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"The home undergraduate market is not offering growth, not offering the margins."



Universities 'may opt out of state system', says study

Graeme Paton
The Daily Telegraph
1 July 2011


Two universities are "actively considering" going private amid concerns over a loss of income in the wake of the Government’s higher education reforms, it has emerged.

Vice-chancellors may pull their institutions out of the state-funded system in a move that would allow them to charge unlimited tuition fees and recruit more foreign students.

By going private, universities would also be free of Government requirements to admit more undergraduates from poor backgrounds and state schools.

Research published today by PA Consulting, the management consultancy group, found two universities were considering the move while large numbers of others were looking to "minimise" dependence on state funding by expanding overseas.

The two have not been named but are believed to be specialist institutions outside the elite Russell Group.

Britain currently has just one private university offering a full range of courses – Buckingham.

Many top institutions have threatened to severe ties with the Government in the past in protest over funding cuts but none have actually made the switch.

Private status would rob universities of most direct state funding, particularly for research, which makes up a sizeable proportion of many institutions’ budgets.

But it would give them more freedom to levy higher fees, well above the £9,000 cap being proposed from next year. Some top universities already charge foreign students – who are not subjected to the fees cap – up to £20,000 for some specialist undergraduate courses.

Universities would also escape current Government controls over the number of students they can recruit and requirements to "widen participation" among teenagers from poor backgrounds.

Separate figures from the PA Consulting study showed more than half of vice-chancellors foresaw a "number of institutional failures and bankruptcies" because of Government reforms, while a similar numbers are predicting mergers and take-overs.

Gareth Thomas, Labour’s shadow universities minister said: "This is further proof that the Government’s huge cuts in university funding are causing serious financial problems for universities; a crucial part of our national infrastructure and critical to the hopes and aspirations of the next generation"

Under the Coalition’s reforms, almost all direct state funding for undergraduate teaching has been cut. To plug the gap, universities can charge up to £9,000 in tuition fees, with as many as two-thirds planning to charge the maximum for some courses.

The Government has promised to lend students the money needed to cover tuition fees upfront. But it is feared the number of universities attempting to set high fees will cause the student loans bill to escalate to an unsustainable level.

A Coalition White Paper published this week outlined sweeping reforms designed to create more competition between universities and reward those that provide top-quality courses at a low price. It is being seen as a move to drive down the loans bill.

Mike Boxall, a higher education expert at PA Consulting, told the Guardian: "The home undergraduate market is not offering growth, not offering the margins.

"Prices are being pushed down – the whole thrust of the White Paper was trying to push tuition fees down – costs are being pushed up, arguably, by raising students' expectations. If you need growth, you've got to be looking outside that."

Parts of this article have been highlighted by PA Consulting Group. Reproduced with kind permission from Telegraph Media Group.

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You can contact us now or visit our website here to find out how we can help you identify the right incentives to deliver public benefits in higher education.

You can read the article in The Daily Telegraph here.

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