Universities as Charities

Yesterday, the government published its strategy for promoting education as a UK export.

Contained within is the telling paragraph:

§2.12 UK education institutions have a noble history, rooted in the charitable impulses of past generations. To this day, many schools, universities and colleges have charitable status. They consider that this is an important part of their identity, and they discharge their obligations willingly and diligently. Although this model has many strengths, it does not lend itself to rapid growth. The governance structures and obligations of charities, or of bodies of similarly ancient pedigree established by Royal Charter or equivalent instruments, were not designed to grow rapidly, or to run a network across the world. Consequently, many higher education institutions are conservative in their approach to risk, in both the size and type of funding, viewing equity finance as a last rather than optimal resort.

This tallies with a contested interpretation I offered of certain paragraphs in the 2011 White Paper. I argued that paragraphs 4.35 & 4.36 pointed to allowing universities to convert to for-profit forms ‘to make it easier for them to attract private investment’. Direct equity finance is not possible for a chartered corporation or charity, which explains the attraction of joint venture subsidiaries.

From the new document: ‘It is for institutions themselves to decide their own structures. Some have found ingenious ways to combine profit-making and non profit-making arms.’

With the warning that, ‘A positive strategic commitment to remain at a certain size is one thing. A reluctant ossification and decline, caused by an inability to see how to change a structure that is thought to have outlived its usefulness, would be quite another.’

Does the government believe that the charitable status of universities ‘has outlived its usefulness’?  The College of Law is offered up as the model ‘that could be of interest to others’ – a charity with a Royal Charter that was purchased by Montagu Private Equity, of which it is now a for-profit subsidiary.