Universities at greater risk of bankruptcy under new fees regime, warns National Audit Office report

4 March 2011

The number of universities at risk of financial trouble is likely to increase under the government's proposals to axe large parts of universities' teaching budgets and replace the money with higher student fees, according to a report released today by the National Audit Office (NAO).

UCU said the report's 'worrying conclusions' were further proof that the government had to look again at its 'barbaric' plans to axe the entire teaching budgets of some institutions and shift the burden of funding higher education from the state to the individual.
 
The union's concerns were echoed this week by hundreds of Oxbridge academics who accused the government of forcing universities to 'fly blind' into an untested system of funding higher education.
 
The 'Regulating financial sustainability in higher education' report warns that 'the new funding framework, coupled with a squeeze in public funding, is likely to increase the level of risk within the sector.' It goes on to warn that the new system will potentially raise the number of institutions at risk of failing.
 
The report examined the Higher Education Funding Council for England's (HEFCE) regulation of the financial sustainability of universities in England and revealed that:

  • Five per cent of universities were considered to be at higher financial risk
  • All institutions already at higher risk have been in the higher risk category for at least four years
  • One has been at higher risk for 12 years
  • Over 25 per cent of universities in 2009/2010 were performing below at least one financial benchmark
  • Nine per cent of institutions have had a deficit in at least two of the last three years
  • In 2007 HEFCE highlighted concerns to ten institutions outside of the 'at higher risk' category
  • By 2010 that number had risen to 43.

UCU general secretary, Sally Hunt, said: 'This report lifts the lid on the real financial health of higher education and the likely consequences of the government's proposals. The worrying conclusions are that, while there might be a handful of winners, many institutions will struggle to cope financially with the new regime.
 
'If the government is happy for some universities to go to the wall then it should be upfront about it. We believe that our universities do an excellent job and letting them fail would be an act of academic barbarity. It would also be one of cowardice unless the government is prepared to front up and tell us which institutions it doesn't believe are worth saving.'

Last updated: 11 December 2015

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