Market bet could cost communities a great deal

Lord Mandelson was haunted through his time as a minister in the UK’s last Labour government by his statement that his party was “intensely relaxed about people getting filthy rich”.

In the phrase – which, it should be said, was the first half of a sentence that finished “as long as they pay their taxes” – the former business secretary seemed to betray what many perceived to be the failure of Tony Blair’s and Gordon Brown’s administrations to do more to tackle income inequality.

Perhaps another minister, Jo Johnson, might come to be remembered as having been intensely relaxed about English universities going to the wall.

Johnson, minister for universities until earlier this year, did not express himself quite as pithily as Mandelson – stating that a “properly functioning market has to have scope for both market entry and market exit”.

But Johnson’s market, now being overseen by a new regulator, the Office for Students, nevertheless represents a significant shift from the regime previously supervised by the Higher Education Funding Council for England, which was prepared to step in with loans or to drive through a merger when an institution got into trouble.

Just how soon the “market exit” of a major higher education institution becomes a reality is yet to be seen; Adam Tickell, vice-chancellor of the University of Sussex, spoke openly at September’s Labour Party conference of “well‑founded rumours” of a university “teetering on the edge”.

In our news pages this week, however, we highlight how some UK universities find themselves in increasingly challenging financial situations, with some running up deficits in excess of £10 million in a single year.

Many of these institutions have lost out in the student recruitment race to more prestigious rivals that have expanded since student number controls were fully removed in 2015.

For these universities, the most recent recruitment round, and the one that is now under way, will be vitally important.

What is striking is that some of the English universities with the largest deficits are located in parts of the country where the higher education sector has a crucial role to play in rejuvenating the local economy, particularly as Brexit approaches: in the north east, the north west and the south west, for example.

Policymakers risk underestimating the myriad ways, visible and invisible, in which a university is woven into its fabric of its community – and thus cannot grasp just how damaging a university closure could be. As Nick Hillman, director of the Higher Education Policy Institute and a former special adviser to Lord Willetts when he was universities minister, wrote in Times Higher Education in August, for all the talk of OfS-mandated protection plans designed to ensure that students at a failed institution can continue their education elsewhere, the closure of a university would create a huge political headache. Very often, universities are one of the biggest employers in their town or region, and the knock-on effects of a closure on a local economy would soon send the area’s MPs howling to the Department for Education.

These issues are by no means restricted to the UK. As we reported in July, some 100 private universities in the US have closed since 2009, leaving angry students, parents, employees and alumni, and millions in unpaid debts.

Elsewhere in our news pages this week, we report on how some Australian universities, too, have run up multimillion-dollar deficits in the space of a year. There, competition for domestic and international recruitment is increasingly intense and, again, more prestigious universities are able to take the cream of the crop, leaving the rest to scrap it out for the remainder.

Even if Australian policymakers are felt to be more likely to bail out an institution that gets into trouble, the quandary they face is the same as it is for their UK counterparts: universities cannot lead the country’s transformation into an innovation-led nation if they get into financially perilous situations.

As the figures we report this week show, this is a situation that no one can afford to be relaxed about.

chris.havergal@timeshighereducation.com