Half of Britain's universities 'have fallen into red'

Almost half of Britain's universities and colleges have gone into the red, according to government estimates.

The figures showed that a "timebomb" in higher education finance was ready to go off, Phil Willis, the Liberal Democrat spokesman on education, warned.

Estimates show that 57 universities and colleges expected to show a deficit during the 2000-2001 financial year.

The Higher Education Funding Council for England, which produced the figures, said there had been a sharp increase in the number of institutions slipping in debt.

Union leaders warned of a fresh wave of job losses and the possibility of mergers to prevent universities going under.

Details of the debts, revealed in an analysis of universities' financial forecasts, show 44 per cent of universities and higher education colleges predicting an operating deficit for 2000-2001, falling to 25 per cent in 2004 and deteriorating slightly to 28 per cent by 2005.

Fewer than 20 are expected to have a surplus above the minimum recommended to ensure financial stability. The estimates are sharply up on last year's predictions, when only a third of institutions forecast deficits.

The report said that universities faced financial risks. "The financial strength of the sector is satisfactory when viewed in aggregate, but a small number of higher education institutions are facing a tough operating situation with limited financial resources," it found.

Ministers are planning to lift the safety net designed to help universities out of financial problems amid growing concern in Whitehall that millions of pounds is spent shoring up institutions.

Senior government sources have made clear that institutions failing to attract students will be encouraged to merge or even die.

Mr Willis said he was concerned that the statistics had exposed severe funding problems. He said: "This shows that the ticking timebomb which Lord Dearing [the government-appointed expert] predicted in 1997 is now about to explode.

"The aim of hitting the target of 50 per cent of young people going to university within a decade is not going to happen. If universities are having to cut back on staff and they are going to be under pressure, it is very hard to expand," he said.

Tom Wilson, head of universities at the National Association of Teachers in Further and Higher Education, said union leaders expected a new wave of redundancies next year and were preparing for industrial action across the country to challenge job losses.

He said: "We have learnt from bitter experience that there has been a mini-wave of redundancies, almost entirely in the new universities. They are almost all the kinds of institutions that do most to improve access.

"We are planning to organise courses on redundancy procedures and are gearing up for action. The lesson of last year is that taking pretty forceful action made people think pretty hard about cutting staff."

Vice-chancellors are demanding in increase in funding of nearly £10bn over the next three years as part of their submission to the Government's comprehensive spending review, due to report this summer.

Diana Warwick, chief executive of Universities UK, the body representing university vice-chancellors, said: "As we outlined in our 2002 spending review submission, these latest forecasts reveal a continued decline in the operating position of higher education.

"Universities UK has been concerned about this for some time. As we look to the future it is vital to ensure the sector receives adequate funding to ensure the continued excellence of our universities."

¿ Government-commissioned research shows that clever middle class students are more likely to jeopardise good A-level results by spending too much time in part-time jobs than their less bright, poorer classmates.

Teenagers who spend too much time in paid work in the sixth-form get two grades lower than similar students without jobs, the research by Joan Payne, a senior research fellow at the Policy Studies Institute, finds.

The drop in grades could see overworked bright students achieving a C grade rather than an A and is "easily enough to lose them their university place", the report says.

Policy makers have been concerned that students from poor families might be putting academic results at risk because they were forced to support themselves.

But it is the sixth-formers whose parents are financially comfortable who are most likely to combine a part-time job with their A-level studies, the research suggests.

Middle class parents' ability to network was a crucial factor in finding jobs for their children. The children of the richest and the poorest families are less likely to take paid work while they are still in education, the report says.