Tuition fee rises may not stop universities in England going under, says regulator
Chair of the Office for Students told the FT most institutions were ‘on a journey to balancing income with expenditure’
A high-profile university could still collapse despite a rise in tuition fees “stabilising” the finances of higher education in England, the chair of the sector’s regulator has warned.
Edward Peck, chair of the Office for Students, told the Financial Times most universities were “on a journey to balancing income with expenditure” but that some institutions could yet fail, and called on vice-chancellors to strengthen governance to avoid insolvencies.
Peck’s comments come after the UK government last week laid out a long-awaited strategy for higher education, vowing to overhaul research funding, strengthen regulatory oversight and legislate for inflation-linked increases in tuition fees in a bid to improve the sector’s finances.
“Increasing fees linked to inflation has stabilised most institutions in their current position . . . but there is still risk,” Peck said, describing a cash crunch caused by alleged mismanagement at Dundee university this year as a “wake-up call” for the sector.
“The OfS has paid too little attention to governance,” he added, while urging universities to see themselves as “autonomous organisations” and improve financial oversight in order to minimise intervention by the regulator.
“That’s got to be our approach in the future, to be as collaborative as possible . . . There’s no benefit to them or us in having a stand-off . . . they need us more than we need them at the moment.”
Many of the proposed reforms in the post-16 education and skills white paper — which reiterated Prime Minister Sir Keir Starmer’s pledge that two-thirds of people enrol in a university or technical degree or an apprenticeship by the age of 25 — have been welcomed by universities.
But institutions have warned that plans to fund maintenance grants for domestic students through a levy on international student fees will dent the government’s drive to boost the economy and further damage their finances, already hit by the rise in employer national insurance contributions.
Peck said the white paper’s emphasis on “a shift back to vocational technical education” presented an opportunity to “rethink what it means to go to university”, with incentives for universities to specialise and align with the government’s industrial strategy.
Asked about the planned levy on international student fees, to be set out in the Budget next month, he claimed it would demonstrate the benefits of overseas students to the public but acknowledged it would require universities to make “difficult judgments” about raising international fees.
Overseas undergraduates are charged up to £38,000 a year in tuition, far above the £9,535 paid by their English peers.
The OfS, set up in 2018, has repeatedly criticised universities’ “overly ambitious” projections for international recruitment after the previous Conservative government tightened visa policy in a push to slash immigration, leaving some institutions on the brink of collapse.
Peck, a former vice-chancellor of Nottingham Trent university who joined the regulator in July, said that while the sector’s forecasts now showed more “realism” and worst-case scenarios had not come to pass, some providers would have to take further steps to ensure a “viable future”.
These would include new models, such as the proposed merger between the universities of Kent and Greenwich, Peck said, adding that he was aware of no other tie-ups at present but expected to see more in future.
Stricter governance regimes — a key concern of the white paper, which called for “diverse skills and capability” to reduce the risk of boards signing off “unachievable plans” — were also needed, he added.
“Some institutions have not got ahead of the problem fast enough, and persuaded themselves that their student projections or financial forecasts were going to be realistic when they weren’t,” said Peck, adding that the sector was quickly learning that “the professionalism needed to run a university is not that dissimilar to a large business”.
Although the OfS preferred a university-led approach, ministers and the regulator would “need to give more consideration” to shaping the sector if providers were slow to act on the white paper’s recommendations, Peck noted.
The OfS plans to take a more hands-on approach in some areas, such as franchising and exploitation of students by recruitment agents, and the white paper pledged to increase the regulator’s powers in law.
Peck said a stronger remit would allow the watchdog to root out “bad actors in the system” more quickly.
Delivering the government’s ambitious reforms would probably require a bigger budget, but the OfS had set efficiency targets that would allow funding to be recycled into frontline regulation, he added.
Fees from regulated institutions accounted for most of the body’s £33.2mn budget in the 2024-25 financial year, with an extra £1.5mn in government funding to support its work on financial sustainability.
The OfS has been criticised for its pro-competition philosophy and lack of intervention, with a highly critical review last year calling on it to take a “more proactive” approach to “emerging risk”.
Peck admitted that there was “a lot of truth” in the idea that the OfS had “misunderstood distance for independence” and vowed to better engage with the sector, noting that it did “a great job for students most of the time”.