Government willing to bail out some Universities - Tutor Hunt Blog

Government willing to bail out some Universities Government willing to bail out some Universities, but will others be left to fail? Government willing to bail out some Universities, but will others be left to fail?UniversitiesWe are all used to reading about the government bailing out Banks when they face hard times, but what about universities? Can they expect the same kinds of help the financial sector regularly receives? Are they also, to use the popular American colloquialism, `too big to fail`? A university is not part of the capitalist system - they are public institutions, funded by the government, and of course by students themselves, who must pay substantial amounts for their attendance. The purpose of a university though is not to make money - they are seats of learning, palaces of higher education. Many receive partial funding from private companies for research purposes, but this goes towards ancillary aspects of the university. They are there to educate, not to make money. The international ratings agency Moody`s recently revelled to its clients that it believes there to be a high probability the government would step in to assist a university that was facing financial hardship. This is not to say that they believe most universities are acting complacently, nonchalantly believing that whatever troubles they face, the government will save them. It is actually not unusual for universities to borrow money from a bank in the same way that a company would - but out of the nine universities that have recently taken out large loans from banks Moody`s have attached negative warnings to the credit ratings of as many as seven of them. Out of all the UK universities only Oxford and Cambridge are rated by Moody`s as being stable financially. This summer it was reported that a university, so far unnamed, had received a 900,000 bail out package from the Office for Students, the government funded UK higher education regulator. The timing was comically apposite, given that only this month the head of the OfS, Sir Michael Barber, announced in a speech that they will not be bailing out universities in the future, and that they must not assume they will always be propped up with emergency financial packages. At the wonderfully named Wonkiest higher education festival in London earlier this year he laid out his views on the subject: `The OfS will not bail out providers in financial difficulty. This kind of thinking not unlike the `too big to fail` idea among the banks will lead to poor decision-making and a lack of financial discipline, is inconsistent with the principle of university autonomy and is not in students` longer term interests,` `Should a university or other higher education provider find themselves at risk of closure, our role will be to protect students` interests, and we will not hesitate to intervene to do so. We will not step in to prop up a failing provider.` These are indeed hard times for many universities - rising tuition costs have meant that the number of students applying to universities has dropped in recent years. Their financial uncertainty is only exacerbated by the imminent threat of a funding review, commissioned by Teresa May earlier this year. It seems that larger universities are afforded more protection by the government, with a financial bail out being more readily given to them than to smaller ones. While Oxford and Cambridge enjoy top triple A ratings according to Moody`s, Manchester only has an Aa2 rating, while Keele and Leeds languish with Aa3 ratings. Moody`s said the drop in University applicants has played a major role in low credit ratings, with uncertainty concerning tuition fees, general funding, and brexit related fears only adding to their financial uncertainty. The rating`s agency wasn`t all negative in its report however, going on to say that it expected general credit ratings for UK universities to remain good, thanks to secure debt management plans, and the well respected international reputation they enjoy. It uttered a cautionary note however, saying that `some rated universities are likely to post operating deficits as a result of these pressures over the next couple years.` The UK has some of the oldest and most prestigious universities in the world - it would be a terrible shame for any of these to be lost due to financial mismanagement. It also has a number of smaller, newer universities, that may not be able to solicit as much aid as their larger, more venerable counterparts; and it would be sad indeed if a disproportionate amount of assistance went to assist the larger universities, while the smaller institutions were left to fend for themselves. 15 months ago0Add a Comment