Universities: Financial Sustainability

Part of the debate – in the House of Commons at 4:26 pm on 11th February 2019.

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Photo of Chris Skidmore Chris Skidmore Vice-Chair, Conservative Party, Minister of State (Department for Business, Energy and Industrial Strategy) (Universities and Science) (Joint with the Department for Education) 4:26 pm, 11th February 2019

I thank the hon. Lady for the opportunity to discuss the higher education sector today in what is my first urgent question.

This Government recognise the importance of the higher education sector and the massive contribution that it makes to this country. We recognise the multiple challenges that the sector is facing and that these will require institutions to adapt to a more competitive and uncertain environment. It is true that the current context presents significant challenges to institutional management, efficiency and financial planning in the HE sector, but it is wrong to characterise the HE provider sector as teetering on the brink of financial collapse. In its final annual report on the financial health of the sector published in March last year, the Higher Education Funding Council for England—the Office for Students’ predecessor—concluded that the HE sector continues to be in a sound position financially.

The new regulatory framework under the Office for Students brings a risk-based approach to monitoring financial viability and sustainability in order to protect students’ interests. Financial sustainability is a condition of registration. This means that the OfS, as regulator, will pay greater attention—and, importantly, require more specific action—where there is greater institutional vulnerability. Where the OfS identifies particular risks to a provider’s financial sustainability, it will indeed take action. This may include enhancing its monitoring or imposing a specific condition of registration on a provider to improve its financial performance. It may also require a provider to strengthen its student protection plan. This will enable action to be taken before a provider faces major financial difficulties.

The Department for Education is also working closely with the OfS to understand the sector’s wider financial risk in worst-case scenarios. We are working with the OfS, other Departments and other relevant national partners to develop full contingency plans to deal with unforeseen and/or major HE provider failure. This will set out roles, responsibilities, triggers and actions to be associated with instances where HE provider market exit falls outside the normal business-as-usual approach of the OfS in implementing its regulatory framework and requires Government action. But ultimately, as autonomous bodies, the financial viability of universities is a matter for the leadership of the HE providers themselves.

The terms of reference of the post-18 review that has been led by Sir Philip Augar include a focus on ensuring choice and competition across a joined-up post-18 education and training sector. The review will look at how it can support a more dynamic market in provision while maintaining the financial sustainability of a world-class higher education and research sector. We have been clear that the review recognises the need to preserve and protect the existing strengths in the system, and the stability of providers is key to a strong system.

The HE sector does face challenges, but we are confident that universities will rise to these challenges and continue to be providers of world-class higher education.