Originally Published 29 November 2002

The Times, Monday 2 December 2002, by Tony Halpin, Education Editor

Warwick could easily lay claim to be Tony Blair's favourite university. The Prime Minister once declared it "at the cutting edge of what has to happen in the future".

Entrepreneurial, hugely popular with students, and third in The Times rankings of teaching quality (ahead of Oxford), Warwick enjoys runaway success less than 40 years after its foundation.

It has financial strength too, recording a £4m surplus last year at a time when half of universities are in the red. Two-thirds of its £174m budget is earned from research contracts and business activities such as management training courses, holiday conferences and retail ventures.

However, David Vandelinde, the Vice-Chancellor, said that Warwick's £60m teaching budget must rise by at least a third if it was to remain a world-class centre of education. Put simply, a degree from Warwick was too cheap.

"The issue here as much as anything else is sustainability. We have managed the university so the service we deliver is effectively a break-even business," Professor Vandelinde said. "But if you look at teaching for home students, without international students, we lose a substantial amount of money in that operation. That is even with increasing staff - student ratios and demonstrably underpaid staff."

Warwick loses about £1,500 for every British undergraduate it teaches. For the first time last year it earned more from the tuition fees paid by 3,000 overseas students than from 16,000 home students: international students pay between £7,725 and £10,000 for degree courses; their British counterparts a maximum of £1,100. Warwick's average student - staff ratio, at 15.7, is higher than all but three of the Russell Group of 19 leading universities. Professor Vandelinde said that it crept up each year.

"I would like to reduce student-staff ratios by maybe 10% to claw it back to the level of the OECD average, because we are increasingly uncompetitive in this. That's £3 to £5 million," he said.

"Then there are salaries. All of our young lecturers - all of them - can't afford to buy a house unless they have a partner who works."

More money would go on improved library, computing, and study facilities for students, "When you add it all up it's £20 million, another third of the budget," he said.

Professor Vandelinde will not be drawn on how this should be paid for, but Warwick is known to favour higher fees for its courses and is likely to be at the forefront of introducing them if the Government's White Paper in January gives the go-ahead.

Howard Thomas believes that British universities are at a critical point. He took charge of the Warwick Business School two years ago, after ten years as head of the business school of the University of Illinois in America. It has 1,000 undergraduate and 2,000 MBA students. Short executive training programmes generate 10 to 15% of its ?26 million turnover.

"The most pressing problem in being internationally competitive is that it's very difficult to have the right people at the salary levels we are offering," he said. Typical salaries at Warwick are £28,000 for lecturers and £60,000 for professors. At Illinois they ranged from £50,000 to £185,000.

"Our MBA students probably go out and get £60,000 plus a signing-on package, 15 years ago the gap between being a senior academic in a UK business school and the alternatives was narrower."

The effect is a collapse in interest in a university career. Only 20% of places on doctoral programmes, the incubators of future academics, are filled by home students.

Professor Vandelinde said that the greying of the academic population was a serious issue. A lack of young talent meant that even Warwick was struggling to fill vacancies in some subjects, such as computer sciences. "The new blood is not there," he said.