1. Income Distribution Model (IDM) Review Jeremy Lindley

2. Terms of reference Support the University’s strategic objectives Assist in the increase of STEM Grow the unregulated business Support the infrastructure needs

3. Process Two Groups: IDM Group Working Group Explored two IDM themes: Replace HEFCE units of T resource Replace of poll tax with an income tax

4. HEFCE T resource Would an Exeter unit of resource better reflect activities at the University? TRAC data not conclusive HEFCE work on new national T units not definitive

5. Charges under review PSC SDF Infrastructure Space

6. Changes to PSC Income tax Based on nine income streams Tax rates set to insentivise activity “Above the operating line” charge Endowment income excluded Suggested rates…

7. PSC tax bands Category2010/112011/122012/13 Home/EU UG41% Other income41% HEFCE T Grant30% Home/EU PGT30% International PGT30% International UG20% Research QR0%5%10% Research PGR0% Research other income0%

8. PSC incentives Grow research awards Grow PGR numbers Grow UG international numbers Grow PG numbers Regulated business? Other income?

9. SDF Disaggregate SDF, infrastructure charges and long term maintenance Income tax as with PSC 10% charge on all income excluding the research categories “Below the operating line” charge

10. Space charge Remain in current format for 2010/11 Currently not sensible to shift resources to STEM “Above the operating line” charge Charge utilities directly Create new group to review space charging including: Cellular office space Centrally bookable space Corridor and other circulation space Mothballing of space

11. Infrastructure charge New charge Responding to HEFCE reducing capital resourcing “Below the operating line” charge Rates: 2010/11 = 0% 2011/12 = 1% 2012/13 = 2%

12. Impact at the operating line College 2010/11 Current IDMRevised IDMGain/ (Loss) PSCSpaceTotalPSCSpaceTotal L&ES8.84.713.58.44.713.10.4 EMPS5.82.88.65.32.88.10.5 Business6.11.47.57.31.48.7(1.2) Social Sci8.02.210.28.12.210.3(0.1) Humanities8.62.310.98.32.310.60.3 Total37.313.450.737.413.450.8(0.1) All data is £m

13. Impact at reserve position College 2010/11 Current IDMRevised IDMGain/ (Loss) (£m) Reserve (£m) % incomeReserve (£m) % income L&ES0.20.4%0.71.5%0.5 EMPS1.13.2%1.54.3%0.4 Business1.75.4%(0.5)(1.8%)(2.2) Social Sci1.43.9%1.54.1%0.1 Humanities(0.4)(1.1%)0.72.0%1.1 Total37.313.437.413.4(0.1)

14. Marginal tax rates College 2010/11 Current IDM % TaxRevised IDM % TaxGain/ (Loss) OpSDFTotalOpSDFTotal L&ES28.85.734.527.95.533.31.2 EMPS24.24.528.722.94.727.51.2 Business24.55.429.928.68.537.1(7.2) Social Sci27.57.134.627.66.734.30.3 Humanities31.69.140.630.67.037.63.0 Total27.56.333.827.56.433.8 All data is £m

15. Overall impact Adverse impact on the Business School Little effect on overall University position Impact on colleges and services Growth areas taxed less Addition of QR tax to support research growth

16. Key benefits Simple and less costly to operate Very transparent – more predictable and useful for planning purposes Improves link between the taxes paid and the capacity to pay Adaptable model that can be flexed

17. Other issues: Risk: Volatility...good incentives… … but what if Colleges do grow? Support Business School Based on HEFCE five year plan Opportunity: SDF devolve?

18. Recommendation Approve new IDM model Support Business School New model out to Colleges on Monday Iterate through business planning Review as part of budget approval Go live with Colleges on 1 August 2010