Terence Kealey: Why Oxford University had to resist Sir Victor Blank

In the year 2000, Gordon Brown set out to destroy the 800-year tradition of academic self-government at Oxford and Cambridge. The man he chose to execute his policy was Sir Victor Blank. Sir Victor is the chairman who severely damaged the share price of Lloyds Bank, and on that evidence he is less than competent – as of course is Gordon Brown. So how did those two men position themselves nearly to destroy the governance of two of the greatest universities on the globe?

The story started with the chip on Brown's shoulder exposed in 2000 over the embarrassments he sprouted over Laura Spence, who had failed in her application to enter Magdalen College, Oxford. As subsequent investigations showed, Spence had been treated with equity, and Gordon Brown's suggestion that she had been excluded because of her social class was disproved. Brown never apologised – but then he never does.

Yet Brown's real difficulty with Oxbridge emerged with the exposure in 2000 of another of his mistakes, the dotcom bubble. Brown believed in that bubble (he believes in all bubbles) whose "success" he attributed – following cod economics – to the workings of post-neoclassical endogenous growth theory (PNEGT). But PNEGT is simply jargon for the assertion that science is a public good that the market would neglect. Yet, as I and others have shown, science is not in fact a public good (it only appears to be) and empirical studies show that its funding by government does not promote economic growth.

Nonetheless, Brown has always been committed to pouring public money into science. Under him, the Government science budget has doubled to more than £3bn annually. So the bursting of the dotcom bubble came as a shock to Brown, but rather than acknowledge that his policy was at fault (ha!) Brown looked for someone to blame. He found the academics guilty. Brown reasoned that academics are not primarily interested in wealth creation, so they must have failed to transfer their new knowledge into new products. Only business people could do that.

So Brown commissioned the Lambert Review, to throw academics off university councils and to replace them with business people. To appreciate that grotesquerie, look at the council of City University, which embraced Lambert. If you did not know City was a University, would you guess from its council's membership that it was one?

But Oxford and Cambridge rejected Lambert, and their governing councils continued to comprise largely of – shock horror – academics. To crush them, therefore, Brown promoted the 2006 Charities Act, which made the Higher Education Funding Councils the universities' principal regulators. So the universities' chief funder became their principal regulator! And, unpleasantly, the Higher Education Funding Council for England (Hefce) then demanded that Oxford and Cambridge replace their academics on council with business people... or else.

Hefce's tool at Oxford was Sir Victor Blank, one of the few external trustees on the council. Together with Chris Patten (the misguided Chancellor of the university) and John Hood (the hapless Vice-Chancellor), Blank tried to persuade the university to surrender its academic self-governance. He nearly succeeded, and but for the efforts of some courageous people who led a revolt, he would have.

But what would have happened to Oxford had Blank won? Look at Lloyds. Its decline is attributable largely to Victor Blank's agreeing to Gordon Brown's proposal that it take over HBOS. In that vignette, we see why business people should have little say in the direction of universities. Academics have faults but they are, at least, bloody-minded and resistant to political interference. But business people are institutionally corporate, and too many of them are predisposed to please government. Academic freedom means, inter alia, the freedom to reject government instructions, which must generally mean keeping business people off university councils.

Gordon Brown has destroyed our economy and, though that will recover, he nearly also destroyed Oxbridge's competitive advantage; namely, its governance by academics, who actually know something about universities. Thank goodness this Government is about to go.

The writer is the Vice-Chancellor of the University of Buckingham

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