Next UK government urged to commit to university ‘rescue fund’

Pressure is mounting on the incoming UK government to commit to providing “rescue funding” for universities in trouble as leaders call for a stopgap solution to deal with a potential post-election financial crunch.

The first few months of the new administration will coincide with a crucial admissions period before institutions must prepare another round of accounts and show they are a going financial concern.

Labour – widely tipped to win the election – has signalled its willingness to act to stabilise the sector and leaders are pushing the party to increase tuition fees in England and provide reassurance to potential international applicants, alongside developing emergency measures.

“An incoming government has two choices; it can do something to start to steady the ship – and then university leaders can do a hell of a lot to sort out their own problems – or it can let the issues drift and allow a much bigger and nastier problem to develop,” said Vivienne Stern, the chief executive of Universities UK.

“It is essential we as a sector take some leadership of the issues we face. But if we can do that in a stable environment, I think we might avoid something going really badly wrong.”

Ms Stern said that the incoming government should consider introducing a mechanism to “get institutions through what would otherwise be a crunch point”.

“In the short term, you might be looking at perfectly viable institutions that have been hit by a very, very rapid deterioration in conditions,” she said.

“It could be an institution that was viable last year and can be viable next year but between those two points it has got to do a lot of reshaping. Universities can do that, but it can’t be done overnight or without some considerable upfront costs.”

She said the government should therefore consider acting as a lender of last resort “where in certain circumstances it can stand behind a university whilst it sorts itself out…It isn’t really bailing out a university, it is helping it buy some time.”

In the medium term this should be coupled with separate stimulus funding more geared towards encouraging institutions to “do something differently, or to support one institution to step in to help another which is no longer able to operate”, Ms Stern said.

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Matthew Atkinson, a former director at the Department for Education who now works as a consultant specialising in finance and restructuring, said that, given how long it would take to instigate funding reform, it seemed “inevitable” that a “rescue regime will be required”.

Any such fund is likely to come with “strict conditions”, he cautioned, which could be tied to an incoming government’s potential priorities, including devolution of skills funding, institutional mergers and more collaboration with the further education sector.

“A university just asking for money without a plan to change will be asked to try again,” he said.

Matthew Innes, deputy vice-chancellor of Birkbeck, University of London, said the sector should be wary of presenting its wishes too negatively to new ministers.

Asking for “bailouts” or “rescue funds” was a high-stakes approach, he said, and it would be better to develop a scheme through which individual universities could receive support to transform their operating model or market positions.

Rapid action to restore confidence among international applicants and alleviate cost-of-living concerns by making tweaks to student finance would go a long way to dealing with many institutions’ immediate financial concerns, especially if better maintenance support could be accompanied by a small uplift to the home undergraduate fee, he said.

tom.williams@timeshighereducation.com