The Treasury is resisting calls for a £2bn bailout of UK universities, insisting that they should not be treated differently from other hard-pressed industries, raising fears of bankruptcies in the higher education sector. The Treasury’s opposition to a sector-specific bailout for universities, which was confirmed by officials from three Whitehall departments, comes despite increasing warnings that some universities face crippling losses because of the Covid-19 crisis. Its resistance has caused division in Whitehall as well as objections from senior figures in the university sector. They warn that a bailout is essential to protecting the national research base that will play a key role in the post-Covid recovery phase. Universities have asked for a doubling of this year’s research funding in order to plug an immediate £790m shortfall this year and the forthcoming hit to their budgets caused by the expected collapse of the international student market, which is worth £6.9bn annually in the UK. The proposal from Universities UK (UUK), the sector’s lobby group, promised to cut costs, accept restructuring and rein in predatory admissions policies that risked leaving less prestigious institutions facing bankruptcy as the result of students being poached by better-resourced academic institutions. Rishi Sunak, the chancellor of the exchequer, is expected to review the UUK request in the coming days. However, Whitehall officials — while stressing no final decision had been made — said the early signs were that the Treasury is not receptive to what is viewed as universities’ special pleading. The Treasury has indicated that universities should first avail themselves of the government furlough and continuity loan schemes before seeking any further bailout, in keeping with the message communicated to airlines this month. Recommended AnalysisThe Big Read Coronavirus: universities face a harsh lesson A cross-departmental meeting in Whitehall last week showed broad support for a bailout, including from the departments of education, health, and work and pensions, according to a person on the call, but the Treasury refused to be drawn. A senior official in favour of a bailout argued that rescuing individual universities as a last resort was not realistic. “The Treasury’s faith in their ability to carry out highly targeted just-in-time interventions is extraordinary in current circumstances,” the person added. The university sector is continuing to press the Treasury, arguing that its proposed rescue package is balanced, will protect against bankruptcies, stabilise admissions for students and will use only research funds already pledged by government. Labour is also applying pressure and has called on the government to guarantee that no university be allowed to go bankrupt, arguing closures would hit jobs, social mobility and institutions that train staff who have proved so vital during the coronavirus outbreak. “Our universities are not just businesses and should not be treated as such,” said Emma Hardy, the shadow minister for universities, in a letter to the universities minister, Michelle Donelan. Alistair Jarvis, the chief executive of Universities UK, said there was “urgent need” for clarity on support from government, warning of significant cost-cutting in the sector if government intervention was not forthcoming in the coming weeks. “Without government intervention there is a real risk that some universities will go bankrupt, which will have significant adverse impact on those local communities which can least afford it,” he added. Editor’s note The Financial Times is making key coronavirus coverage free to read to help everyone stay informed. Find the latest here. Gavin Williamson, the education secretary, is said to be supportive of a stabilisation package, mindful that some of the most financially vulnerable universities — such as those in Sunderland, Bolton, Staffordshire and Wolverhampton — are in politically sensitive areas. The Department for Education acknowledged the work universities had done to respond to the crisis, adding that it was working with the sector to “understand the financial risks they might face, stabilise the admissions system, and help them access the support on offer”. But the department is equally clear that any stabilisation funding must come with conditions that will force the sector to tackle the issue of “low-quality courses” that give a poor financial return to graduates and were singled out in the last Conservative manifesto. “The scale of the challenge presented by coronavirus will unfortunately mean some tough decisions for universities over the coming month,” said a senior government official. “This crisis will leave the sector facing difficult questions about its ‘offer’ and how it may remain financially viable in the recovery period.” A Treasury official said that discussions on the bailout were continuing, adding: “We are working with our colleagues at the Department of Education to come up with a sensible and targeted solution.”
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