Things are moving fast today as news of imminent university and course closures spreads. This was aided by a main headline article in the Sunday Times that added to a growing sense of urgency. The government is running out of time and will not be able to blame the previous administration for long. They surely will not want the ‘hand of history’ on their shoulders as they allow some universities to fail on their watch.
The headline was for some reason bypassed by Laura Kuenssberg on BBC 1 this morning in her summary of the Sunday press, and then ignored later.
Figure 1 shows the headline and a reproduction of the UK map where the locations of universities making cuts are shown.
The main message is that, apart from Northern Ireland, all regions of the UK are impacted. The solution may have to be UK-wide. It is likely that consistent lower funding for Northern Ireland universities over years means they are already more efficient and surviving better. The data is based upon ongoing monitoring by University and College Union (UCU) members in Queen Mary College, London.
Using independent auditors, UCU have identified three (unnamed) universities that are in danger of collapse. UCU General Secretary, Jo Grady is quoted as saying.
“We think there are three universities we have been able to identify that could be close to financial collapse and would benefit from state intervention and support,”
“If they do not get state support they will struggle still and use cuts to staff as shock absorbers. We see this as a systemic crisis. We don’t think parents and prospective students understand the total mess some of our universities are in.”
Why no urgency before?
It is strange that we are kept in the dark when the Labour manifesto promised more. Also, the BBC identified the crisis in universities as one of the ‘Five big problems the Starmer government has to fix’. Frozen fees and advancing inflation mean that,
“Had fees increased using the RPIX measure of inflation, they would now be more than £14,000 a year”.
This is clearly not an option unless the funding model undergoes radical change. TEFS has proposed an option with a ‘Graduate National Insurance Levy’ paid by graduates and their employers. Its easy to administer, avoids fees, protects against inflation, and could be rolled out across the UK.
The sudden sense of urgency and apparent surprise is tempered somewhat by the simple fact that this is not unexpected or new. Warnings have been circulating for a long time and one would expect an incoming government to be well prepared to act. The Sunday Times observations match the Office for Students (OfS) own assessment in May ‘Financial sustainability of higher education providers in England: 2024’ (pdf).
Now it’s a slow speed ‘train crash’. But when the cash ceases to flow in any one university the buffers will stop it in its tracks. Things will happen fast if student numbers fall below expectations and income fails to match payments to creditors, staff and students. Applicant numbers were steady in January, but the rate of applications was below expectations. Some universities and courses will be under great pressure.
HERR we go again, again.
I know well that universities are very complex operations with a high volume of multiple payment outgoings. For example, grants of varying kinds are paid in arrears after approved claims are made; in the meantime, cash has to be found to cover payments. There few businesses that operate in this way to such an extent. Creditors can be patient up to a point, but staff pay is unforgiving. Net liquidity is falling across the sector and if the cash dries up, and a bank withdraws credit facilities, then it’s ‘Goodnight Vienna’. This situation may be nearer than at first expected. The government will have to step in to arrange some credit attached to a restructuring plan. The Office for Students (OfS) may take on this role, but they are not trusted by the sector.
The original ‘Higher Education Restructuring Regime’ (HERR) of the OfS from 2020 was discontinued as universities avoided it. As a regulator, the OfS was found to be lacking in its role (TEFS 5th October 2023 ‘End of term report: the Office for Students must do better’). Now it is becoming less effective over time and a radical reset is needed. The government will need to appoint an interim chair to replace the much-maligned David Wharton (aka Lord Wharton of Yarm) who lacked experience of education and was a Conservative peer. They will need someone who is both experienced in the ‘business’ of universities but not obviously conflicted. Former VCs or Conservative ministers would not fit the role in this respect. Instead, an analytical ‘cool head’ with an appreciation of how universities operate with finances, staff and students would go a long way to setting things straight.
In the end, the government will find the period in which they plan to blame the previous government will be contracting fast. The mantle of blame will pass to them fast as action is needed. Being the government that allowed universities to fail will not be a good look down history. Omitting to protect students caught in the middle will look even worse: ‘Don’t forget the students’.
ORIGINAL POST Universities and students; HERR we go again
It came as little surprise that the King’s speech failed to address the looming crisis in Higher Education. While TEFS called on the government ‘Don’t forget the students’, it appears this fell on deaf ears. Yet this is a highly competent and motivated government team that is deliberate in its inaction. Some cynical observers might think Universities and students are being squeezed further so that the actions of the ousted Conservative regime can be blamed for failures. But the government must act to avoid being accused of fobbing off students and universities with the old two-step.
Mushroom management is a well-established term often applied to the management of staff in universities. It is therefore surprising that the management of universities are themselves the subject of similar management. They are being kept in the dark about what reforms the government may bring about. It must be slowly dawning in the minds of those running universities that the tactic is deliberate. Something is in the offing, and it could be bigger than expected; but not until they have been squeezed more.
Why the delay and ruthless thinking.
There is a crisis looming for universities and students, and it is not getting action from the government. Instead, it looks increasingly like universities are being cast adrift for now as they fight to stay afloat. It’s ruthless if correct. The managements trim their sails while most of the crew are bailing out the water and the cargo sits tight and prays. Only the most seaworthy and efficient will stay afloat. With the actions of the previous government taking the blame for the crisis, the new government can come to the rescue eventually and round up the fleet. This is the political dimension. Radical change looks more attractive after a full-blown storm. Higher Education Minister, Jacqui Smith has only been in the job for a few days, but she is a big gun in waiting to fire off something radical.
The old Hertford two-step.
Some might be wondering why Jacqui Smith is back other than she is very experienced in government. There are certainly similarities between her and Education Secretary Bridget Phillipson in their backgrounds and education.
Both attended Hertford College at Oxford University; Smith in 1980 and Phillipson in 2002. They were still in the vanguard of changes in privilege and access. Smith studied Philosophy, Politics, and Economics (PPE) and Phillipson History and French.
By 1965, the college had departed from the traditional entry examination route and was recruiting students from state schools after earlier interviews. This led to the college rising up the degree attainment ‘Norrington ranking’. In 1974, women students were accepted when it became coeducational. Both ministers benefitted from this enlightened approach and the tutoring they received. There is no doubt their formative experiences will have moulded their views of what a good university is likely to offer students. But this is far from the experience of most students in universities today. Back in 2011 Smith offered her appreciation of a past tutor, Professor Roger Van Noorden, as her ‘best teacher’ in the Times Education Supplement.
“He will remain a reminder to me that universities need to value high-quality, caring teaching as well as research”.
She is still right on this. But with a diminishing resource, few will find this experience possible. Time is running out and both Smith and Phillipson must avoid giving universities and students the old ‘Hertford two-step’.
Universities react.
As the dust settled in the immediate aftermath of the King’s speech, the Office for Students (OfS) hosted a meeting across the river in London for university officers concerned with finance. Interestingly, apart from one slip up, the word ‘provider’ was replaced by use of the word ‘institution’. A sign of changed times perhaps.
The backdrop for the meeting was an earlier report on the financial state of universities. Emerging in May, the report ‘Financial sustainability of higher education providers in England: 2024’ (pdf) was a message to the sector and government. It warned that the planning assumption of increasing student numbers is a false hope and that universities must now adjust to a fall in numbers from those expected. UCAS data this year has confirmed this, and many universities have started to take action. While the number of UK 18-year-olds applying has remained steady this represents a decline in the expected application rate from 41.5% in 2023 to 41.3% in 2024. It may continue to fall.
While the report warns of some universities finding a liquidity and cash-flow problem emerging this year, many will ride the initial storm. A general trend is described as,
“Declining surplus levels, cash flow and net liquidity. A significantly higher number of providers expect to fall into deficit in the coming years. While net liquidity has fallen, there is evidence of the sector adjusting to protect its cash flow in the face of financial challenges”.
Simply put, net liquidity is falling fast across the sector but is not yet catastrophic for many universities.
But modelling has predicted deficits over time that are not sustainable. With the current trend of small reductions in student numbers, it predicts “202 providers could be reporting deficits (75 per cent of providers)”. However, with a larger fall in numbers “239 providers could be reporting deficits (89 per cent of providers)”. The outcome could be a sudden cashflow problem early in the academic year in some cases.
The meeting was originally planned during the election campaign, but purdah rules meant it was postponed. The mood was sombre as the enormity of the task ahead loomed. Those in the room were resigned to a worsening situation and the task of balancing the books for at least another year. The discussion revolved around two things.
Firstly, that the OfS must be informed as early as possible if there were problems.
Secondly, the various ways ‘institutions’ can trim their sails and become more efficient with help.
None of this was new and generally offered no surprises. The old chestnuts of rationalisation, course closures and mergers, redundancies and general cutbacks will already be happening. The rise in employing fewer permanent academic staff, tasked with oversight of a team of less experienced ‘cheaper’ temporary assistants doing the main teaching, will no doubt continue. In the end, cutting staff numbers will be the only way out.
Emphasis on keeping students ‘on board’ during ‘restructuring’ will not be enough. The impact on staff was avoided throughout the meeting. However, working closely with staff and their unions will be essential for effective change. One of the outcomes for staff (based on my own experience) is more hours working under greater pressure. The temptation to adjust workload models without thinking ahead must be avoided. This would have great negative consequences and must be a main consideration.
Concerns on the horizon.
Many less well-off students are going to find the coming academic year even more challenging than the last and might not cope. The OfS and universities will also find it difficult to offer support. The big concern is the likelihood of falling student numbers when rising numbers were planned for as the population rises. With recruitment turnover lower than expected, some may face an immediate cash-flow problem within the first term. If a university defaults, the banks and creditors will withdraw facilities and the failure will happen within a day or so as staff are not paid, and student support dries up. It is no wonder the OfS would like to get an early warning. But they in turn cannot offer much in financial facilities. Their offer is in managing ‘restructuring’ only. The government must address this.
Emergency measures: HERR we go again.
The prevailing situation is that many universities can take the pressure for another year. The government can see this in the OfS report from May. However, there is a big problem brewing as the majority will fall into deficit soon. This is not sustainable in the long run so a longer-term fix is needed.
In the meantime, emergency measures may be needed as the first wave of universities start to fail. With no cash to pay wages and creditors, this would trigger a fast collapse within days. Some may find their net liquidity and cash flow too low if student numbers fall. The government may have little choice but to offer emergency assistance as loans that are linked to restructuring plans being enacted.
This is like the early days of the Covid crisis when the government started to panic about some universities going under. The then Education Secretary, Gavin Williamson rushed in an emergency loan scheme to bail out universities in trouble. The strings attached involved the OfS taking control and enforcing a restructuring. The scheme called ‘Higher Education Restructuring Regime’ (HERR) did what it said on the tin. The outcomes were twofold. First, universities did not like it and second, they coped so they could steer clear of HERR. In the end there have been reports of three resorting to the help. Two were restructured without a loan and another was loaned £7.8 million which has been paid back. However, for the rest, there is a legacy they must now live with. They are forced into restructuring now and missed a chance earlier.
UK wide action.
The conclusion is that the government is probably working on a wider funding model that could be applied across the UK. This will take more time to negotiate and TEFS has favoured a Graduate National Insurance Levy that could be applied over the UK (Funding students and Universities: a graduate National Insurance Levy is gaining traction). The government has only a year to make the changes and start a transition.
It avoids fees and loans but does require graduates and their employers to share the costs and pay back in time. With the SNP government in Scotland in retreat, there may be a window of opportunity for a scheme that has no overt fees attached to it. With the payments tied to graduate pay inflation, it would be a better way to ensure longer term stability. In the meantime, universities will need to become much more efficient and work with less. But we must also not forget the students.
The author, Mike Larkin, retired from Queen’s University Belfast after 37 years teaching Microbiology, Biochemistry and Genetics. He remains optimistic and loves mixed metaphors.