Archive for October 14, 2008

The New Inflationary Universe

Posted in Finance, Science Politics on October 14, 2008 by telescoper

Among the bits of economic information released by the Office of National Statistics today is one item that academics in all disciplines wanted to hear about: the value of the Retail Prices Index (RPI) in the UK for September 2008, which turned out to be 5.0%.

The reason for the fascination with this number is that, in an unusual spasm of farsightedness, the University and College Union stipulated that the final stage of the pay deal it negotiated in 2006 would be applied in October 2008 and this would amount to 2.5% or the RPI whichever is the greater. Two years ago it seemed a very different world, and 2.5 % seemed to be much the likelier eventuality, but energy and commodity prices surged last year and the RPI now stands at double that figure. So we’re all set for a 5% pay rise this month, although probably we won’t actually get any more money until the November pay packet arrives.

It would have been even better had UCU chosen the Consumer Prices Index (CPI), which has now overtaken the RPI and stands at 5.2%. This is the governments preferred measure of inflation, which is based only on the price of consumer goods and household utilities, while the RPI includes other items such as mortgage costs and transport costs.

At least in the short-term, this seems good news for all academics in UK universities.

But even in paradise there was a serpent, and there is a significant danger that some departments’ balance sheets will suffer very badly from these extra salary costs. Many already operate on very tight margins. In the longer term there may be mergers and closures followed by redundancies. Also since the research councils’ cash allocations for the next few years are already fixed, an increase in salaries over that already accounted for will mean a corresponding reduction in the number of positions that can be funded, which is bad news for younger people looking for PDRA positions. Given that the Science and Technology Facilities Council‘s budget wasn’t very generous in the first place, causing a crisis in funding for astronomy and particle physics research the extra wage demands are likely to cause further strain.

Still, a 5% pay rise just before Xmas will be good while it lasts.