The government’s initial support is a welcome first step, but a lot of uncertainty remains, writes Ian Robinson
UK higher education has received clarity, of sorts, via the government’s sector support package. To support short-term cash flow, the Student Loan Company will bring forward £2.6 billion of tuition fee payments for the 2020-21 academic year. Student number controls have also been temporarily reinstated, specifically a cap on providers recruiting full-time domestic students of up to 5 per cent above their forecasts for the next academic year. Essentially, the domestic applicant pool needs to increase about 6.5 per cent to result in an even spread across all institutions.
Let me begin by voicing my support for the advancement of Student Loan Company payments. This is a welcome first step to support institutions through the sector’s current cash shortage. It will likely reduce or at least delay the immediate demand for financing, be it traditional bank finance or through one of the government’s support schemes, necessary to fund the deficits caused by the expected reduction in international students and the as-yet-unknown deferral rate of domestic students. That said, the cash hole now appears a little further down the road, which is why this is only a first step.
There is continued debate regarding a September term commencement, with “digital September” now firmly on the cards for many. This is expected to increase the number of deferrals, affecting both domestic and international student numbers, although the student experience may have a greater impact. It will have a knock-on impact on accommodation, catering and research income next year, not just this summer. Furthermore, with universities’ digital provision becoming so important, there needs to be increased safeguarding for it. Having the right digital learning offering in place is one thing, but getting the message to students about how they will still receive a high-quality education and value for money is a separate and significant challenge.
It also remains to be seen whether, if students cannot travel internationally on a gap year, and if the domestic job market is as tough as expected, they will choose to instead study at university.
The government’s support package did not contain the £2 billion research funding bailout that Universities UK had called for in order to support the research-intensive universities likely to be hardest hit by a drop in international student numbers. Questions about the HE sector’s eligibility for Bank of England and HM Treasury support schemes (CCFF and CLBILS) remain uncertain. Notable through its absence, the new government support package also offered no guarantees that all institutions will survive.
Given this uncertainty, universities are in the “wait and see” stage of responding to the coronavirus crisis. Having been given some short-term government assistance through the reprofiling of tuition fee payments, they must continue to assess their eligibility for various government support schemes, undertake sensitivity analysis and await greater clarity about student numbers and social distancing measures.
European finance law raises questions regarding the classification of the Student Loan Company’s funding and the determination of public/private institutions. The test criteria for the reprofiling of fees resembles EU procurement law, which determines a 50 per cent state income threshold. The resulting theme is that the Bank of England may deem the majority of universities ineligible for CCFF support, although some institutions are making headway here. Meanwhile, the Treasury has stated that if universities were at risk of closure, it would intervene only where “there is a case to do so”, and then only “as a last resort”. This could result in forced mergers. An Office for Students proposal for an exit strategy condition of registration may flag which institutions are at risk, depending on how the OfS applies this condition.
The Treasury continues to suggest that the higher education sector is eligible to apply for the various government finance and job retention programmes before receiving extra funds. The question this raises is “do ‘eligible to apply’ and ‘eligible to access’ mean the same thing?” At present, the answer appears to be “no, but…”. The resulting challenge is that the Bank of England won’t want to risk breaking EU finance law and will consult the European Central Bank, yet the likelihood of bailouts happening appears to be remote, which would most harm universities that are neither investment grade non-public institutions nor cash rich.
When looking at higher education’s funding eligibility rationale and the bailout requirement, the key questions may become about what purpose institutions serve, from their teaching provision to their wider role in the national economy, including their civic engagement and research.
Can many other sectors rival UK universities in claiming to be a global beacon of excellence? If it were me answering this question, I’d be very clear in my response. Hopefully others share my view.
Ian Robinson is sector head of public sector and education at HSBC UK.
This is an edited version of a blog that originally appeared on LinkedIn.
Brought to you in conjunction with HSBC UK. Find out more about HSBC UK’s education team.
