A question of money

For a few years now there has been a steady stream of predictions that one or more English universities would face bankruptcy, or at any rate life-threatening financial difficulties. Most recently this month it was suggested that at least three universities are at risk. In what is an increasingly marketised system, the question this has thrown up is whether, in the event of such a crisis, the government or its agencies would throw a lifeline.

According to Sir Michael Barber, the chair of the Board of the new Office for Students (OfS), earlier this month, the answer is no:

‘The OfS will not bail out providers in financial difficulty. This kind of thinking – not unlike the ‘too big to fail’ idea among the banks – will lead to poor decision-making and a lack of financial discipline, is inconsistent with the principle of university autonomy and is not in students’ longer term interests.’

But then again, maybe it isn’t. Last Thursday the BBC reported that an unnamed university head received almost £1m in the summer ‘to stay afloat’ as it was ‘running out of cash’. The OfS, which provided the money, offered a complicated explanation of why this had been done, when Sir Michael had just emphasised that it wouldn’t be a good idea; apparently it was done under the framework previously applying to HEFCE, and so it was entirely different.

No matter. The question really is whether universities should always be protected by the state, or whether there are circumstances where it would be sensible to let a badly-managed institution close shop altogether. The issue is rapidly transitioning from being the sort of thing you might raise after you’ve indulged in food and drink excessively to one where the prospect of university bankruptcy does not seem beyond possibility. In the United States, a Harvard Business Scholl professor has even predicted that half of America’s universities are at risk.

Closing a university is no small thing. This is not about removing an excessively paid Vice-Chancellor from the payroll: it is about what happens to staff, students, suppliers and others who interact with it. It is about facing a big gap where the university previously provided a magnet for investment or regeneration.

Having a vague threat of liquidation hanging over institutions is not good. If universities are genuinely to face this risk, the rules in this context need to be clearly stated and understood,

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One Comment on “A question of money”

  1. Vince Says:

    I’ve been arguing a version of what Christensen is on about with you for about ten years now. If I can boil it down to this. There is something really wrong when a graduate is paid more and treated better if they enter the support staff of a uni than taking the academic.


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