Nothing like this for Oxford yet.

Not much has been published about the financial history of Oxford and Cambridge.

The exception that proves the rule is a book by Robert Neild (Fellow of Trinity College, Cambridge and Emeritus Professor of Economics) about The Financial History of Cambridge University reviewed in Oxford Today (November 2012).

This book was published by the Thames River Press, the website of which makes clear it specializes in recherché books. The Press reports that it relies heavily on its authors to do their own book marketing.

Meanwhile no similar history seems yet been published about the finances of Oxford, other than in a section of a book about the Oxford University Press. What is readily available is an aggregated endowment comparison showing Cambridge in first place among UK universities with an endowment of £4.9 billion as of 2013. Oxford is in second place with £4.03 billion; both university totals include their college endowments.

The lack of data is important, because negative consequences for students and faculty follow from the financial starvation of educational institutions or the misdirection of resources.

Alumni are in a position to improve that situation. Higher education has long been supported by democratic governments. Educated giving is twice blessed - for the graduates who give and for the universities who receive.

The Three Ages of Cambridge Finances

Neild writes about three ages of Cambridge University financing. I will give them my own names:

• Medieval - from the original march of disgruntled Oxford scholars to the fens up to, say, 1939.
• Meritocratic - from World War II to Margaret Thatcher.
• Bitterly disappointing - from Thatcher's initiation of greatly reduced funding and tighter controls to the present.

Comment

I comment from the perspective of someone who has spent a lot of time officially reviewing government and nonprofit budgets - and unofficially as a curious student of university budgets and endowments on both sides of the Atlantic.

1. Medieval Practices - from the Migration of Oxford Scholars to 1939

The thrust of Neild's financial history seems to be that prior to World War II, both Cambridge and Oxford engaged in medieval practices compared with their modernizing private-sector contemporaries. The sunlight of information penetrated a growing share of capital-driven businesses,  but ironically not so much to the shadows of academic enclaves.

University investments tended to be in land, and agricultural land was still preferred - Cambridge and the colleges were slow to move away from physical estates to stocks and bonds. The name "Estates Bursar" is still used widely for the person who manages college endowments, an indicator of colleges' continued, perhaps wistful, focus on property rents as a source of non-tuition income.

For the 37 years between 1883 and 1920, agricultural land was not a reliable investment. The clever investing in stocks initiated by John Maynard Keynes at King's College was a rarity. Trinity College, Cambridge was just lucky, says Neild, that its exchange of one poorly performing agricultural property for another better-performing one turned out to be a financial coup. The 7th Duke of Devonshire showed what could be done by investing in steel and ship-building, and his money financed the Cavendish Lab.

Neild says that tuition policies were egalitarian. In 1842, a nobleman paid £16 in tuition whereas a student on financial assistance paid 15/-.  Fundraising is nothing new - appeals for aid were frequently made to those with deep pockets.

2. 1940s-1970s (World War II to Thatcher) - the Golden Age of Meritocracy

The equalizing influence of World War II led the British Government to seek to make the country's higher education system more meritocratic, and funded students to go to university.

Universities had suffered from price inflation during the war, and the British Government - like the U.S. Government with its G.I. Bill - sought to reward its military veterans, those who survived, with access to higher education.

The system of financial support for scholars that the postwar British Government put in place, along with National Health, came with some general guidelines to ensure that the elite universities were admitting their share of worthy commoners.

At some Oxbridge colleges (I know Trinity College, Oxford was one), dons seeking a more diverse student body went round to grammar schools to encourage them to attend their college. If it was a golden age, it was because the universities were given a third-party-funded source of tuition income from a broad range of graduating secondary-school students, and Oxbridge could pick from the best and brightest.

No wonder the medieval custom of appealing for money from well-off Old Members fell into disuse. (When I told an incoming President of Trinity College, Oxford that I, as the College's Rep in the USA, wrote an appeal letter in November every year on behalf of the college to American alumni, he asked me, seriously: "Why do you do that?" I have been assured that none of the Presidents since that one would ask this question.)

3. Since the 1970s - Bitter Disappointment

Neild was appointed a Fellow of Trinity College, Cambridge in 1971 and may be reflecting his own disappointment in describing what happened to Cambridge finances in the third phase. When "Iron Lady" Margaret Thatcher became Prime Minister in 1979, bent on making Britain more efficient and reduce the burden on taxpayers, she was determined to make higher education less dependent on government aid.

She - and subsequent Prime Ministers - told British universities that they should emulate the American model and view perennial fund-raising from alumni as a natural way of getting back from university graduates the proven contribution to their lifetime incomes of a university education.

Government grants to universities for research were subjected to more rigorous competition at the same time as money was cut from tuition support.

An increasingly desired attribute of a prospective Head of College was an ability to bring in money from alumni, corporations, foundations or governments. Universities by the 1990s had formidable fund-raising arms, replicated at the college level by alumni relations officers and development officers.

While a new equilibrium may be emerging, and recent fundraising successes at both Oxford and Cambridge suggest that they have adapted well to the post-Thatcher climate - newer universities are having a more difficult time - the new environment may not be to the satisfaction of those who liked the Golden Age.

Certainly, something had been lost from the calmness of the pre-Thatcher days when careers of all kinds were less competitive and academics one could think at one's own pace and with a wider latitude for eccentricity and introversion.    

Financing of the Cambridge Colleges

Neild's comments about the financial practices at King's College under Keynes and at his own college, Trinity, have led me to wonder whether it would be possible to compare the Cambridge colleges over time.

As a first cut at this question, I have used a spreadsheet to look at data on the fixed assets of the Cambridge colleges based on how old they are, using Neild's cutoff of World War II rather than the traditional distinction at Cambridge between the 16 "old" colleges being only the ones founded before 1596.

My hypothesis is that the older (pre-World War II) colleges were better able in general to cope with the cuts during the Thatcher era because of their larger resources, but that some newer colleges with special missions had a few advantages because they were known to be addressing weak points in the Cambridge university college structure, such as lower accessibility to higher education for women and older students.

In about 2006 - based on available data - Cambridge colleges had 11,802 undergraduates in residence and 6,489 graduates - 18,264 total students (components don't add up because students can be counted twice if they change status during the year).

The colleges had £4,375 million in fixed assets. In the United States, we would call that £4.4 billion - an average of £240,000 per student.

Of the total fixed assets, £3.9 billion represents the fixed assets of the 21 colleges established before World War II. That amounts to an average of £187.2 million per college.

The next group of colleges are three established as institutions in the City of Cambridge but not brought within the university until after World War II. These three colleges had an average total fixed assets of £61.8 million.

Finally, seven colleges were newly established since World War II. They had average fixed assets of £37.1 million.

I plan to drill down on this some more, but in the meantime would be interested in comments - either posted, or sent direct to me at john (at) cityeconomist.com.