Universities would be prevented from going bust under new plans unveiled by Labour to protect higher education and students from “rampant” market forces.
The plans to overhaul regulator the Office for Students reflect fears about some universities’ viability.
Under Labour, the OfS would get an explicit objective of avoiding “disorderly failure” at universities, and be able to provide emergency loans.
The government said the OfS already had strong powers to regulate universities.
There have been increasing concerns about the financial sustainability of higher education institutions, with reports that three are on the brink of bankruptcy, relying on short-term loans to get by.
And several others are planning to run deficit budgets and make significant cuts.
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Universities minister Chris Skidmore has suggested some “providers may, in a small number of cases, exit the market altogether as a result of strong competition”.
But shadow education minister Angela Rayner has highlighted that the OfS itself has said it would “not bail out providers in financial difficulty”.
She said: “The Tories have unleashed a failed free market experiment in higher education.
“They have created a system that goes to the very heart of their ideology – a system where market logic is imposed on public goods and where the forces of competition run rampant at the expense of students, staff and communities.
“Students would be left with immense uncertainty about their futures and entire communities would lose one of their major academic, economic and social institutions.
“Education is a public good and should be treated as such. Our universities are there for all of us,” she added.
Universities are in competition with each other to attract students, and the larger and more popular universities have been opening up more places in order to take advantage of the significant funds each student brings with them.
This appears to be leaving smaller, or less popular universities, abandoned by prospective students.
Mr Skidmore told MPs earlier this week that the government’s reforms to regulation were designed to promote diversity, innovation and choice in higher education, in the interests of students.
But achieving that, he said, does not equate to propping up any particular failing provider.
He said he hoped the OfS would be able to anticipate any development such as course closure or market exit rather than react to it.
Its predecessor, the Higher Education Funding Council, granted at least £1m in emergency loans last year.
Labour also pledged to set limits on vice-chancellor pay, by limiting it to 20 times that of the lowest paid member of staff in the university.
Vice-chancellors would also be banned from sitting on the boards that set their pay.
This week an OfS report revealed that some university vice-chancellors were being paid 12 or 13 times the median (or the middle) salary of their employees.
Other measures planned by Labour include requiring universities to publish more data on disadvantaged students, including details of students’ socio-economic background, ethnicity, gender, and those with a disability or a caring responsibility.
Responding to Labour’s proposals, a Department for Education spokesperson said the OfS was set up “to champion the interests of students, promote choice and ensure that higher education delivers value for money for both students and taxpayers”.
They continued: “We have given it strong regulatory powers to take action where it deems necessary, including financial penalties and even deregistration.
“The OfS has already made a significant impact on the sector even though the OfS is not yet at full strength, with some of its powers due to come into force later this year.”