Are there secret government bailouts?

Philip Augar – he of the review of higher education funding in England commissioned by Theresa May’s government – wrote a piece this morning in the Financial Times with an interesting snippet:

Three quarters [of English higher education providers] are expected to be loss making by 2025-2026, a handful are getting secret bail outs and 10,000 jobs are under threat.

We knew about the scale of loss-making; we knew about the scale of jobs under threat, but did we know before about a handful of secret bailouts? It may be that I have missed this, but I didn’t think that any bailouts had been given.

Back in the autumn, Jacqui Smith, higher education minister, was busy telling vice chancellors that the HE sector would receive any help the government could give, as long as it didn’t cost anything.

So what’s changed?

No government wants to see an HEI go bankrupt. Even if they make noises like they do, when push comes to shove, help tends to be forthcoming. Take Cardiff, for example. Not the current travails, but back in 1987 when the then University College Cardiff was going bust. Government intervention with funds, and a forced merger with the University of Wales Institute of Science and Technology (UWIST), staved off collapse.

Have we seen a close thing at a current provider? It was recently reported that auditors had raised questions about the sustainability of Coventry University (although its board states that it is still a going concern), and there are several other universities known to be in serious financial distress.

What form might a bailout take? Cash is the obvious one, but bailout cash usually comes with conditions. And for the OfS to be giving bailouts is not in line with its previous policy announcements.

Perhaps direct money from the Department for Education? It may be that the amount of a bailout would be lost in the rounding up of published accounts so could remain secret, at least for now.

Or it may be that the bailout came in the form of guarantees to commercial lenders: knowing that the government would ensure that a university kept gong would be a very comforting assurance for a lender considering calling in its debts.

If it were now government policy that English HEIs should not be allowed to go under, that would be a very big deal. It would change the dynamic for institutions considering how to survive, with cuts in staff, reorganisations and mergers on the cards. Knowing that the government would step in would take the wind from the sails of those pushing for sector reform.

Would it just be big institutions which would be saved? Smaller and specialist providers are under a great deal of pressure – they often face necessarily higher costs – and they have fewer resources to cut. Would the closure of a specialist performing arts school cause the government to act, or would it take a big university closure to force action?

Don’t get me wrong: I believe it would be very good news if the government intended to ensure that English HEIs would, in the final analysis, be protected. But if this policy is secret, then uncertainty will lead to bad decisions.

The sector would benefit from knowing:

• What conditions need to be met for a bailout to happen?
• What would a bailout look like?
• What conditions are attached?

Without clarity on these points, vice chancellors and university governing bodies might make decisions which turn out to be unwise and end up costing the taxpayer more. Transparency would lead to better decision-making and a more stable sector.