The Budget and Higher Education: waiting for Augar and the ONS review.
The 2017 budget reported by TEFS last year  promised several things that might have assisted universities but it really offered little help for the many hard pressed students. There were some concessions that may have helped settle the nerves. The decision to raise the ‘Student Loans Repayment Threshold’ was projected to cost £615m for the government by 2022/23. This was offset to some degree by the ‘Tuition Fee Cap Freeze’ that will save £235m by 2022/23. However, this burden of capped resource now lands in the lap of the Universities and Augar may make it worse. The suspicion was that the £2.3bn of investment in research and development projects announced last year would cover a projected loss of research income from the EU after 2019. The increase in research and development funding in the 2018 budget may be suffering from the same illusion.
What is clearer is that the government are effectively treading water at this stage with regard to universities. The Augar review has been delayed until 2019 and, barring more leaks, will not be released until after the Office for National Statistics rules on how student loans are recorded. The uncertainty is palpable.
Projected student numbers and the viability of institutions.
Immediately after the budget announcement, news broke that several universities were on the brink of bankruptcy. An article in i-NEWS revealed an exclusive report that shed some light on this problem . It seems that some unnamed institutions are borrowing too much in the short term in order to survive as their annual deficits mount. The Times Higher provides a much better coverage through its analysis of the financial statements of institutions . This reveals that an increasing number are accumulating deficits into the millions and, in some cases, this is over 10% of the annual turnover. Clearly they are compelled to either become more efficient or go under. Redundancies would seem inevitable in the near future.
What are the projections and who will be hit the hardest?
The root of the problem for some universities lies in two fundamental areas. Firstly, the number of eighteen year olds is set to continue to decline in the near future but will recover after 2021. A valuable report by the Higher Education Policy Institute (HEPI) earlier this year looks at the projections to 2030 . The projections in the report, and shown here in Figure1 (numbers shown as x 1000 on the Y-axis), seem
Secondly, despite the decline in eighteen year olds, there are still a significant number of students entering university. The trouble is that this benefits the socially ‘elite’ Russell Group and pre 92-institutions more than the newer universities that have expanded over recent years and take in many more students from lower income backgrounds.
The possible impact of falling student numbers from the EU and elsewhere adds to the rising anxiety. Figure 2 shows the recent figures from HESA that indicate the proportional
extent of the problem. On the face of it, it might seem that the student numbers from outside the UK are relatively low when compared to home students. However, in terms of income they represent much more pro rata and the financial loss would be significant. Additionally, in this respect, the office for Budget responsibility has the serious task of calculating the projected demand for student loans. To better calculate this they have recently started using different criteria  and now predict a significant fall in demand that is well below their earlier predictions. This only serves to add to the worry and confusion.
In the context of the financial history.
Coinciding with the news of financial troubles mounting at some of our universities, a WONKHE report was released that reviewed the financial history of universities in the UK using HESA statistical data going back to 1994 . This is an excellent review that certainly ‘does what it says on the tin’. It reveals the myths and realities that put the current situation into a clearer historical context. Those tasked with the problem of tiding over institutions in trouble for the next few years will benefit from such analysis. The interactive tables and figures are excellent – but are too comprehensive to review here in any detail.
The dampening effect of T-levels.
The potential of T-levels diverting students away from A-levels is a real one. If this were to happen in great numbers, than the effect would be to dampen the projected increase in university numbers from 2022. This would again be more striking for the post-92 institutions because those with A-levels are more likely to be drawn to the so called ‘elite’ institutions as in the current downturn. Also, the colleges would have to expand greatly to take up the demand and the £38 million promised in the budget would become a drop in the ocean. The idea that T-levels will be taken up by students not currently seeking a university place might seem reasonable at one level. However, more likely is that there will be a diversion away from university by talented students from lower income backgrounds who see more financial merit in a technical career. The result will be a fusion between some current post-92 institutions and nearby colleges to take up demand and use any spare capacity. This may be a good thing, but there is little evidence of any government planning. This simply cannot be left to the ‘free market’ to rectify.
Will government bailout a failing institution.
The feeling is that this is very unlikely with the current government. Nick Hillman, Director of HEPI reported in the Guardian in 2017 that “some universities are struggling far more than people realise” . His analysis and in August of this year  are excellent. It is the case that the Higher Education Funding Council for England would previously have helped in the short term, “It has a list of at-risk institutions that it keeps hugely confidential. In the past if it needed to lend £100m to prop up a failing institution it could do it.” Now, with the transfer of powers and regulation to the Office for Students, there is no source of funds to do this available. Interestingly, the government has never done this in the past and it seems unlikely given their lack of experience and adherence to free market dogma.
The same Guardian article cites the failing University College Cardiff (UCC) in the 1980s as the only case to come close to date. Rather than be allowed to fail, it was effectively taken over by the University of Wales Institute of Science and Technology (UWIST) that was situated nearby in Cathays Park Cardiff (a more detailed report is at Wales Online ). This surprised some, but came as no surprise to me. I was a PhD student at UWIST from 1977 to 1980. The profligacy and poor leadership at UCC was obvious to those of us under the very tight financial strictures at UWIST. This meant that UWIST weathered the storm of cuts under the Thatcher government. I was at Queen’s University Belfast from 1980 and they quickly adopted the same 'style' of financial controls that I had already observed at UWIST. Some colleagues were stunned by the impending crises and certainly by 1987 Queen’s was also in trouble itself despite strenuous efforts (that is another horror story that I will spare those already feeling under threat at this time). But, unlike Queen’s, UCC apparently did not respond well and by 1986 it was heading for bankruptcy. Then the Department of Education and Science and the University Grants Committee stepped in. To the horror of the staff at UCC, it was the UWIST Vice Chancellor that took control of a merged University of Cardiff institution. Like Queen’s University Belfast, it survived and both are Russell Group Institutions with healthy reserves. But anyone around a university at that time, as either a student or staff member, will remember the increasing student numbers against a backdrop of declining staff numbers and resources. At Queen’s, the staff managed to up their game to an almost heroic extent to accommodate students and maintain teaching standards and levels. Many students come from low income backgrounds at Queen's. Unfortunately, for some staff this was at the expense of their research careers and some were to be brutally betrayed by RAE and the REF exercises to come. This was a shameful time that will be regretted in years to come.
This would be a tragic loss and a social betrayal that will not be forgotten.
I lose track of time
And I can't see the wood for the trees
You set them alight
Burning bridges as you go
I'm too weak to fight you
I've got my personal hell to deal with, then you say………….
 Budget 2018 https://www.gov.uk/government/publications/budget-2018-documents
 iNEWS Thursday November 1st 2018 Three UK universities on the brink of bankruptcy and more reliant on short-term loans ‘to survive’ https://inews.co.uk/news/education/university-bankruptcy-reliant-on-loans/
 Budget 2017 https://www.gov.uk/government/publications/autumn-budget-2017-documents and see also: TEFS Budget 24th November 2017 Can students be confident in their future with this budget? https://studentequality.tefs.info/2017/11/can-students-be-confident-in-their.html
 Times Higher Education November 1, 2018. Growing English deficits trigger sustainability fears
 HEPI number 105 15 March, 2018. By Bahram Bekhradnia and Diana Beech
Demand for Higher Education to 2030 https://www.hepi.ac.uk/2018/03/15/demand-higher-education-2030/
 OBR 29 October 2018 Supplementary forecast information release Student entrants: forecast methodology change. https://cdn.obr.uk/Supplementary-release_student-entrants-1.pdf
 WONKEHE 29th October2019 Myths and realities of sector finance.
 T-Levels Guidance. T Levels: next steps for providers. Information for post-16 providers on the next steps towards delivery of T Levels. https://www.gov.uk/guidance/t-levels-next-steps-for-providers
 The Guardian 7 Feb 2017. What would happen if a UK university went bust? https://www.theguardian.com/education/2017/feb/07/what-if-uk-university-goes-bust-ucas-students
 The Boar Aug. 29, 2018 Nick Hillman warns of the growing possibility of institutional failure https://theboar.org/2018/08/nick-hillman-warns-possibility-institutional-failure/
 Wales Online 28 JUN 2007When Cardiff was at the centre of a crisis. https://www.walesonline.co.uk/news/wales-news/cardiff-centre-crisis-2247012
 HEPI 16 March, 2018 By Diana Beech. If student numbers are set to grow, then isn’t it about time we ensure we will have the staff to teach them? https://www.hepi.ac.uk/2018/03/16/student-numbers-set-grow-isnt-time-ensure-will-staff-teach/