Disclosure, not exposure, is still our best bet

July 13, 2007

"Almost 50 universities at risk of financial collapse", the headline promised. "Universities in peril", forecast another. The reaction was predictable.

Politicians were quick to argue that students had a right to know the financial health of institutions to which they were applying. A choice that involves an individual investing thousands of his or her pounds and years of study deserves to be made with such information to hand, they insisted. Others pointed out that staff, too, deserve to know if an institution is teetering on the brink of a financial precipice. Why should they take up an appointment at a risky proposition? And doesn't the public have a right to know if universities, recipients of large dollops of their cash, have frittered it away?

Given the publicity the story generated, it would have been surprising if prospective students and their parents hadn't done a quick check to see if the university of their choice was on the "at risk" register.

Understandable fears, perhaps, but misplaced ones. If universities were limping towards imminent bankruptcy, the public, staff and students would indeed have a right to know. The only problem with last weekend's stories was that no university was. Not one. The bailiffs aren't at the porter's lodge; no mace has been pawned. The list of "almost 50" institutions paraded in the press included those that had been on the funding council's radar for a few months as well as those that had been subjects of concern for some years. It lumped universities that had had financial difficulties back in 1998 with those that were finding the situation challenging some years later, and none more recently than 2003. It did not distinguish between those that had found themselves temporarily a bit short because they had embarked on ambitious capital projects and those that had, at one time or another, more deep-seated structural deficits.

The true picture is this: there are six institutions that are being closely monitored by the funding council - the same number as last year but not necessarily the same ones. None of them, we understand, is in the former "immediately at risk" category, but in the old and less serious 2* band.

Which raises the question, what if universities were immediately at risk? How justified is it to publicise their imminent demise? The short answer is that, barring some catastrophic failure of the monitoring procedure designed by the Higher Education Funding Council for England, it would be very difficult to justify.

The first reason for this is that fear of financial outing would deter universities from a full and frank exchange of information with Hefce. The current system depends on sharing data early and honestly. That would be jeopardised if universities thought their dirty financial linen would be aired sooner rather than later.

The second reason is equity: if incoming students and staff have a right to know the financial health of their new institution, established campus inhabitants have an equal if not greater right to protection from the turmoil that premature disclosure would bring.

The third is that reports of imminent institutional death become self fulfilling even if exaggerated - students, research and investment dry up and add to a struggling university's woes.

And the final reason to continue with the current financial purdah is that it works. The most striking fact about the list of institutional "delinquents" published last week was how they had, with appropriate advice, time and investment, managed to turn the corner. If, and only if, the benign oversight devised by Hefce results in an unforeseen and dramatic meltdown at a university should the system be revised.

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