Post top-up failures can't bank on subsidy

April 30, 2004

Unpopular universities and subjects cannot rely on being bailed out by taxpayers' money, funding chiefs warned last week.

The squeeze is expected to affect the middle of the market - including old universities with lacklustre research records and former polytechnics that attract large proportions of middle-class students.

Speaking at the annual conference of the Higher Education Funding Council for England, Sir Howard Newby, its chief executive, said there was unlikely to be enough spare cash to rescue institutions that did not prosper after the introduction of top-up fees.

He warned that some institutions could get into difficulties rapidly.

"It's going to be really, really important that institutions understand their position in the market, and we do worry that some institutions will get theirs wrong. The implications of getting it wrong will be visited upon institutions very quickly and will be difficult to reverse," Sir Howard said.

These market failures were not necessarily the type of institution that received special attention from the funding council, he said. Moreover, he added, if Hefce intervened, it could find itself acting against the intentions of the government.

Sir Howard said: "We recognise that the transition (to a more mixed economy on the introduction of top-up fees) is going to have to be managed. We can put a lot of effort into assisting an institution to recover, but we can afford to manage only a few events simultaneously.

"How and when we need to intervene is not something that the Hefce board has discussed. At the end of the day, it is something ministers will have views on."

He pointed out that the higher education bill now passing through the Lords proposes to create an Office for Fair Access with powers to intervene in a university's financial affairs, but it does not propose to grant such powers to Hefce.

Sir Howard said: "The role of the funding council will be to secure the public interest - but which public, in who's interest and how? There will still be a lot of taxpayers' money coming into higher education in 2006, and we have to think hard about what the money is for.

"Does Hefce have a role to protect provision nationally? Or regionally? Should it provide baseline funding to ensure threshold quality? That will involve intervening in cases of market failure.

"At present, we intervene in a minor way in minority subjects such as languages on a just-in-case basis. Some areas such as physics and chemistry have been suffering a decline in student demand, and large numbers of external stakeholders have asked what we are doing about it.

"These issues are going to be exacerbated by the introduction of fees, and the sector needs to come to a view of when it is legitimate for the funding council to intervene."

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