Increasing responsibility for university governors

Universities are to take on full responsibility for their financial sustainability under the new regulator

The higher education sector remains unsettled as the Office for Students (OfS) sets the precedents for how it will use its powers. The new regulator, created by the 2017 Higher Education and Research Act (HERA), is chaired by Sir Michael Barber. He has clearly laid out that governing bodies of universities are fully responsible for their financial sustainability and that the OfS will neither bail out universities in financial troublenor encourage moral hazard developing in the market.

Governance and academic autonomy

HERA's recognition of “the institutional autonomy of English higher education providers” (Clause 2(1)(a)) can also be read as extending to autonomous governance responsibility as well as academic freedom. At a recent round table held by Grant Thornton, it was stated that OfS is a different beast from its predecessor, the Higher Education Funding Council for England (Hefce), which was ‘provider friendly’. University leaders would check with Hefce on the sense or legality of their plans and, only once they had the green light from the regulator, would they bring those plans to the university’s governing board. This will not be an option with the OfS. Governors of universities now have to accept, perhaps more fully than before, that they hold ultimate responsibility for their organisation and the risks that it is running.

If the political landscape had remained stable following the passing of HERA, this change of emphasis would have been allowed to bed in softly and become part of the bedrock of the higher education sector. However, Brexit and the impending results of the Government’s review of tuition fees will see that change tested much sooner. The expanded risks some universities have taken on since the expansion of the university sector, and particularly since the tuition fee rise under the Coalition, may well crystallise in the near future and the question arises as to whether university boards are ready for the ensuing problems.

Participation and access at risk

Falling student numbers - due to changing demographics - along with the potential reduction in the average fee paid by UK students after the Government’s review and a possible three D’s A-level entry floor, will have a significant impact on university incomes.

Options to find savings through reducing salaries in a unionised environment will be difficult. It’s also highly questionable that academic salaries should be cut, especially at the more junior levels where high qualifications and many years of effort do not make you wealthy. Research budgets are committed years in advance and other costs, like facilities management contracts, would need to be renegotiated using professional advice.

In contrast, spend on social mobility and participation programmes could be targeted for cuts much more easily. An attendee at the Grant Thornton round table believed that £1 in every £9 from tuition fees at their university went on participation - a figure that may seem high, but reflected the need to fill spaces and reach out to the broadest audience possible. However, it would be an absurd consequence if the Government’s review recommending a reduction in tuition fees resulted in a decline in spending on people who benefit most from going to university and reduced social mobility.

Spending solutions

A partial solution to tightening participation budgets might be for universities to pool their spending, either locally or across subjects, and to target particular groups (such as participation of local areas). Whether this coordination would work in the competitive world created by HERA and the lifting of the student cap would be open to question, but it may be an interesting option to get more from a shrinking budget. It would be a positive if the OfS is able to indicate that this pooling or top-slicing of budgets would be acceptable in the new regulatory regime.

For more information, please contact James Kirkland.

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