Sunderland university says deficit is ‘legacy issue’

The vice-chancellor of the University of Sunderland, which hit the headlines last year for running one of the highest deficits of any higher education institution in England, said that the university’s financial problems were now a “legacy issue”.

David Bell, a former permanent secretary at the Department for Education, said that after making significant cuts to rein in its budget deficits, the university was “on track” to run a substantial surplus this year. He added that banks were “very positive” about providing a further £20m of lending to fund the university’s operations.

Sir David was speaking ahead of a government review of higher education funding that could reduce the maximum level of tuition universities can charge students. There are fears that this could threaten the financial viability of universities with large budget deficits — possibly forcing them to close.

The University of Sunderland, a former polytechnic given university status after 1992, is one of several higher education institutions that have struggled to adapt to increased competition in the sector following the increase of tuition fees in 2012 and the subsequent ending of government caps on student numbers.

“I think first and foremost there’s a legacy issue here,” Sir David said. “In the aftermath of the 2012 changes to higher education, with the opening up of student numbers and so on, the university had a bit of a tough time.”

© S. Forster/Alamy

He acknowledged that tuition fee levels — currently set at a maximum of £9,250 per year for most students — were now an “existential issue” for the university. He said Sunderland derived 86 per cent of its income from student tuition, with 92 per cent of students paying the full £9,250.

Leaked reports suggest that a review of English higher education funding by Philip Augar, expected this spring, will suggest that tuition fees should be capped at either £7,500 or £6,500 a year. If fees fell to £6,500, and the Treasury provided no extra funding, the university would lose £19m a year.

Speculation about some universities’ financial problems prompted the Office for Students, the regulator, in November to warn that it would not bail out any struggling institutions.

“You can see that direct connection between our dependence on tuition fee income and what happens around the tuition fee in the future,” Sir David said.

Sunderland recorded a budget deficit of £6.11m — 4.9 per cent of its income — in 2016-17, the sixth highest among higher education institutions in England. However, by the following year, this had fallen to just £719,000, or 0.5 per cent of its income.

Any change to the University of Sunderland’s income would have a knock-on effect on the local economy. While the university has campuses in London and Hong Kong, the vast bulk of the institution’s 20,000 students study in Sunderland.

Sir David, who was appointed in July last year, said the university’s deficits over the past two years were the result of one-off restructuring, including redundancy payments for 200 support staff.

“We’re absolutely on track this year to be posting a surplus of around £4m with no other underlying factors there,” he said. “I think there’s been a story there that people have perhaps thought back three or four years and said, that’s what Sunderland is like, so presumably it must be one of the institutions facing difficulties.”

Sir David pointed out that Sunderland last year became one of five institutions in England to bid successfully for funding for medical schools to alleviate the National Health Service’s shortage of doctors. The first 50 trainee doctors start in September.

“That was quite an interesting indication of what people thought of us . . . that they were prepared to give us a medical school and we also have been given permission for other health-related disciplines,” Sir David said.

The director of the Higher Education Policy Institute, Nick Hillman, said that on a recent visit he had been “very impressed” with the university’s work in healthcare but that future government policy remained a concern.

“I think Sunderland has a lot going for it but the policy environment could knock them for six,” Mr Hillman said.

The university could face problems if, as expected, the Augar review recommends that students receiving less than three D grades at A-level should not be financed for higher education. The recommendation reflects the view of some policymakers that higher education has over-expanded, with too many poorly-qualified students going to university.

Around 10 per cent of Sunderland’s new entrants received three Ds, said Sir David, but he added that these students — who often came from poorer backgrounds — should not be excluded.

“I think personally it would be a socially regressive measure because what you would end up saying is, ‘Actually, university is not for the likes of you’,” he said. “Our analysis suggests that even students who are coming in with lower grades are not radically underperforming when they get here.”

Ultimately, Sir David said, the issue of who should attend university raised an “interesting question” about whether policymakers had confidence in the functioning of the current competitive market in higher education in England.

“How much do you trust prospective students to have agency and to make informed decisions about what they do?” he asked.


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