Tutor HuntBlog

Financially struggling Universities to be bailed out, says labour

Universities
all

We have all heard the slogan `Too big to fail` - the assertion that certain institutions, primarily financial ones, are so interconnected and vital to the economy that they must be protected from market forces. Whereas a failing business would go bust, a failing bank will be bailed out.

Should universities also fall under this category? Are they, along with banks, not so important to our society that they should be rescued with tax payers money if they are facing closure. Or if they are facing financial hardship should they be left to fall?

Under new plans unveiled by Labour it seems that struggling universities could be rescued from going bankrupt, protected from `rampant` market forces. The Office for Students (Ofs) currently has the powers to regulate universities, and is able to offer financial aid - but there are limits to how much fiscal support it will be able to provide.

The very idea of a university going bust will be surprising to some, with people being of the opinion that only businesses can go bankrupt, and that universities don`t seem to be structured along such lines as a corporation or commercial outlet.

The fact is that, since the higher education sector is effectively a competitive marketplace, universities can certainly fail financially. They have huge overheads: having to cover the salaries of scores, perhaps even hundreds of teachers, lecturers, and other staff members. They will also have maintenance charges, costs for equipment, and may also have to pay rental charges for the buildings and land they use. If these financial obligations are not met, they will go under. Universities are of course in competition with each other - all vying for a customer base that generally only make a single purchase. The marketplace isn`t one where, if you lose the shopper to another company one day, you can entice them with your wares the next: for most students selecting a University is a once in a lifetime decision.

Though it is rare for universities to go bankrupt, it is certainly not unheard of, and there are reports that 3 major Universities are on the brink of bankruptcy at this very moment. Chris Skidmore, the Universities minister, has recently stated that `providers may, in a small number of cases, exit the market altogether as a result of strong competition`.

We certainly seem to have entered a more uncertain time for universities - the financial stability they enjoyed in the past seems to have gone, a point made by the director of the Higher Education Policy Institute think tank Nick Hillman, who was former adviser to the universities minister Lord Willetts:

`A university going bust is more likely than at any other point in the last generation,`

There are however some who oppose the protective measures - the shadow education minister Angela Rayner has recently pointed out how the OfS, an institution that one might expect to be steadfast in proposing pecuniary aid to struggling universities, has said it would `not bail out providers in financial difficulty`.

Being an opposing party politician, it may come as no surprise that Mrs Rayner went on to critique the conservative party for the current state of higher education in the UK:

`The Tories have unleashed a failed free market experiment in higher education. They have created a system that goes to the very heart of their ideology - a system where market logic is imposed on public goods and where the forces of competition run rampant at the expense of students, staff and communities.

`Students would be left with immense uncertainty about their futures and entire communities would lose one of their major academic, economic and social institutions. Education is a public good and should be treated as such. Our universities are there for all of us.`

There is a general feeling that there`s soon to be a serious review of the state of student finances, and that the financier Philip Augar is going to advocate a cut in tuition fees. An initial annual figure of around £6500 was tentatively proposed, with this rising to £7500 after many universities complained. One thing is certain - if there are reductions ahead, this will mean a significant drop in income for many universities. While many students will celebrate more affordable fees, the long term results may mean many smaller universities will struggle to remain solvent.

5 years ago
comment