A memo obtained by Times Higher Education reveals Hefce boards lack of confidence in London Met's management.

"Hefce considered ‘nuclear option’ over London Met."

26 June 2009

By Melanie Newman

Dissolution was considered by funding chiefs as a ‘last resort’ Melanie Newman reports.

Funding chiefs considered plans to take the “nuclear option” and dissolve London Metropolitan University during the ongoing crisis engulfing the institution.

Times Higher Education has obtained copies of ministerial correspondence that show that the Higher Education Funding Council for England considered closure, albeit as the last resort.

The institution is being forced to repay £36.5 million paid to it on the basis of student completion figures that Hefce says were wildly inaccurate. A further £15 million has also been held back from its recurrent teaching funding.

Documents released to Times Higher Education under the Freedom of Information Act include a memo exchanged between two officials at the now-defunct Department for Innovation, Universities and Skills.

The author of the DIUS memo, whose identity is withheld, reveals that a Hefce-commissioned report provided by consultants BDO that scrutinised data handling at London Met was “extremely critical” of the institution’s processes and its governing body’s lack of oversight.

This report was considered so incendiary by London Met that lawyers acting for Brian Roper, its former vice-chancellor, and a number of the university’s governors threatened to sue Hefce for defamation if it was published, the documentation reveals.

The memo from the DIUS official, dated January this year, says the BDO report “will strengthen the [Hefce] board’s lack of confidence” in London Met’s management.

“What happens next is not entirely clear yet. The scale of the problem… is much greater than any precedent, so the ‘traditional’ solution of lining up some sort of merger isn’t in play.”

It says: “If all else fails, Hefce thinks that its only remaining option may be to ask the Secretary of State [John Denham] to dissolve London Met… Clearly this is a nuclear option… It would also be new ground for all involved.”

Another piece of correspondence details a Hefce board meeting in May 2008, stating that one attendee “was worried that Hefce would lose reputation if [London Met] stayed afloat”.

In the event, the “nuclear option” was not taken, and the university has agreed to pay back the money it over-claimed over the next five years. This will involve a restructuring exercise, including up to 550 job losses.

As late as January 2009 Hefce board papers were still noting that the “Secretary of State has powers to dissolve a higher education corporation”. The DIUS briefing responding to this paper said: “We do not have a HEC [higher education corporation] here. Hefce knows this.”

London Met is incorporated as a company rather than a higher education corporation and as such may be dissolved only under corporate insolvency legislation.

The documents also reveal that Hefce received legal advice saying that it could threaten to withhold funding from London Met unless Mr Roper resigned from his position.

An email exchange between DIUS officials shows that in December 2008, Hefce’s board concluded that it had “no confidence in [London Met’s] leadership”.

By January this year, the funding council was acting on legal advice to the effect that “there is a road that will take Hefce as far as being able to withhold funding until a named individual ceases to be [London Met’s] accounting officer”, a DIUS briefing note says.

The same month, John Denham, the then Universities Secretary, sought legal advice over whether he could direct the university’s governing board to remove Mr Roper, Peter Anwyl, the board’s chairman, or the entire board.

He was advised that this was impossible, but that Hefce’s powers over university funding could be used to “put considerable pressure” on the institution.

In the event, Mr Roper resigned as vice-chancellor in March 2009, although he will remain employed by the university until December.

The board of governors, including its chairman, remain in place. No other senior manager has been asked to leave.

Bob Aylett, deputy vice-chancellor, took up the role of acting vice-chancellor in the wake of Mr Roper’s resignation. In May, Alfred Morris was appointed as interim vice-chancellor.

http://www.timeshighereducation.co.uk/story.asp?sectioncode=26&storycode=407156&c=2