How to take a financial crisis and turn it to your advantage

Thirty years ago, a discredited Labour Government, faced with a bad economic situation, lost an election to a revitalised Conservative Party committed to cutting public spending and rolling back the State. Sound familiar? The (pre-1992) universities were early casualties of the Thatcher Cuts. In July 1981, 18 per cent was cut from university funding. Will history repeat itself?

I was appointed vice-chancellor of the University of Salford that summer and was working out my time in the Cabinet Office as chief scientific adviser when the axe fell.

I had accepted the position because I believed we needed a closer relationship between academe and society in general and industry in particular: I thought Salford, as a technological university, would be a good place to start. I knew that cuts were coming but was as astonished as everyone else (including Mrs Thatcher) by the way the University Grants Committee (UGC) applied the 18 per cent cut selectively - Salford, sentenced with a 44 per cent cut over three years, was hit hardest. I took a week's leave, went to Salford and found deep depression and anger.

No one seemed to think the university could (or should?) survive. The university council touchingly intimated that they would understand if I withdrew. I suggested instead that the cuts gave us an opportunity. Salford was nationally prominent for the first time. We should seize the chance to find out who our real friends were and, with their help, build an institution less dependent on the whims of the UGC. We would find ways to earn our living.

An unprecedented PR campaign, the Campaign to Promote the University of Salford (Campus), followed, paid for by local people and businesses. We even rattled tins in the street.

When I finally arrived as vice-chancellor in the autumn, Campus had nearly 100 subscribing organisations and had evolved into the mechanism whereby the university solicited and organised industrial and other inputs into its activities. It set a pattern.

I wanted a better relationship between the university and society, but we also had to protect the university's academic integrity from occasionally overweening, or even bullying, demands from would-be supporters.

A body at arm's length such as Campus, which is still going strong, fulfilled that role. Its staff listened carefully to what subscribers said they wanted, steered them to those in the university who might help and organised the resulting discussions. Sometimes we could not do what was wanted but, more usually, we could help - although often in ways other than was initially supposed.

I remember an instance where the university's electronics department was unable to help a local electronics firm, but the geography department could. It helped them develop an export market for a global positioning system-based product.

To organise this consultancy work we developed, in parallel with Campus, another arm's-length body - Salford University Business Services Ltd (Subs) - as a wholly owned commercial subsidiary of the university. Again the aim was to protect the university's academic activities from commercial pressures.

University staff became used to delivering to time, specification and cost when working on a Subs contract while retaining their scholarly ways in their own teaching and research. The distinction was not always evident to some corporate bodies (central government was among the worst offenders and the experiences of David Nutt, the Government's drugs adviser sacked for his remarks on cannabis, suggest it still is).

The revenue Subs generated was spent according to criteria expressed in the Senate's academic plan. There was sometimes comment when it was spent on activities far removed from the commercial contract work that generated it, but it was vital to demonstrate that Subs and Campus existed to support the university's academic development not just to create another consultancy operation.

Salford did not close, but it was transformed. In 1981, 84 per cent of the university's income came from the UGC; by 1989 it was only 54 per cent of a larger total income. Home student numbers initially went down from 4,205 to 3,104, but overseas and postgraduate student numbers grew and, in part thanks to a merger with Salford Institute of Technology in 1996, the university has 20,000 students.

Universities may be about to face dramatic cuts again. I hope not. But if it happens, a good crisis should not be wasted. Vice-chancellors are paid to lead, identify and publicly support the innovations that the crisis makes possible while preserving the scholarly enterprise and academic integrity of the university. If that is compromised, the university has lost its point - something politicians and industrialists often forget and always need telling.