Universities are sitting on large cash reserves and could cope with a cut in the funding they receive from government, according to a think tank with close links to the Conservative party.
Policy Exchange, which was set up by Tory modernisers led by Michael Gove, called on ministers to strip more than £500 million in annual funding from universities and instead give it to technical colleges.
They should use it to expand high-level technical and professional courses and so help to improve Britain’s productivity, a report by the think tank says.
The proposal is expected to cause alarm within universities because Policy Exchange has close links with the government and has been used in the past to float controversial proposals that later became policy.
Sajid Javid, the business secretary who is responsible for universities and further education colleges, told MPs last week that there had been “too much focus on higher education and too little on vocational education and apprenticeships”.
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The report, published today, says that universities’ overall income has risen by 26 per cent since 2010 and they have £12.3 billion in reserves.
Further education colleges, which train young people for skills in short supply, have suffered a drop in revenue of 24 per cent over the same period and one in four is at risk of going bankrupt.
The report also proposes that young people aged 18 who want to study higher professional and technical qualifications to level 4, equivalent to a foundation degree, should be able to take out a student loan to fund it.
Jonathan Simons, head of education at Policy Exchange, said: “As well as degrees, we also need many more people with high class technical and professional skills — and that means a flourishing further education system.” He added: “Universities have substantial cash reserves, which could be much better utilised than sitting in banks.”
The report was criticised by universities. Nicola Dandridge, chief executive of Universities UK, the vice-chancellors’ body, said: “It should not be seen as an ‘either-or’ choice between further education and higher education.”