MPs query Smith’s claims that insolvent providers can teach out

Westminster MPs have challenged the skills minister over her assertion that a university could keep teaching even if it became insolvent.

Jacqui Smith recently told the House of Commons Education Select Committee that the government’s interpretation of insolvency law was that continued trading was permitted even during a period of compulsory liquidation.

This would allow an under-threat higher education institution to keep supporting research and students while its operations were wound up, Smith said.

In particular, it would allow for students to be supported through a “teach-out” of their course or to move elsewhere, and their records and achievements would be protected.

This evidence was “markedly and significantly” at odds with other viewpoints presented to the committee’s inquiry on higher education funding, its chair Helen Hayes writes in a letter to Smith seeking clarification.

She says that other witnesses emphasised the “lack of clarity” over what would happen in the event of a higher education provider becoming insolvent.

Neil Smyth, a partner at the law firm Mills & Reeve, told MPs that providers “would likely be treated as an unregistered company and therefore undergo immediate liquidation”, Hayes writes. This would mean no further teaching would be possible.

Hayes says the committee was therefore “surprised” at the Department for Education’s “confidence” that a teach-out would be possible.

She has asked the minister to explain further the legal basis for the opinion and has requested a response by 19 December.

MPs are investigating university finances after several experts raised concerns about the unclear process providers must follow in the event of insolvency. Students are seen as particularly vulnerable should their institution be unable to keep trading.

Some recent closures have seen students offered places to continue their studies in far-away cities, while they have also been locked out of campuses, unable to access their work.

Some have called for a “special administrative regime” to be introduced for the sector, mirroring work done in further education, that would make the rights of students clearer.

Insolvency has become more likely in recent years given the threats to university finances from frozen tuition fees, spiralling costs and dips in recruitment.