Allowing an English university to go bankrupt would be ¡°unthinkable¡±, the former chair of a landmark higher education funding review has said, calling for a ¡°behind-the-scenes¡± support package to help struggling institutions.

Addressing the House of Commons Education Committee, Philip Augar, chair of the 2019 review of post-18 education and funding, said, ¡°we can¡¯t allow a university in England to fail¡± because of the consequences for students, staff and the local region, ¡°let alone the UK¡¯s international reputation¡±.

The devolved Scottish and Welsh governments have both recently intervened to provide extra funding for institutions as the sector¡¯s financial concerns reach crisis levels. Regulator the Office for Students has said worsening finances across the sector has made the risk of bankruptcies more likely.

Asked about the prospect of university closures in England, Augar said: ¡°I think that¡¯s actually unthinkable, so something has to be done and there has to be a behind-the-scenes support package to ensure that the university doesn¡¯t fail.¡±

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While Augar supported government intervention in England, he said it needed to happen in line with actions to address issues of poor governance within universities.

¡°The thing that troubles me is that if a university fails, no one is on the line for it really except probably the taxpayer,¡± he said. ¡°I think the focus has to come on to the university vice-chancellors and senior managers.¡±

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Augur, a former banker, suggested that the higher education sector could adopt a similar remuneration system to one commonly used in finance, whereby part of high-earning employees¡¯ compensation is ¡°paid on a deferred basis once the term has been completed and you can see that the university has gone through without falling over¡±.

Malcolm Press, the vice-chancellor of Manchester Metropolitan University who was recently announced as the next president of Universities UK, agreed that a ¡°transformation fund¡± would be ¡°sensible¡± for English universities.

¡°It would help them make the sorts of changes that we want to make so we can operate at high quality but even more efficiently,¡± he said.

Jessica Corner, executive chair for Research England at UK Research and Innovation, said a similar model would also be valuable to support the innovation system.

As well as ¡°stable funding¡±, she said, the sector ¡°might need to diversify¡± and think about which research areas each individual university should specialise in. ¡°Not all institutions should or could do everything,¡± she said.

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Given mounting financial problems, universities are going to have to ¡°make difficult choices¡± about what research they fund, she continued, conceding that this could mean that the ¡°overall amount of research will contract in universities¡±.

¡°We don¡¯t really know whether that in itself would lead to a different outcome in terms of quality,¡± she said.

Asked about the impact of his 2019 funding review six years on, Augur said the ¡°direction of travel has been in line with recommendations¡± but that some recommendations had been ¡°taken too far¡±.

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In particular, the panel recommended a tuition fee freeze until 2023, that the sector¡¯s overall financial position was ¡°reasonably sound, with a strong balance sheet and operating surplus¡±.

¡°We felt that there was some excess in the system that could be worked out by a fee freeze for a period, but we wrote before Covid, we wrote before Ukraine, we wrote before the inflation and interest rate increases,¡± he said.

University fees are set to be increased for the first time in eight years in England this autumn, with the cost of an undergraduate degree rising to ?9,535 from ?9,250. The impact of rising inflation on the real-terms value of domestic tuition fee income has been widely blamed as partially fuelling the financial problems British universities are facing today.

¡°We felt there was some fat in the system,¡± Augar continued. ¡°That¡¯s gone. We¡¯re now eating into muscle and something substantial needs to happen pretty soon or we will be facing the question of what to do with a failed university.¡±

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helen.packer@timeshighereducation.com