Union pours water on public asset 'fire sale'
Institutions with private equity links must face enhanced audits, says UCU. John Morgan writes
The government must introduce specific regulation for institutions bought by or linking with for-profit firms to stop a "fire sale of public assets" and safeguard quality, says a report on private equity ownership by the University and College Union.
The report, published on 25 October, expresses concerns that the expansion of private equity in higher education will erode quality through "attacks" on staff pay and conditions.
It also warns of a threat to students from "the creation of unstable business models"; the sale of public assets "to generate cash for private equity owners"; and a trade in degree-awarding powers that will damage the international standing of the whole sector.
Of the four private institutions where students took up the highest fee and maintenance loans from the publicly funded Student Loans Company in 2010-11, two have private equity ownership or investment. They are: Greenwich School of Management and the Brighton Institute of Modern Music (both Sovereign Capital). BPP University College was also jointly owned by the Carlyle Group until earlier this month.
Meanwhile, the previously charitable College of Law, one of only six private providers with degree-awarding powers, is in the process of being sold to a private equity firm.
The College of Law sale "seems to indicate that it is possible to take over a chartered (pre-1992) university but their prestige and greater financial resources make joint ventures with PE funds more likely than buyouts", says the UCU report, Public Service or Portfolio Investment? How Private Equity Firms are Taking over Post-Secondary Education.
One route into higher education for private equity firms could be to buy a further education college, the report says. The college could seek degree-awarding powers "without the problems associated with taking over or buying a stake in a traditional university". "Private equity has played a key role in fuelling the growth of US for-profit higher education," the report also notes.
The US for-profit sector, which has been embroiled in scandals relating to high dropout rates and high federal subsidies, was the subject of a Senate inquiry led by Tom Harkin.
Sally Hunt, the UCU general secretary, said: "Senator Harkin's report clearly states that for-profit companies - especially those with private equity backing - are a different kind of institution and they need more regulation, not less."
In its recommendations, the UCU says the government must instruct the Higher Education Funding Council for England and the Quality Assurance Agency "to institute an immediate review of degree-awarding powers and access to subsidies upon any change of ownership by any provider".
Hefce should also be given a new duty to protect assets accumulated through public investment to ensure that they are "retained for the public benefit in education and cannot be disposed of, including disposing of them in part or granting an interest in them".
And the UCU says that any further or higher education institution that sets up a for-profit subsidiary or joint venture or changes corporate form "should be subjected to an enhanced quality assurance review regime".