U-turn is likely to desta­bilise bud­gets as stu­dents flock to bet­ter-per­form­ing in­sti­tu­tions from lesser ri­vals, finds Rachel Mil­lard

The Daily Telegraph - Business - - Front Page -

The Gov­ern­ment’s U-turn on A-lev­els this week brought re­lief to stu­dents but will do lit­tle to al­le­vi­ate the money wor­ries of uni­ver­sity bosses. Coro­n­avirus has heaped fi­nan­cial pres­sures on the sec­tor, putting many at risk of bank­ruptcy as they try to cope with a prospec­tive fall in in­ter­na­tional stu­dents, the loss of in­come from events and bal­loon­ing pen­sion deficits.

If that was not enough, the de­ci­sion to up­grade A-level re­sults by re­ly­ing on teacher-as­sessed grades rather than Ofqual’s al­go­rithm is likely to desta­bilise del­i­cate bud­gets as stu­dents flock from poorer-ranked in­sti­tu­tions to higher-per­form­ing ri­vals – with stark con­se­quences.

“In pre­vi­ous years, stu­dents who

‘There might be some who had not thought about go­ing to uni­ver­sity but now might do, given the de­ci­sions on grad­ing’

missed out on their first choice would re­view their op­tions and de­cide to en­rol with other universiti­es that of­fer strong aca­demic sup­port, a pri­mary teach­ing fo­cus and sup­port suited to the stu­dent,” says Ian Dunn, provost at Coven­try Uni­ver­sity.

“This may not take place now. These changes may see universiti­es strug­gle fi­nan­cially, or close al­to­gether. We need to re­tain the breadth and ex­pe­ri­ence of the UK higher ed­u­ca­tion sec­tor and avert any nar­row­ing of the range of ed­u­ca­tional ex­pe­ri­ence that it of­fers.”

Fi­nan­cial pres­sure has been build­ing in the sec­tor, with universiti­es in deficit by a re­ported ag­gre­gate £3.5bn last year.

About £7bn of the uni­ver­sity sec­tor’s an­nual £40bn in­come comes from in­ter­na­tional stu­dents, about £7bn from re­search grants and con­tracts, and £5bn from di­rect pub­lic funds, ac­cord­ing to a re­cent study by the In­sti­tute for Fis­cal Stud­ies.

The IFS warned in early July that much of that in­come had been put at risk due to the coro­n­avirus cri­sis, which could turn in­ter­na­tional stu­dents away, pos­ing a par­tic­u­lar prob­lem for the likes of the Lon­don School of Eco­nomics, al­most 70pc of whose stu­dents are from over­seas.

In its cen­tral sce­nario, the IFS pre­dicted universiti­es could lose about £11bn in the long term in fee in­come, pen­sion pro­vi­sions and con­fer­ence in­come due to the pan­demic.

The losses would im­pact universiti­es very dif­fer­ently de­pend­ing on the strength of their fi­nances, with the IFS pre­dict­ing that up to 13 uniden­ti­fied in­sti­tu­tions, likely among the least pres­ti­gious, could be at risk of bank­ruptcy with­out a gov­ern­ment bailout.

Un­der pres­sure from in­dus­try group Universiti­es UK, which high­lighted the 940,00 jobs in the sec­tor, min­is­ters stepped in back in July to al­low in­sti­tu­tions to ap­ply for gov­ern­ment re­payable loans as a “last re­sort” as part of re­struc­tur­ing plans.

But they come with strings at­tached, in line with the Tory Party’s 2019 man­i­festo prom­ises to tackle what the party deemed “low qual­ity cour­ses”, as well as “the prob­lem of grade in­fla­tion” – one rea­son for the ditched Ofqual al­go­rithm. The

Depart­ment for Ed­u­ca­tion said universiti­es re­ceiv­ing sup­port would need to de­liver a “high-qual­ity of­fer aligned to lo­cal and na­tional eco­nomic and so­cial needs”.

Min­is­ters also want universiti­es to keep in check vice-chan­cel­lors’ pay, which in 2019 rose above £250,000 on av­er­age for the first time, trig­ger­ing anger among unions.

Gavin Wil­liamson, the Ed­u­ca­tion Sec­re­tary, said at the time: “We need our universiti­es to achieve great value for money – de­liv­er­ing the skills and a work­force that will drive our econ­omy and na­tion to thrive in the years ahead. My pri­or­ity is stu­dent wel­fare, not vice-chan­cel­lor salaries.”

Some ex­perts have sug­gested the re­stric­tions might deter universiti­es from ap­ply­ing to the scheme. In any case, Universiti­es UK says the sup­port will not be enough to mit­i­gate for the sud­den flux in stu­dent num­bers for many universiti­es due to the about-turn on A-level grades.

In a let­ter seen by The Daily

Tele­graph, it asked the Ed­u­ca­tion Sec­re­tary this week to “ur­gently put in place al­ter­na­tive forms of sup­port to mit­i­gate against the dam­age to oth­er­wise fi­nan­cially sta­ble universiti­es”.

They were, it added, “go­ing to take a se­vere fi­nan­cial hit over the next three years due to this sud­den change in gov­ern­ment pol­icy – with knock-on im­pli­ca­tions for lo­cal economies and com­mu­ni­ties”.

Al­though it is too early to say which universiti­es will be af­fected and to what ex­tent, some could be in the re­gions at the heart of the Gov­ern­ment’s agenda to “level-up” the econ­omy. Universiti­es are also ask­ing for money to take on the ex­tra stu­dents who now have the grades.

Si­mon Ol­droyd, in­terim deputy vice-chan­cel­lor at Le­ices­ter’s De Mont­fort Uni­ver­sity, agreed that some universiti­es could be in a “pre­car­i­ous” sit­u­a­tion, but noted that lower-ranked universiti­es might also ben­e­fit from the A-lev­els U-turn.

“There might also be some stu­dents who had not thought about go­ing to uni­ver­sity but now might do, given the de­ci­sions on grad­ing,” he said.

“Higher ed­u­ca­tion in this coun­try is a wide spec­trum and there is a place for all kinds of universiti­es.”

He added: “In­ter­est re­mains re­ally high [for us] and we are in a good po­si­tion as we have had strong re­cruit­ment for a num­ber of years. We are for­tu­nate we don’t have im­me­di­ate fears.”

Jack Brit­ton, a se­nior re­searcher at the IFS, also be­lieves that the im­pact on A-level stu­dents may ul­ti­mately bal­ance out.

“It’s re­ally hard to know how far stu­dent num­bers are go­ing to drop among universiti­es fur­ther down the rank­ings,” he says. “I sus­pect it won’t be as bad as peo­ple are think­ing.

“I think the big­ger risks to uni­ver­sity fi­nances are prob­a­bly the pos­si­ble drop in in­ter­na­tional stu­dents and in the value of pen­sion funds. Those could well dwarf all of this.”

Universiti­es such as Ox­ford are likely to see a surge in stu­dent num­bers, but oth­ers will not be so lucky

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