The Welsh government considered asking universities to agree to pool their financial resources if one institution needed to be bailed out, Times Higher Education has been told.
This “draconian” idea was abandoned only after Welsh universities argued that this could cause a “domino effect” in which financial problems would spread from institution to institution, it is understood.
It is believed that the idea was discussed during negotiations with Welsh universities over the Higher Education (Wales) Bill, which was laid before the Welsh Assembly on 19 May.
Under the proposal, which was floated about two months ago, Welsh universities would have pooled their surpluses to cover the debts of struggling institutions, according to Simon Thomas, the Plaid Cymru shadow education minister, who was in contact with universities during the discussions.
Although the idea was not included in the final bill, “clearly there’s been some thought given from the Welsh government for some pretty draconian measures”, he said.
A senior university source confirmed that the government had presented such an idea to universities. The government had thought that universities might sign up to the idea voluntarily, the source continued, avoiding the need to put specific powers in the bill to allow the funding council to compel institutions to pool their finances.
But it was argued by university representatives that if the rest of the sector had to prop up a struggling institution, it could lead to a “domino effect” and push other universities with weak financial positions towards bankruptcy as well, the source added.
A Welsh government spokesman said that the administration did not “recognise Simon Thomas’ comments about pooling university surpluses”.
He said that as far as the government was aware, there had been no discussions to make the idea “part of the HE bill”.
Welsh universities have already reacted with alarm to the content of the bill, which they fear could extend the powers of the Higher Education Funding Council for Wales. But the government has insisted that the bill will not “threaten the academic or institutional autonomy” of institutions.