HEFCE will be 'less of a nanny'

April 5, 1996

Universities and colleges have been given greater freedom and responsibility in the management of their financial affairs, writes Tony Tysome.

The Higher Education Funding Council for England has decided to be "less of a nanny" and to allow institutions to make more independent decisions about how they spend their money, how much they borrow, and how they dispose of taxpayer-funded assets.

And it has dropped plans to automatically fine institutions which fail to comply with most of the funding council's new requirements for information.

The move, outlined in a circular published this week which gives details of the revised financial memorandum between HEFCE and institutions, has been approved by education ministers and the Treasury.

New decision-making rules contained in the memorandum will allow governing bodies to dispose of assets which were acquired or developed using public funds, or to borrow against these assets as security, without having first to gain funding council approval that the project represents value for money.

The rules mark a significant shift of responsibility from the funding council to governing bodies for decisions on the use of capital assets and borrowing, at a time when institutions are being encouraged to explore new capital-funding avenues, such as the Private Finance Initiative.

The only catch is that institutions will still need written consent from the funding council before taking on debts which would push the servicing costs of their total long-term borrowing beyond 4 per cent of overall income.

Jane Henderson, HEFCE's director of finance, described the extra freedom as "a significant victory" over outdated bureaucracy. Although institutions would be expected to have all information about transactions readily available, this was no more than should be required by their own governing bodies.

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