Open University issues warning over £30 million deficit

Fresh concerns have been raised over the sustainability of part-time higher education in the UK after it emerged that the Open University is forecasting a £30 million deficit this year, and another major provider started losing money.

In its latest accounts, the OU posted a deficit after taxation of £17.9 million in 2017-18 compared with a £9.8 million surplus in the previous academic year.

When one-off costs – including £27.7 million for “restructuring and strategic change”, of which £13.3 million related to voluntary staff severance payments – are excluded, the university’s deficit stood at £5.2 million compared with £2.4 million in 2016-17.

However, the Open University, which had 174,898 part-time students last year, told Times Higher Education that it had “a projected operating deficit of around £30 million” for the current academic year.

The figures emerged after a difficult period for the OU, marked by the resignation of vice-chancellor Peter Horrocks amid staff opposition to plans to cut courses and jobs as part of a £100 million savings drive.

A £30 million savings programme was subsequently approved, and an OU spokeswoman said that the institution aimed to “return to a surplus in 2019-20 and…achieve our target 2 per cent operating surplus in 2020-21”.

The university “remains in a strong financial position with substantial reserves which were deliberately built up prior to the 2012 funding changes in England [which] were designed to give the university some protection ahead of uncertain fluctuations in student numbers and to help us invest in change to increase efficiency and support student success”, she added.

Meanwhile, Birkbeck, University of London – which specialises in evening courses and where a third of new undergraduate enrolments in 2017-18 were classed as part-time – also returned an underlying deficit of £518,000. This was the first time it has failed to return a surplus in a decade.

Birkbeck expects to be in deficit again in 2018-19, but intends to achieve a 5 per cent surplus by 2022-23, its accounts state.

The weakened finances of the UK’s leading part-time education providers are likely to strengthen calls for England’s post-18 education review to recommend policies to protect this area when it reports in early 2019.

Claire Callender, professor of higher education policy at Birkbeck and the UCL Institute of Education, said that the review should recommend government subsidies to lower the cost of part-time courses.

“If you want to see a continuation of part-time education, you probably need to bring down the overall level of tuition fees and that will involve reintroducing subsidies – I just don’t see how else this can be done,” Professor Callender said.

Universities also require financial incentives to teach part-time students who are “more expensive to teach than full-time ones”, she added.

“We also need to rethink how the apprenticeship levy is used so employers can encourage staff to undertake part-time study,” Professor Callender suggested.

Birkbeck said that it had a “strong balance sheet based on a decade of recurrent structural surpluses, [which] given the decline in part-time and mature students…is testimony to our institutional agility and resilience”.

It also highlighted the “impact of Brexit” regarding its deficit, stating that the number of non-UK European Union nationals, who have “historically been a significant part of the college’s student population”, has halved since the EU referendum in June 2016.

jack.grove@timeshighereducation.com