Universities must scrap plans to spend big on “needless vanity projects” and instead invest money in their staff amid the soaring cost of living, a union has insisted.

The University and College Union (UCU) vowed to ballot next month for industrial action which it said could see “significant disruption” across the whole sector if negotiations fail.

Higher education institutions across the UK are generating billions of pounds in spare money and planning huge increases in capital spending, the union claimed.

The organisation said it had analysed financial data from each higher education institution in the UK, and identified the scale of the surplus and what it described as “eye-watering” amounts the sector is planning to spend on new buildings.

The Universities and Colleges Employers Association (UCEA), which represents employers in the pay dispute, has described focus on capital investment as “disingenuous” and said the sector endured “significant cutbacks” during the pandemic as it tried to support both staff and students.

If universities continue to treat their staff as shock absorbers to vanity and wasteful building projects then we will call action and there will be mass disruption

UCU said universities finished the 2020/21 financial year with £3.4 billion more than they started it with, and that university leaders had confirmed to the Office for Students (OfS) they were planning to increase overall capital expenditure by 36% this year, to £4.6 billion.

The union said the extra income for universities is generated from “core operations” including teaching, administration and research, and should therefore be reinvested into staff.

UCU is also calling for some of universities’ planned capital expenditure to be diverted instead to increase pay, bring staff onto permanent contracts and restore pension benefits.

The union said it plans to open a national industrial ballot in early September over pay, working conditions and cuts to pensions – and that disruption can be avoided by employers “prioritising investment in staff”.

UCU general secretary Jo Grady said: “If universities continue to treat their staff as shock absorbers to vanity and wasteful building projects then we will call action and there will be mass disruption.”

She added: “Our analysis shows clear as day that the university sector is not only hoarding billions of pounds in cash, but also planning an eye watering spending spree on shiny new vanity projects – all whilst holding down staff pay, cutting pensions and plunging thousands into hardship in a cost-of-living crisis. It is inconceivable and insulting.

“Falling pay, devastating cuts to pension and insecure contracts are not a fact of nature but the consequences of spending decisions made by vice chancellors.

“University staff are clear that they have had enough and unless urgent action is taken to raise pay, restore pensions and address their wider concerns, they will be voting to take strike action this autumn.”

Many HE (higher education) institutions are working hard to avoid redundancies, and others are struggling to balance budgets to maintain staffing levels

UCEA chief executive Raj Jethwa said the union’s references to the latest OfS update were “ironic”, accusing UCU of “ignoring the risks it highlights, including a forecast decline in overall financial performance and the significant cost pressures which could accentuate this”.

He said: “Many HE (higher education) institutions are working hard to avoid redundancies, and others are struggling to balance budgets to maintain staffing levels, while delivering this year’s pay uplift into staff pockets.

“Our pay uplift provides for up to 9% for staff on the lowest pay points, who are most affected by inflation, and a minimum increase of 3% for all staff.”

The union has described the 3% pay offer as representing a real-terms pay cut amid rising inflation.