Vice-Chancellor's Oration 2001 - (1) to No 4597

<br /> Oxford University Gazette: Vice-Chancellor's Oration 2001<br /> (supplement)

Oxford University Gazette

Vice-Chancellor's Oration 2001

Supplement (1) to Gazette No. 4597

Wednesday, 10 October 2001

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2 October 2001

I must begin this year's Oration by recalling the tragedies that befell the
United States on 11 September. The relationships that bind this University to
North America are long-standing, multiple and intimate—whether
through the Rhodes Scholars and the many other students who have and still
do come to us from the United States, or through our own students who have
gone on to study or work there, or else the shared experiences of research
collaborations, academic exchanges and visits, or finally the many personal
relationships that we have there. As an institution and as a community, we do
not remain untouched by these events. I do not yet know exactly how many
Oxonians died. However, there are those among us who knew one or more
of the victims; there are many of us who are affected directly or indirectly by
what has happened; all of us are moved by it.

Even if we did not have such a particular link, we could not as a
University remain indifferent. The barbaric character of these acts strikes
against the core values which a university exists to explore and defend. In
present circumstances, we should remember the central aim of our University,
both senior and junior members alike. Our purpose is unprejudiced enquiry
into the true nature of things; our purpose is to recognise and seek to
comprehend the extraordinary complexity of the physical, social, emotional,
and spiritual worlds and of the relationships that compose them; our purpose
is to understand that which we do not understand. It may be that difficult
times lie ahead of us. If so, it is important that we hold fast to first principles
that are as universal as we can make them. Among these, pre-eminently, is
the principle that we do not discriminate among our own members—or
others—on the grounds of ethnicity or religion. We are all here to
understand that which we do not understand. Crude rejection of difference out
of prejudice simply has no place in a university; nor does the ignorant refusal
to listen to other views lawfully expressed. That does not mean that we
condone crime or qualify it.

The past year has been marked by both continuing achievements in
pursuit of the goals of the University and also difficult consequences of
growing financial constraints. I will return to the latter further on in this
Oration; but let me begin with some enduring and some new themes.

This first year of activity under the new governance structure has
naturally had a somewhat experimental feel as new bodies have found their
feet and tested new processes. Additional pressure on the new organisation has
certainly resulted from further financial constraints coinciding with the
elaboration of a new resource allocation model. Nonetheless, the divisional
structure has performed well in this situation and thereby showed its strength
for the future management of the University's academic business. We should
not lose sight of that in the more immediate concerns of the present and in the
various practical questions thrown up by the transition. Divisionalisation does
require adjustments in the conduct of academic business because it is designed
to place more financial and planning responsibility for the shaping of academic
decisions in the hands of the academics most informed about and concerned
in the current and future directions of their fields.

Divisions have not organised themselves each in exactly the same way,
and that seems entirely appropriate since the University is not uniform in the
nature of its activities and forms. Naturally, there are new relationships here
and they may occasionally feel awkward in their novelty. Nonetheless, I have
the strong impression that new energies are being released in many parts of
the University. I see Divisions beginning to think strategically, creating a
number of new opportunities, and engaging with our changing environment
(about which I have spoken in previous Orations). Of course, the transition is
not yet complete. We have been operating on the basis of budgets and
purposes derived from the General Board; the cycle of planning against
resource, which has always been central to the new structure, will be
completed during the coming year.

I think that it is important that we recognise how much of a burden has
been assumed this year by the new Heads of Division and also by the
chairmen of departments and faculty boards. We do owe the Heads of
Division a particular debt of gratitude for seizing so energetically the
challenge of bringing a new structure into life; but we should recognise that
both they and the chairmen have had a hard year and that the coming year will
have further burdens.

As for the centre of the University, new bodies have also been finding
their feet in new ways of addressing matters. I feel that here too the focus of
decision-making has become sharper, as the division of activity between the
new committees of Council has allowed more continuous attention to each
broad area of business. This has been seen most clearly perhaps in the
Educational Policy and Standards Committee, through which we are now able
to give consistent attention to questions which have become more critical with
the changing demands placed upon us as an institution. As symptoms of the
effectiveness of the new central organisation, I might choose two small
examples—leaving aside the larger issues to which I refer later. First, in
response to the requirements upon which HEFCE's three-year funding
initiative `Rewarding and Developing Staff in Higher Education', the
Personnel Committee (another body gathering functions previously dispersed)
was able to produce one of the very few Human Resource strategies from
universities which were deemed `full' rather than `emerging' (and thus subject
to further negotiation). Second, under the guidance of the Principal of
Linacre, we have been able to construct a specific budget for the whole
service sector of the University. This had never been done before, since much
of this expenditure had previously been dispersed among other budgets on an
historic basis. Now, of course, these are technical matters for which many
colleagues may feel as much enthusiasm as they would for a seagull during a
hot afternoon at the beach. However, they are indications of the capabilities
of our new structure for the management of our affairs.

Naturally, the first year of operation has thrown up some issues for
reflection and elaboration, as it has in the Divisions. The dominance of
resource questions this year has seemed to give the Planning and Resource
Allocation Committee the character of an embryonic renewal of the General
Board. It has to resist this tendency and not seek to deal with more than the
financial aspect of matters that properly belong elsewhere—and this
should be easier when the financial structure becomes more settled. The
Educational Policy and Standards Committee has had to discuss some
interesting questions concerning the definition of university and divisional
responsibilities in the devolved management of academic matters. Finally,
when we come to review the new structure at the appointed time, we shall
have to consider how we may better include more colleagues from outside the
rather small reservoir of Council members in the business of the central

Let me conclude this section by recognising also the considerable burden
shouldered by the Pro-Vice-Chancellors as they have competently developed
the areas that have fallen to them—Professor Susan Iversen with Planning
and Resource Allocation, especially the elaboration of a new resource
allocation model to which I shall return shortly; the Principal of Linacre with
Services, especially the matter to which I have already alluded; and Dr Glenn
Black with Educational Policy and Standards, with not least among his tasks
the issues raised by the QAA. To them, I should add the Principal of
Somerville who has chaired the Personnel Committee.

So, I may say that the University has travelled a considerable distance,
though not yet the whole way, towards the goal of a renovated structure of
governance, indicated by the Commission of Inquiry in 1997. A different step
in that direction has been actively pursued this year. The Principal of St
Hugh's and a small working party (consisting of the Master of St Cross and
Professor M.R. Freedland) has been drafting a considerable revision of the
University's Statutes and Decrees. Our existing Statutes and Decrees present
a complex geology of accretions and adjustments over time. As a result they
are unnecessarily complex, in places contradictory, in places opaque, often
difficult to penetrate, and containing much material that could be better held
in another form. The working party's objective has been, therefore, to
simplify, rationalise, and, in places, improve or update the provisions. The
new text has been distributed to each member of Congregation over the
summer for consultation. I hope that colleagues will make comments without
delay at the beginning of this new academic year. Congregation should
consider the matter this Michaelmas Term if we are to hope to obtain the
necessary Privy Council assent for the next academic year. I shall, I hope, be
in a position to recognise formally in my next Oration the very substantial
effort that the Principal and his colleagues have put into this.

Among other themes that have acquired a perennial status in my
Orations, I should refer to the issue of Access. In February, the Education and
Employment Select Committee of the House of Commons published the report
of its Education Sub-committee's enquiry into Access. It found nothing to give
credence to the abundance of high-flown rhetoric, though it expressed some
uneasiness about college-based admissions systems and made general
recommendations about interviews. Judging by applications last autumn,
potential candidates were not much moved by the fuss earlier in the year. The
proportions of UK students entering as undergraduates this Michaelmas Term
2001 are 53 per cent maintained sector and 47 per cent independent sector.
This represents a reversal of the proportions in 1993, and refutes the
simple-minded who suggest that this University has only acted under recent
pressure from government. Pupils within each sector now stand precisely the
same chance—42 per cent—of applying successfully to the
University. Indeed, I must restate here (as I did for the Select Committee) that
we have a long record of initiatives over Access. In this context, I may
celebrate the most recent example in the joint Colleges--University initiative
to establish bursaries for students whose family income is less than £20,000
as evidenced by the remission of the self-paying fee. This represents a
considerable effort by the collegiate University, funded in part by benefactors,
to encourage able students from backgrounds which do not predispose them
to think about Oxford or even, perhaps, about travelling to university outside
their region. It is a clear response to one of the disincentives most clearly
identified by the research commissioned by the Working Party on Access and
it sits well alongside our many other initiatives, such as the considerable
development of Summer Schools which Oxford was the first to develop and
which became the model for one of the government's funded initiatives.
Furthermore, HEFCE's allocation of Aspiration Funding for the next three
years will allow us to improve the infrastructure, provide new initiatives, and
complete the implementation of the Working Party's recommendations.
Finally, a new Admissions Executive has been put in place this year under the
chairmanship of the Principal of St Anne's.

We can therefore justifiably be in good heart over Access. Nonetheless,
we should not see here any reason to relax our attention to this issue. As a
University, we do clearly desire to recruit the most able students irrespective
of their educational or social background. We do therefore need to continue
to be attentive to enhancing our ability to attract applications from them and
to make a well-grounded choice among them. Since that is our objective, we
may regard the government's continuing interest in this issue with equanimity.
Indeed, though the attractions of American universities for British
school-leavers have received media attention, I may say that this is a two-way
traffic. The new academic year will see an American school-leaver from near
Philadelphia beginning her undergraduate studies in Physics here, having
rejected a place at MIT. I should add that her interest was stimulated by
visiting our Web site and was pursued through the Internet, and that she made
an open application rather than one specifying a college. How fragile the
stereotypes about us do seem.

We have this year seen some major projects brought to completion and
some new ones initiated. The new building for the Saïd Business School has
been handed over to the University by the Saïd Business School Foundation
and the School has been moving in over recent weeks. There will be a formal
opening during the coming academic year at which the University will be able
to express in proper terms its delight at and gratitude for this outcome.
Indeed, this moment brings to fruition a project which has run over three
Vice-Chancellorships and has not been without its dramatic episodes. It is
important for us to recognise here not only the substantial generosity of Mr
Saïd's benefaction to the University in the gift of this building, but also the
generosity of spirit with which he has sustained his intentions over the course
of this project. I must express here—as I will again at the formal
opening—the University's gratitude for this benefaction. I should also
salute on this occasion other benefactors whose generosity has contributed to
bringing this building into existence: most notably, Lord Sainsbury of Preston
Candover and also the Rhodes Trust. Indeed, the building is a significant
addition to the University's architectural stock. At the formal opening, but not
only then of course, the members of the University will have the opportunity
to appreciate the alliance of architectural strength, designed fitness for
purpose, and attention to detail that characterise the interior of the building.
Furthermore, the building does provide space for future expansion of activity,
which is something that we so often do not have the ability to provide in new

The Saïd Business School building is not only an addition to the
University. It also makes a substantial contribution to the city. It is evident
that this development is a powerful impetus to the regeneration of this area of
West Oxford which one can see beginning to take shape. In this, the
University is continuing its historic and creative function of both contributing
to the physical aspect of the city and being a positive influence on its

I should remark in passing on the growing success of the School as it
moves into this building. This was the first year that the young School has
been able to participate in the international rankings. It has immediately
moved to thirty-fourth place in the world, second in the UK behind the
London Business School and first in the UK for one-year MBA programmes.
The decision taken a number of years ago to develop a business school and to
do so resolutely inside the University rather than self-standing was a
challenging one. The evidence so far is that the challenge is being met
successfully. I believe that with the Saïd Business School on the one hand and,
on the other, Templeton College and its roots in the earlier Oxford Centre for
Management Studies, we have a resource of great potential for the
development of a commanding place in the academic study of this domain as
well as the delivery of a distinctive MBA.

Two other long-standing projects have also been brought to completion.
It was only a few days ago that we held the formal opening of the Sackler
Library, which brings together five of our collections to form one of world's
most comprehensive academic resources for the study of ancient mediterranean
civilisation. This is the first purpose-built library in Oxford for many years
and it provides not only relief for those who use these collections but also a
necessary investment in the vitality of the Humanities. I must recognise here
the generosity of Dr Mortimer and Theresa Sackler, whose benefaction
enabled this project to be completed, as well as that of Edgar Wind without
which we could not have begun. Standing in the courtyard between the two
drums, so to speak, large and small, one cannot escape the feeling that here
again the University is making a significant architectural statement. All that
I have said earlier can be repeated here.

Indeed, when one turns to the third major university building opened this
year—the Rothermere American Institute—one realises just how
diverse in character, though not in quality, is the impact of our new building
on the University and the city. This is to my eye another remarkably
handsome building and one with a most intelligent design for its objectives.
Once again, this is a project whose realisation has stretched over three
Vice-Chancellorships. Once again, we are indebted to the great generosity of
benefactors. I mean most particularly the Harmsworth family, who have thus
added to their long and close relationship with this University, and also the
Rhodes Trust; but I should not forget the many individual American Rhodes
Scholars who supported the initiative. Finally, I should pay tribute to the
Warden of Rhodes House, without whose attentive activity the project could
well have had a more laborious birth to the disadvantage of the University,
and in equal measure to the Warden of New College who, as the Director of
the Institute, has accepted the responsibility for bringing the life and
excitement of new programmes to it. Indeed, the University has here a
remarkable opportunity—an opportunity, first, to develop the most
significant international centre in Europe for the study of North America and,
second, to innovate in the creation of interdisciplinary programmes among the
Social Sciences and the Humanities. I look forward with interest to the ways
in which this opportunity is seized. The prominence and dimensions of this
opportunity were made apparent by the fact that the building was formally
opened by the former President Bill Clinton, whom we were pleased to
welcome back to Oxford.

Unlike completed projects, new departures often begin as holes in the
ground. Among those which have appeared this year, I mention one small and
one large. The small one presages the building of a university swimming
pool—an ambition longer held than any I have evoked so far, since it
was already being spoken of when I was an undergraduate in Oxford. I hope
not to tempt fate if I say that I look forward to being able to announce its
completion before I leave Oxford.

This small hole is destined to remain a hole, albeit furnished. The large
one, by contrast, leads to the re-provision of the Chemistry Department's
research facilities. This £60m project is the most ambitious redevelopment in
the Sciences that we have undertaken in the last few decades. It is an
important step not simply because it responds to the inadequate and out-of-date
infrastructure in one of the core areas of the Sciences, but also because it
provides timely flexibility as the contours of this subject are shifting in some
dynamic ways. I spoke in my last Oration about the award of the largest grant
made under the JIF programme. I can now report that the substantial
remainder of the cost has been covered principally through an agreement with
the Beeson-Gregory Group, an investment bank. I would make three remarks
about this. First, the Beeson-Gregory agreement was an imaginative and
innovative step, which attracted much attention and has been seen as leading
the way in higher education sector funding partnerships. Second, from
conception to completion (including especially the raising of a large capital
sum, by British university standards), this project has proceeded very rapidly
and this serves to demonstrate once again that reality does not here conform
to stereotypes. Third, it seems to me that these features are to the credit above
all of the Chairman of Chemistry, Professor Graham Richards, whose
leadership here we should acknowledge. It would be right also to recognise
the role of the Registrar in bringing the complex issues surrounding the
Beeson-Gregory initiative to a beneficial conclusion.

A third new initiative has prospered even faster this year, moving from
conception to funding within about six months. This is the Oxford Internet
Institute, which was brought to fruition above all by the energy of Mr Andrew
Graham, now Master of Balliol, whose role I am pleased to acknowledge. The
Institute has been funded by a generous endowment from the Shirley
Foundation and by a significant five-year grant from HEFCE. It represents
another opening onto a wholly new area of study and one which lends itself
pre-eminently to interdisciplinary approaches in the Social Sciences (the
technology being excluded from its remit). The Internet has transformed
almost every aspect of human private and social life, as no doubt the rapidly
developing successor forms of electronic networking will continue to do. The
questions that this transformation poses are multiple, complex, and crucial to
the conduct of our world. So many vested interests are bound up in and live
by this phenomenon that there is a major need for impartial and intelligent
analysis as well as independent advice to those who make policy. The Institute
does therefore, I believe, place Oxford clearly at the forefront of this highly
important global domain. It underscores the degree to which the University is
engaged in one of its prime responsibilities of relevance to the contemporary

The initiatives to which I have been referring all relate to the
University's general strategic objectives which I have discussed in my two
previous Orations: that is to say, the maintenance of our capacity as a leading
international university by, in these particular cases, enhancing an appropriate
infrastructure and investing in new fields of activity. In the same general
context, I should make brief mention of the fact that the new term sees the
arrival of the first overseas graduates in receipt of support from the Clarendon
Fund, established with part of the Press transfer. I should also record that we
have received a benefaction to establish the Waverley Fund to provide
financial assistance to candidates, primarily from outside the European Union,
who wish to read for graduate or undergraduate degrees.

This international theme finds another expression in the relationship that
has been developing this year between Princeton University and ourselves.
Arising out of the wider possibilities that Professor Cantor and his partners in
Princeton perceived while building a research collaboration, this has been very
much a recognition of matching minds and temperaments. It has quickly
become apparent that a particular affinity exists between the two universities
in the values to which we subscribe, our conceptions of learning and teaching,
and our sense of the purposes of education, as well as considerable
compatibility and complementarity in the balance of Arts and Sciences and in
the range of research interests. Naturally, there exist many fertile and valued
relationships and collaborations between individual elements in Oxford and
other American universities (and elsewhere). There can certainly be no
intention at all of interfering with or inhibiting any such initiatives now or in
the future on either side, for that broad compass of diverse collaborations
around the world is the very stuff of a university like ours. Nor, indeed,
should anyone feel any sense of obligation to participate in arrangements that
develop through this relationship with Princeton. It is simply a matter of
facilitating those who do see mutual benefits, based upon the real convergence
between the two institutions.

We have identified so far three areas of collaboration. Two of these
have to do with research whose outlines have been developed quickly,
particularly through the activity of Professor Cantor and also through visits by
members of steering groups on each side. First, thirteen joint Princeton--
Oxford groups in both the Arts and the Sciences have identified themselves
and have been further elaborating their proposals and testing their feasibility.
We hope also for the exchange of graduate students, connected primarily but
not necessarily with these collaborative programmes. Second, we have agreed
to identify facilities to which each side can have special access and for which
they will jointly seek funding. The process of selecting these will begin once
we have established more firmly the programme of joint research proposals.
The advantages of these initiatives for both sides are evident. There is great
potential for synergy between two universities of great reputation;
collaborative research can conjugate complementary skills and infrastructure;
our ability to attract talented graduate students will be enhanced; joint
programmes and shared facilities multiply the opportunities for research and
capital grants.

The third area of collaboration concerns the exchange of undergraduates.
This matter is at the stage of discussion and is focusing on the potential for
exchanging about fifteen or so undergraduates in all each year from a few
degree courses. Of course, there is a number of issues to be addressed: for
example, the different structure of the academic year between the two
universities, the interests of colleges, the syllabus requirements of departments
and faculties. However, I do hope that colleagues will look very seriously at
this opportunity and, where possible, welcome it with enthusiasm. It involves,
of course, a rather small number of students. But I do believe that we should
be attentive to the virtues of offering some more possibility for study abroad.
We do have some experience of it: if I leave aside the special case of Modern
Languages, there is Law in Europe. I hold the view myself that there is a
good argument for seeing this as a good in itself, provided the context is well
designed; it is perhaps even more so in the sort of international world into
which our graduates now go. Even if one were to speak only in terms of
institutional self-interest, there is good evidence that potential students
(especially those of talent, ambition, and energy) are attracted by such
opportunities; it may well be that we are losing some whom we would hope
to recruit. Princeton shares with us a particular attachment to undergraduate
education and attention to the undergraduate experience. We do these things
somewhat differently from each other. I am sure that just as Princeton students
would benefit from Oxford, so too would our students benefit from

I am accustomed in the Oration to record some of the more individual
achievements of colleagues and groups during the year. However, I should
heed the Public Orator's complaint in the Creweian Oration about the overlap
between our speeches and point to his report of many of these achievements,
printed in the Gazette earlier this summer. Nonetheless, I should
note that the latest figures on research income show that we are again the
largest earner of research income in the United Kingdom and that annual
research income has doubled over the last decade. There are some curious
paradoxes here to which I shall return. Similarly, the University was this year
awarded £43m for science infrastructure from the SRIF, though here again it
must be said that the impact on the University in financial terms has been
diluted by the obligation to provide 25 per cent of the capital cost.

This is a general testament to the quality of research in this University,
which is amply borne out by other evidence. Let me just add that other new
multidisciplinary initiatives and completed facilities join those I have
mentioned earlier: an Institute of Ageing in the Department of Sociology, a
Faraday Partnership on environmental pollution, a major Consortium in
Bionanotechnology; two new galleries in the Ashmolean, the launch of the
Nomura Centre for Quantitative Finance, the completion of the multi-volume
History of the University of Oxford, a new floor at the Oriental
Institute for Hebrew and Jewish Studies, a new resources service for the

With the final part of the Oration, I turn to issues of resource. Let me
begin with the allocation of resources. During the consultations over the new
governance structure, it became very apparent that there was a widespread
demand for a new resource allocation model in many parts of the University.
There was a strongly held view that a new governance structure based upon
the principle of devolving to Divisions a large measure of responsibility for
academic activity and planning together with the resources for that purpose
necessarily implied a more transparent model for defining the basis on which
resource is allocated. This was an extremely strong argument, since the new
organisational structure was incompatible with the old method of funding, and
would have led to considerable dislocation and lack of co-ordination.

Furthermore, the management of the University's resource allocation
and budgeting has not been hitherto particularly transparent. One can perfectly
well argue that there are virtues in some lack of transparency, especially
where it allows central bodies to move resource to needs they perceive without
offering clear account of that. Nonetheless, the University has not been
accustomed to considering all its income and expenditure as a whole.
Responsibility for allocation has usually been divided and it has often been
difficult to obtain an overall picture of the level of resources being allocated
to a given activity. It has been exceptionally difficult to identify the precise
character of the costs of an activity or to understand completely the impact of
any particular initiative. One example of this is the absence hitherto of a
single cost-based budget for academic services, which I mentioned earlier. I
might add that whilst these self-critical observations are important, we should
not think that we are alone amongst leading research universities in facing
these problems: the national Research Transparency Review, and other
initiatives on costing and pricing in higher education, are designed to tackle
these points, and Oxford is playing an active role in both areas.

Two consequences flow from this situation. First, without much
increased transparency, the University is not able to identify costs and control
them in anything other than a crude manner. Second, it cannot provide agreed
incentives for activity nor hope to see adequate formulation of strategy nor
support the process of detailed spending decisions by Divisions. It is especially
necessary to improve this position in a context where we can have little
expectation that funding, and especially core funding, will grow
sufficiently—if even at all—to match legitimate aspirations and the
potential for academic development. Were these considerations not enough,
we should recognise that outside pressures are driving this way too, as they
associate public funding with requirements for transparency. At root, meeting
both our internal needs and the external requirements depends crucially upon
the generation of accurate data on financial, staffing, and student matters. The
new financial system, which the Chest, in consultation with departments and
Divisions, has been preparing for two years, will be implemented in 2002 and
is an essential element in this.

The general principles of a resource allocation model are evident.
Resources should follow planned activity; the model should be
comprehensive—that is, takes account of all the University's income
rather than looking at only parts of it; it should possess clarity, simplicity, and
stability; it should be capable of incorporating incentives; and it should aim
to underpin and support our academic objectives. These principles are easily
stated, although no less important for that, but translating them into a fully
worked out resource allocation method, and reflecting all points of view about
how the principles should be applied, is far from straightforward. The
Planning and Resource Allocation Committee has spent much time this year
debating a new model. This has been developed by a working group composed
of Professor Iversen (chair), the Rector of Lincoln, Professor Hendry,
Professor Newell, and Mr Slater (former Senior Proctor).

The new resource allocation model was accepted by Council in Trinity
Term. The details have been published in the Gazette and so I
want to emphasise a few general points here for sake of clarity. First, there
is a direct allocation through to Divisions and the Department for Continuing
Education of research grant and contract income (including overheads), a
range of other earnings, and overseas student fees in a way that has not
happened before. This is the larger part of the allocation. Second, the smaller
part (consisting of teaching and research related funds) is allocated on the
basis of a formula. It is on this, smaller part of the allocation, that debates
could occur—and have done so—concerning the criteria and balance
of the formula. Third, the model provides for two forms of charge-back.
There is a modest capital charge intended to act as an incentive to the more
efficient use of space, and also to provide for a formula-based redistribution
of about £3m at present; and there is also an infrastructure charge to sustain
the provision of services, many of which have relatively little opportunity to
generate income elsewhere.

Professor Iversen's group makes clear that these elements necessarily
hold together. In this model, it is a condition of passing through to the
Divisions so much income with a relatively small central top-slice that there
should be the two elements of charge-back for the purposes described. In the
detail, however, there is likely to be a considerable development and practical
adjustment to be undertaken during the coming academic years.

Now, the transition from a historic model to an activity-based one is
bound to be arduous. The new resource allocation method is a huge change
for Oxford, and it is inevitable that it will take time before everyone becomes
familiar with the principles behind it, and the details of its operation. It also
requires new approaches to financial reporting and monitoring. All this is
being introduced at the same time as we have reformed our governance.
However, none of this should stand against the identified need for change. But
it is certainly arduous, more so especially for some departments rather than
others. The University will have to consider how best it may migrate and
mitigate without losing the objective. In the immediate, the University has
introduced substantial mitigation for the current financial year at the divisional
level, through three principles: that all Divisions should bear a proportion of
any savings target required by the University as a whole in order to balance
any university-wide difference between income and expenditure plans; that the
maximum loss borne by any Division in any one year should be limited (in
this year to 2 per cent); and that all gaining Divisions should gain

It follows that, although the new method will lead to the redistribution
of resources over time (a process which divisional boards must manage), any
overall deficits in divisional allocations are not the product of the new
resource allocation model and even less of the new governance structure.
Rather, this is the cumulative outcome of underfunding of the sector. There
are local effects particular to Oxford of course, notably the decline in funding
consequential upon the college fee settlement of which the University budget's
share this financial year will be almost £2m. However, the deficit in Oxford
is within the bracket experienced by many other universities this financial
year. There are reports of very considerable difficulties among the university
system in London, for example. Our deficit is in line with those
research-intensive universities with which we most compare ourselves in the
United Kingdom. The calculations done for Universities-UK and earlier for
the Bett Committee identify the annual shortfall nationally now as
approximately £900m. The Transparency Review, conducted over the last
eighteen months, is demonstrating that public funding pays the cost neither of
research nor of teaching, and is subsidised to a considerable extent, albeit not
wholly, by non-public funding. We should not ignore, of course, the ways in
which the government has sought to improve university funding—through
JIF and SRIF, the promised disappearance of the annual `efficiency gain',
some small increases in real terms in the unit of resource for the next three
years, and a number of special initiatives tied to particular performance
requirements. Nonetheless, this does not stand against the general picture of
funding deficit. At the same time, even acknowledging this support, I am
concerned about the continuing public underfunding of the Arts.

There are several aspects to this analysis, especially as it affects a
university like Oxford. For any large research-intensive university, its own
success has a perverse financial effect. Research Councils do not pay adequate
overheads, charitable funding pays none, and HEFCE's QR has not kept pace
with costs. So, paradoxically, increased levels of research funding bring their
own cost with them. In specifically Oxford terms, it does appear that we are
slightly (though not excessively) more dependent on Research Council and
charity sources than our comparators and it is clear that charity funding now
accounts for 35 per cent of research income. We may express this effect from
another angle. The Government's decision to invest large sums in science
research infrastructure through JIF (in our case some £80m) and subsequently
SRIF (in our case some £43m) was, as I have said, a very positive move
which did much to bring critical elements of this infrastructure back to
international levels. At the same time, however, as such developments come
on stream they inevitably increase the charge on universities' annual
expenditure if the activity thus enabled is not properly funded. A comparable
general effect is visible in the requirement to add 25 per cent to SRIF

In a much more general domain of funding strategy, it remains the case,
as I have remarked before, that funding is being fragmented into an array of
programmatic initiatives, often related to a set of policy objectives. These
objectives have obvious importance, but they become problematic if the
consequence is the effective under-resourcing of academic excellence. This has
been termed the `jam jar' approach.

Although, as I have said earlier, we continue to make progress with
some of the elements to a strategy of international excellence, there is one on
which much remains to be done. That is pay. It has become common both in
Oxford and nationally to compare ourselves in pay, as in all other matters of
investment and performance, with the United States. Those of my generation
know that this is not a new question, since thirty or thirty-five years ago there
was talk of the `brain drain' and the disparity of spending and we have long
been accustomed to students who went on quickly to earn more than we did.
I do not think that it is a matter of parity now any more than it was then. But
two elements have changed since that time. One is that the degree of disparity
has become much more acute and the other is that the circulation of people is
now much easier and increased. But we do not need to seek American
examples. The Bett Report demonstrated that, between 1981 and 1998,
salaries have declined in real terms by approximately 30 per cent against
average non-manual earnings. One recent Sunday paper put it more pungently:
`a newly qualified lecturer still earns less than . . . an assistant lift and
escalator operator employed by London Underground'. In many other
professional areas, we experience real problems in recruiting and retaining
staff of the required quality. For academics here, this is not simply a question
of pay. There are issues of duties and the long discussion of this matter since
the Commission of Inquiry really does now need to come to a speedy

As for the future, evidence abounds that we can attract far too few of
the best into our profession and that will have consequences here as
elsewhere. As for the present, there are clear issues about the adequate
remuneration of all those who work here. Yet, on current funding levels the
problem is essentially encapsulated in the figures for this financial year: a
salary increase of 3.5 per cent against an increase of block grant of only 2 per
cent. If we are not to find remedy in outside sources, then this presents us
with some extremely difficult choices.

At root, there is now a substantial dilemma in the public funding of
higher education. The government has two objectives, each firmly and
genuinely held. On the one hand, it desires seriously to support `world-class'
quality and therefore those institutions with substantial international
reputations. On the other, it desires to extend higher education to 50 per cent
of the age group between eighteen and thirty. Since it appears that essentially
all who are qualified and are willing to go into higher education can now do
so, this must involve investing in the HE/FE area for students with
non-conventional profiles. Each of these objectives is expensive. Balancing the
two is an issue with which the current Spending Review must be concerned.
For our interest here, we must hope for some relief on the underfunding of
research, but what practical outcomes there will be cannot be predicted.

So, we must in the coming year attend to the large issues, as distinct
from simply multiplying non-recurrent savings, and establish cleaner general
priorities for the University. We need, for example, to know whether we
conceive of the University's money in the most appropriate way for present
circumstances and whether we need to invest more in people and if so, at the
expense of what activities—though in both these cases there is a danger
of spending the future on the present—and we need especially to control
costs and increase income appropriately. With this purpose in mind, I intend
with the consent of Council to appoint a small group with particular expertise
to review the situation and offer advice and proposals to Council.

In conclusion, I should offer acknowledgements and welcomes. I offer
my thanks to Sir Anthony Kenny who has served as President of the
Development Campaign for the last two years. We owe him a debt for the
special skill he has exhibited in this and some other difficult tasks; the energy
which he has brought to development will now be turned in equal measure,
I am sure, to the writing to which he wishes to return. I am delighted and
grateful that the President of Magdalen has agreed to take an active role in
leading our development effort in his place. I should also express my thanks
to Dr William Hayes and Miss Elizabeth Llewellyn-Smith for their long
service as Pro-Vice-Chancellors.

I am pleased to be able to welcome four new Heads of House: Mr
Andrew Graham as Master of Balliol; Mr Giles Henderson in succession to
Dr Robert Stevens as Master of Pembroke; Dr Judith Milne, who follows
Miss Elizabeth Llewellyn-Smith as Principal of St Hilda's; and Sir Michael
Scholar, who succeeds Dr William Hayes as President of St John's.

This past year has seen the retirement of colleagues who have given
distinguished service to the University. I should mention in particular:
Professor J. Carey, Merton Professor of English Literature; Professor J.F.
Dewey, Professor of Geology; Professor K.D. Duncan-Jones, Professor of
English Language and Literature; Professor D. Edgington, Temporary
Professor in Philosophy; Professor Sir Peter Morris, Nuffield Professor of
Surgery; Professor J.J. O'Connor, Professor of Engineering Science;
Professor R.J. O'Neill, Chichele Professor of the History of War; Professor
G.H. Peters, Professor in Agricultural Economics; Professor C.K. Prout,
Professor of Chemistry; Professor V. Reynolds, Professor of Biological
Anthropology; Professor P.G. RiviŠre, Professor of Social Anthropology;
Professor J.D. Silver, Professor of Physics; Professor R.W. Thomson,
Calouste Gulbenkian Professor of Armenian Studies; Professor M.
Winterbottom, Corpus Christi Professor of Latin; and Professor J.R.
Woodhouse, Fiat-Serena Professor of Italian.

Many other colleagues have retired from academic posts after long
service to the University: Dr N.J. Allen; Dr R.T. Aplin; Dr J.M. Bassett; Mr
P. Benton; Mr J. Collin; Dr P.J. Collins; Dr A.L.S. Corner; Dr C.S.L.
Davies; Mr J.W. Davies; Miss A.M. de Moor; Dr M.J. Dobson; Dr R.
Fennell; Dr W.D. Hackmann; Dr R.L. Hall; Mr G. Hodgson; Mr F.J.
Lamport; Dr M.J. Lockwood; Dr D.J. MacLeod; Mr H.G. Martins; Dr L.G.
Mitchell; Mr A. Murray; Professor A.J. Nicholls; Dr J.E. Paton; Dr M.B.
Powell; Dr J.K. Powis; Dr C.D. Rodgers; Miss E.M. Rutson; Dr G.R.
Screaton; Dr G. Smith; Dr A.W. Speedy; Dr B.F. Steer; Dr S. Trapido; Dr
R.W. Truman; The Revd Dr K.T. Ware; Mr B.E. Woolnough; Mr C.P.

Still others have retired who have held important research or
administrative posts: Mr C.M. Ashworth; Miss S. Barker; Dr R.D. Barnes;
Mrs S.A. Bond; Mrs B.M. Bryant; Mrs P.M. Chadwick; Mr D.J.
Chamberlain; Mrs S.E. Colgan; Mrs E.T. Cope Bowley; Dr F.M. Dewey;
Mr J.R. Douglas; Mr A.F. Edwards; Ms P.J. Frost; Professor J.D. Gross;
Mrs A. Hunt; Mr A.B. Jones; Dr P.B. Jones; Mrs S.D. Lake; Mr I.C.
Lough-Scott; Mr M.E. McIntyre; Mr A.R. Norman; Mr D.G. Powles; Mr
M.E. Robinson; Mr G. Spindler; Ms B.E. Taylor; Mr D. Taylor; Mr V.W.
Twist; Mr H.L. Wright.

There are four people of whom I should like to make special mention.
The first is Dr Robert Gasser, who has retired as Bursar of Brasenose. The
others, between them, have served the University for almost 130 years, before
retiring this year: Mr Philip Moss, Head Clerk of the University, Miss
Margaret Donaldson, of the Oxford Colleges Admissions Office, and Mrs
Diana Diamond, of the Land Agent's Office.

I wish also to record our gratitude for the lives and service of former
colleagues who have died in retirement during the past year: Mr John Allen,
Mr John Backhouse, Professor Jack Christian, Dr Mary Davis, Professor
Oliver Gurney, Dr Richard Martin, Professor Walter Matthews, Dr George
Meakins, Major James Mills, Dr Robert Parker, Mrs Mary Proudfoot, Mr Ian
Robinson, Dr Robert Sherlaw-Johnson, and Mr Roy Smith. I must also record
with much regret the death of John Dobson, the former University Verger,
whose retirement I reported only last year.

Finally, I record that this year the University received with pleasure Her
Majesty the Queen to open new accommodation for Oriel College, HRH the
Princess Royal to open accommodation at St Antony's, former President Bill
Clinton to open the Rothermere American Institute, HIH the Crown Prince of
Japan, and the Secretary-General of the United Nations to deliver the Cyril
Foster Lecture.