The Public Accounts Committee says in a report published today on the financial regulation of universities that the public should also be given information earlier about potentially failing institutions as part of a ¡°new system¡± of oversight.

In a series of recommendations, the report says it is ¡°unclear¡± whether the ÖйúAƬ Funding Council for England¡¯s ¡°light-touch¡± regulation would be ¡°fit for a more uncertain financial environment for institutions¡±.

While it says that Hefce is not expecting any ¡°disorderly failures¡± among ÖйúAƬ institutions this year, it calls for ¡°contingency plans¡± to be developed by the start of the next academic year to protect ¡°students, and the taxpayer, should an unexpected failure occur¡±.

It calls for an end to Hefce¡¯s practice of waiting three years before disclosing details of universities that are ¡°at higher risk¡± and calls for a more ¡°graduated¡± scale to distinguish those facing insolvency from those that may be at risk for other reasons.

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¡°The funding council needs to strike a different and better balance between the interests of institutions and those of prospective students,¡± the report says.

Sir Alan Langlands, chief executive of Hefce, welcomed the report and said the funding council agreed ¡°that a new regulatory system will need to consider a more graduated risk assessment. This will need to include consideration of what information on risk assessments is made public, taking into account the interests of current as well as prospective students¡±.

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He added that Hefce¡¯s current policy was to make public the identity of at-risk institutions in ¡°exceptional circumstances if we judge it to be in the interests of students and the wider public to do so¡±.

Gareth Thomas, Labour¡¯s shadow universities minister, said the PAC analysis was the ¡°latest independent report¡± to call the government¡¯s plans into question.

He added that ministers needed ¡°to use the coming White Paper on the future of ÖйúAƬ to signal a substantial rethink¡±.

Aaron Porter, president of the National Union of Students, said: ¡°The government¡¯s failure to do its sums properly has exposed students and universities to unacceptable risks.¡±

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A spokeswoman for the Department for Business, Innovation and Skills said: ¡°We are putting students in the driving seat, rather than allocating funding though a central grant. Providing prospective students with clear, comparable information about what and how they will learn is a priority for our reforms.¡±

On the claims of a potential funding gap, she said that many universities would offer extensive fee waivers and bursaries so that the total cost to the government of subsidising student loans would not be known ¡°until late next year¡±.

simon.baker@tsleducation.com