Emergency loans for universities about to go bust

Student in library Universities have warned of financial losses from the pandemic

Universities in England at risk of going bust could apply for emergency loans from the government, in plans announced by the education secretary.

But any rescue would come with conditions, including cutting pay for vice chancellors and senior staff.

It could also require universities to focus more on subjects with better job prospects for graduates.

A report from the Institute for Fiscal Studies warned that 13 unnamed universities were facing insolvency.

Universities have warned of cash problems from the coronavirus pandemic – particularly if overseas students cancel plans to study in the UK.

A recent analysis from the Institute for Fiscal Studies warned of a “significant financial threat” to the UK’s higher education system from the pandemic – with losses that could be between £3bn and £19bn.

To avoid the collapse of a university and disruption to students, the government has put forward “last resort” plans for how it will intervene.

There are no guarantees of support, or as the proposals say – “not all providers will be prevented from exiting the market” – but universities could be offered a repayable loan, which would come with “restructuring” conditions.

Universities are autonomous organisations, but the rescue packages would see the government exerting more control over what was taught and how money was spent.

There could be cost cutting through “closing unviable campuses” and mergers, including with further education colleges.

Universities would be expected to end courses seen as being of “low value”, with an emphasis on either high-quality research or courses with good job prospects.

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Image caption There have been warnings of the financial risks if many Chinese students cancel plans to study in the UK

Vocational and higher technical courses could be encouraged – and universities would be expected to offer courses more closely linked to the local economy.

“Vice-chancellor pay has for years faced widespread public criticism,” say the proposals, with an expectation that there would be limits on salaries for senior staff.

Universities would have to “strip back on bureaucracy” and any funding for student unions should be for the “wider student population rather than subsidising niche activism”, say the plans for the “restructuring regime”.

Jo Grady of the UCU lecturers’ union accused the government of “exploiting” financial difficulties to narrow what universities offered and to impose its “evidence-free ideology”.

The lecturers’ leader criticised an “obsession with graduate earnings as a sole measure of quality”.

Alistair Jarvis, chief executive of Universities UK, called on the government to be “more ambitious, to go beyond a small number of universities in financial need” and to extend the funding more widely.

The government has previously announced measures to support universities during the pandemic – including bringing forward tuition fee income and promising that “research-intensive” universities could receive loans to cover 80% of international student losses.

“This new scheme will help those who are still facing financial difficulty as a result of Covid-19,” said Education Secretary Gavin Williamson.

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