Universities should avoid ‘moral hazard’ of government bailouts, says new OfS chair

Edward Peck, the vice chancellor of Nottingham Trent University (NTU) and now chair of the Office for Students (OfS), says universities should be able to solve their own financial issues rather than risk the “moral hazard” of a government bailout. 

Peck made it clear that he did not see it as the OfS’ role to bail out universities with financial struggles.

He argued this is due to the risk of a “moral hazard”, when a university would spend more recklessly knowing that they would be bailed out than they otherwise would.  

Peck’s four-year term will be overshadowed by the regulator’s predictions that three-quarters of higher education providers will be heading towards deficits.

Peck insisted that he would ‘put the interests of students above institutions when it is the right thing to do’

This prediction takes into account the fact that university home fees will be rising by £285 in the next academic year, changing from the frozen fee of £9,250 for the first time since 2017.  

It also considers the massive rent increases seen in student accommodations. Warwick’s accommodation fees, for instance, increased by 5.57% from the academic year 2023/2024 to 2024/2025. 

Peck told the House of Commons Education Committee that some universities were still on the “journey” of reducing costs with the help of OfS-appointed consultants.

If universities are not able to enact these cost-reducing strategies, Peck stated he is “not sure” whether the government should then step in “with what’s been called a bailout”. 

During his time at NTU, Peck reduced expenditure with a 10% reduction in staff, despite claims that job losses were voluntary.

Peck insisted that he would “put the interests of students above institutions when it is the right thing to do”. His selection as the next OfS chair will highlight his potential solution to balancing universities’ increasing income alongside student welfare.