The Commons Public Accounts Committee said Huddersfield University should not have offered Professor Kenneth Durrands a severance package of more than pounds 411,000 - pounds 200,000 more than his contractual entitlement.
MPs also criticised a pounds 52,500 settlement agreed for Professor Neil Merritt, Portsmouth University's Vice-Chancellor, after staff had passed a vote of no confidence in him and he had been reprimanded for his expenses claims. They expressed surprise that the university decided to pay Professor Merritt a salary of pounds 90,000 while allowing him to continue in his job as chairman of a hospital trust which had a notional time commitment of three-and- a-quarter days a week.
The report says: "We note that the settlement was less than the university's contractual obligation (of approximately pounds 180,000) as the Vice-Chancellor's contract had a further two years to run.
"We are nevertheless concerned that it should have cost the University of Portsmouth so much to avoid legal action, given the circumstances of the Vice-Chancellor's departure."
The committee praises the Higher Education Funding Council for intervening to get Professor Durrands' settlement cut to pounds 150,000 but points out that, if the arrangements had been discovered after his departure, it would have been extremely difficult to claw back the money.
The original settlement included pounds 211,000 to cover the rest of the Vice- Chancellor's contract, based on a 40 per cent increase of his salary to pounds 120,000, which would have increased his pension and lump sum by a similar percentage.
The new salary was related to the amount the university felt would be needed to attract candidates of high quality as his successor. The university believed it would need to pay the sum to attract a high-quality candidate because it could not offer the same housing and amenities as old universities.
The MPs say they are surprised that the university's governors should have considered the original settlement reasonable, especially as it had no precedent in higher education.
The university told the committee that the amount had been calculated to secure Professor Durrands' early departure and so reduce the damage to the university, which was in turmoil after a decision to exclude staff and students from the governing body.
The MPs strongly oppose a "gagging clause" under which Professor Durrands agreed to make no public statement for four years about his dismissal. Eight other similar settlements in higher education have included these clauses. "We believe that the expenditure of public money must be seen to be open and openly accountable."
Universities should receive no grant, the report says, unless they agree that there will be no such clauses except to protect commercially sensitive information.
They now have to disclose the size of severance payments, and unreasonable pay increases in the final year of employment are discounted in pension calculations.
tSeverance Payments to Senior Staff in the Publicly Funded Education Sector; HMSO.
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