Thursday, 1 September 2011

Leeds College of Music

Research Fortnight published yesterday a story about the merger between Leeds College of Music and Leeds City College. I haven't seen this reported elsewhere so I guess it counts as a scoop, although LCM published a press release a month ago and the matter was also included in the published papers of the HEFCE Board meeting in July (I linked to this very paper myself here without commenting on the LCM issue so I certainly can't claim it...).

Unusually, the assets and liabilities of the dissolved college are not simply being handed to LCC, but are placed in a wholly-owned subsidiary company. Accordingly, LCM is still a separate going concern with managers and staff still in place as they were before the dissolution. This strikes me as a far better outcome for them than the pure merger which so often leads to asset stripping (see, e.g. Bretton Hall). Research Fortnight says that the company will also control LCM's degree awarding powers, so at first I thought that perhaps it is these powers that explain LCM's unusually effective bargaining, but it seems that LCM doesn't have degree awarding powers and awards Bradford degrees. So perhaps it was just the £6.6 million of SDF funding that LCM brought into the merger that did the trick. Or maybe LCC's senior managers are just very nice people.

Andrew McGettigan comments further on this story here, placing it very firmly in the context of privatisation. I've commented on his blog post and hope he'll explain his view more because on the face of it this seems implausible. As a charitable private company limited by guarantee, the new Leeds College of Music Ltd cannot have share capital or distribute profits which, to quote Wikipedia, 'makes this type of company unsuitable for commercial enterprises'.


  1. Thanks for the correction re DAP. And the heads up about the 'sweetener' (?).

    Re: privatisation
    I hope my responses to your comments on my blog made sense. I'm going to put something up about meanings of 'privatisation'.

    Here, one should consider how a company limited by guarantee can now change into a company limited by share.

    Higher education corporations are 'public' to the extent that they do not have the fundamental right of ownership - they cannot dissolve themselves. The Secretary of State has to do it.

    A company limited by guarantee is private in that sense - future dissolution will be the decision of the new subsidiary.

  2. Thanks Andrew. I admit that one area where my knowledge is weak is how precisely you dissolve/transform a company limited by guarantee, so that is helpful additional information.

    SDF funding to support mergers always used to be pretty standard practice, even in cases where there was no urgent need to make the merger go ahead. ASNs were also usually added to the package back in the day. So the grant alone means little.

    HEFCE would normally award the money to the merger rather than the mergee, but in this case the mergee is in the HE sector and the merger isn't, so that may have made a difference.

  3. I've asked HEFCE for an explanation for a follow-up piece.

    the ClG to ClS is another 2-step. A new company is set up, limited by share, then whatever undertakings are transferred over as before. I'd like to see the board set up at LCM limited to see how many BoG from LCM & how many from LCC are involved.

    Currently what makes this unlikely/impossible in the case of ex-HEcorporations are the legal provisions protecting assets in the 1988 Education Reform Act. (they are only to be used by educational charities)

    My paranoid mind thinks this is exactly what the government is targeting with sec 4.36 of the white paper and Q21 of the technical consultation.


  4. For the 1988 ERA do you mean section 128? ( Surely this only limits the Sec of State when he transfers the assets to a body which isn't a charity. In this instance, as is usual, he has transferred the assets to a body which is a charity. So the 1988 Act won't be engaged if that charity is wound up and/or transfers some of its assets to another party (I think).