What is York getting INTO? The proposed joint venture between The University of York and INTO University Partnerships

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1 ? The proposed joint venture between The University of York and INTO University Partnerships January 2014 UCU has ed a series of high profie campaigns against universities forming partnerships with this company as we beieve these joint ventures are risky enterprises with a risky company. UCU is deepy opposed to the proposed venture between the University of York and INTO University Partnerships. In this briefing we woud ike to draw the university community s attention to important information about INTO. We woud aso ike to expain why we beieve this proposa represents an unacceptabe risk for the university. WHO ARE INTO? INTO is a private company that offers to form joint ventures with universities in which it assumes contro of the recruitment and teaching of internationa students for universities and runs as a for profit enterprise. They aso commony offer to take over and deveop university property, turning it into new faciities for internationa students. The and is eased to INTO for 35 years and the faciities are owned by INTO. UCU has ed a series of high profie campaigns against universities forming partnerships with this company as we beieve these joint ventures are risky enterprises with a risky company. WHY DOES UCU OPPOSE THIS PROPOSAL? We beieve a joint venture with INTO woud be an unnecessary gambe and that it woud represent a threat to the high quaity of education and reputation of the University of York. We beieve that joint ventures with INTO are an extremey risky proposition and for to enter into partnership with the company woud be paying with fire in financia terms. FINANCIAL RISK: RISK OF JOINT VENTURE LOSSES OR FAILURES INTO s mode is to recruit internationa students and guarantee them (subject to achieving the correct grades) a pace at one of their partner universities. But it s highy questionabe whether partner universities wi fee the benefits of this mode. UCU conducted research in 2011 using Freedom of Information requests to ook at joint venture progression rates. This showed that at their most successfu, in the bigger, onger estabished joint ventures, after three years of operation, INTO joint ventures at 1

2 the joint ventures commit their partners to bearing a significant risk of incurring financia osses and even possibe faiure. UEA, Exeter and Newcaste were recruiting between 200 and 400 students at each joint venture of whom between 44 and 58% were progressing to their partner universities. In other words, in the best case scenario, a partner university might be ooking at four or five in every 10 internationa students recruited not progressing to one of their courses In addition, the joint ventures commit their partners to bearing a significant risk of incurring financia osses and even possibe faiure. Because each university commits 50% equity to the joint ventures, the osses are shared accordingy. INTO wi say that osses are characteristic of the eary ife of a joint venture. But in some cases, the osses have been termina to the joint venture or continue to be significant. INTO s partnership with Manchester Coege was dissoved in 2009, foowing osses of 1.4 miion. At Queen s University Befast, a joint venture was incorporated in Apri 2009 in the face of staff opposition. Company accounts for showed that the joint venture at Queen s Befast ost 1,539,237. Two years ater, company accounts showed that the joint venture was sti making a oss of 630,000. Both the City and Queen s joint ventures seem to rey on oans from their partner universities and from INTO University partnerships. At City University it was reported in January 2011 that recruitment shortfa was generating a forecast oss of 1.3miion to the joint venture rather than the surpus the company had forecast. In FY , the joint venture posted osses of 2.5miion. Three years after it began trading, City University s joint venture is sti making osses. In fact, according to the university s financia statements, its oss in 2012/13 was 50% greater than in the previous year. 1 City University s counci is currenty reviewing the future of the joint venture. RISK TO QUALITY: REPUTATION AT STAKE UCU has aways argued that partnerships with for-profit companies represent a particuar risk for universities particuary when the universities are using their reputations to attract students to the joint ventures. INTO Exeter is one of the odest INTO joint ventures. As the Times Higher recenty reported, it appears that the drive to recruit new students might be putting a strain on the quaity of the students being reported, exacty as UCU predicted. The Times Higher reported that: The University of Exeter counci minutes state that growth in internationa student numbers in the business schoo had been driven by INTO which had resuted in students predominanty from the Peope s Repubic of China studying accounting and finance. The minutes aso state: A review was being undertaken to ook at the quaity of students entering the business schoo through INTO, as the quaity of these students was now, for the first time, ower than those recruited by the university data/assets/pdf_fie/0006/204738/city-university-london-financia- Statements pdf 2 2

3 For-profit private providers ike INTO depend on cutting the cost of teaching to generate their profits, creating downward pressures on quaity that wi eventuay rebound to affect their partner universities. The point about this is that there is a imit to what the university can do about this situation. Having effectivey outsourced recruitment of students, the university is carrying the risk to its reputation whie being ocked into a ong-term equity joint venture with INTO. UCU has aso ong warned that for-profit private providers ike INTO depend on cutting the cost of teaching to generate their profits, creating downward pressures on quaity that wi eventuay rebound to affect their partner universities. Transferring staff out of university empoyment At severa joint ventures, staff have been transferred out of university empoyment to become empoyees of the joint venture. TUPE offers temporary protection for the pay and terms and conditions of these staff but they ose their right to incrementa pay progression, whie rates and terms and conditions can be atered whenever the empoyer decides to make a business case for doing so. Some staff report changes to rates of pay. Many have tod us that teaching workoads increased dramaticay under INTO s joint ventures. Membership of TPS and USS cannot be maintained under a Joint Venture with INTO. New staff: ess quaified and on ower pay and poorer conditions Firsty, INTO appear to recruit ess quaified staff than their pubic or in-house counterparts. INTO job advertisements ask for an appropriate postgraduate quaification (this coud be CELTA, DELTA or a PGCE). It is desirabe but not essentia to have an understanding of chaenges of teaching internationa students. Pubic institutions typicay demand a higher eve of quaification and experience of teaching in higher education. Chairman of INTO Andrew Coin is on pubic record admitting that rates of pay are probaby worse in his company than in partner universities. This is borne out by job adverts. INTO saaries for fu-time jobs range from 24,000 per annum at the bottom to a maximum of 28,000 per annum. There is no incrementa progression. By contrast, pubic institution saaries range from 27,319 to 39,000 with many ecturers positioned on Grade 6 which has a saary range from 27,319 to 33,600. INTO offers a markedy inferior pension scheme to either USS or TPS with 12% annua contribution shared equay between INTO and the empoyee. Staff are eigibe to join the scheme ony after a 12 month period of empoyment. In TPS by contrast, empoyees join straight away and pay a 7-8% contribution, whie the empoyer pays 14.1%. Fu-time INTO empoyees work an 800 hour teaching year. Some are empoyed on zero hours contracts. INTO provide ony statutory maternity eave and sick pay. INTO centres remain open during university cosure days and staff must take these off from their hoiday aowance. INTO contracts incude causes enabing the company to summariy dismiss you if you 'are guity of any conduct which in the Company's opinion is ikey to prejudice the interests of the Company whether or not such conduct occurs in the course of your empoyment'. 3

4 UCU has produced a report on the dangers of companies controed by private equity, citing the exampe of the US higher education sector, where private equity funds fueed the growth of massive for-profit education companies which have become a pubic and poitica scanda for their educationa faiures. INTO contracts aso incude causes saying 'You agree to submit to a persona search and/or to a search of your office, ocker, desk and other persona effects whenever the Company reasonaby beieves such a search to be necessary for safety reasons, for the protection of heath... for the prevention of crime or the protection of the rights of others (incuding the Company's rights).' In UCU s view, these kind of pay rates, pension rights, terms and conditions and contracts are inappropriate for university professionas and incompatibe with the fostering of a coegiate academic and professiona community. INTO A RISKY PARTNER Unti recenty, INTO was soey owned by Andrew Coin, an education entrepreneur who previousy ran Study Group Internationa, a speciaist in Engish anguage training for foreign students. He sod it to Daiy Mai & Genera Trust for more than 40m in INTO s chairman Andrew Coin is aso a man of high ambitions. He tod the Times Higher Education Suppement: I deveoped partnerships with universities in Austraia, North America and the UK. Some see their core business as brand identity, postgraduate teaching, research and quaity contro not necessariy teaching undergraduates. There is nothing to stop undergraduate teaching being outsourced. In 2013, INTO announced that it had sod a 25% stake in the company to a private equity fund caed Leeds Equity Partners. UCU has produced a report on the dangers of companies controed by private equity, citing the exampe of the US higher education sector, where private equity funds fueed the growth of massive for-profit education companies which have become a pubic and poitica scanda for their educationa faiures. This is particuary reevant in the case of INTO as Leeds Equity Partners have a record as investors in higher education. Aong with Godman Sachs Capita (the private equity arm of Godman Sachs investment bank) and Providence Equity, Leeds Equity Partners are the investors behind Education Management Corporation. Education Management Corporation is the second biggest for-profit higher education company in the USA. Its growth became astronomica after the buyout and the company was accused of putting fast growth and big profits ahead of any respect for students or standards. As the Huffington Post reported in 2012, empoyees recounted a distinct cuture shift once the company went private under Godman Sachs and the other private equity investors, as day-to-day operations warped from a commitment to students and their success into an environment aser-focused on hitting mandated enroment targets. New recruits were viewed simpy as a conduit for federa student assistance doars, the empoyees said, and pressure mounted from management to enro anyone at any cost. 3 Interviewed in August 2010, the company s former CFO, who retired shorty after the buyout, stated: you take on that amount of private-equity debt, you need to earn high 3 4

5 These joint ventures tend to be deveoped by managements with amost no consutation in the wider university community. Perhaps this is because whenever the wider community is consuted it tends to oppose such gambes. rates of return for these investors, I was worried that the quaity of the experience for empoyees and students was going to deteriorate. And Senator Harkin s comprehensive report into the for-profit education industry in the US said of Education Management Corporation: the company may have been more focused on demonstrating enroment growth (and the corresponding growth in profit) than on ensuring that the company was enroing students who coud benefit from its programs. 4 The worry is, obviousy, that the increasing roe of private equity in INTO University Partnerships wi import the same business imperatives into that company and that this wi be refected in the behaviour of the joint ventures. This coud mean that the company ooks to increase its portfoio at York, putting at risk other areas of its existing provision and it coud ead to the pressures to recruit and teach students who are not suitabe, as seen at Exeter. The utimate risk with a this is of course carried by the University of York which wi have aowed INTO to trade with its name. WIDESPREAD OPPOSITION These joint ventures tend to be deveoped by managements with amost no consutation in the wider university community. Perhaps this is because whenever the wider community is consuted it tends to oppose such gambes. For exampe, UCU has poed staff at four universities on how they thought a joint venture with INTO woud affect their university s reputation: At Queen s University Befast 96% of those voting said that they thought a joint venture with INTO woud adversey affect the reputation of the university. At Godsmith s Coege 94% said they thought a joint venture woud adversey affect the coege s reputation. At Essex University 90% said they thought a joint venture woud adversey affect the reputation of the university. At De Montfort University, 90% said they thought joint venture woud adversey affect the reputation of the university. IT S JUST TOO RISKY UCU has strong views that universities shoud be pubicy funded and reguated and that these are vita eements in defending the quaity of higher education in the UK. But whatever your view of how higher education shoud be conducted, we beieve that this proposed joint venture with INTO is just too risky for York. The financia commitments for the university are too big and the risks of faiure and permanent reputation damage for the university are too great. Perhaps this is why so many other universities have turned down INTO incuding Essex, Godsmiths Coege, Oxford Brookes, Roya Hooway, Reading, Queen Mary and most recenty De Montfort University

6 UCU is caing on the university of York s management to reconsider a partnership with INTO and emuate other universities, ike Essex, which have sought to deveop their in-house provision instead. The Vice Chanceor of De Montfort emaied his staff ast year to expain the university s reasons for turning down the joint venture: Whie there are a number of benefits to be had from entering into such a partnership, any decision to do so must be based on a robust consideration of the potentia risks weighed against the potentia rewards. On that basis, and after carefu consideration, the Executive Board (EB) has made the decision not to proceed with this joint venture partnership. This decision has not been reached ighty. The up-front investments invoved, couped with the significant uncertainties in the current funding regime (which require us to conserve our cash reserves and generay imit our exposure to risk) meant that EB members did not fee abe to support a joint venture partnership with INTO. UCU is caing on the university of York s management to reconsider a partnership with INTO and emuate other universities, ike Essex, which have sought to deveop their in-house provision instead. 6