University told to pay back £36.5m

London Metropolitan University will begin paying back the £36.5m it falsely claimed for students who were ineligible for funding, its newly appointed vice-chancellor has revealed in an interview with The Independent.

Professor Malcolm Gillies, who took up office at the university earlier this year, said it would start paying the money back at the rate of £10m a year starting in September.

The university, which had its budget cut by the Higher Education Funding Council for England, has already been forced to make 150 members of staff redundant. Any further cuts are likely to be strongly opposed by unions.

Professor Gillies said applications are up by 14 per cent this year, with student numbers totalling 31,500 at the university. "Recruitment looks very healthy and has enabled us to capitalise on our strengths," he said. "We still have a strong international reputation. Nationally, the increase in student numbers this year has been 23 per cent – so I suppose the fact that ours is 14 per cent might show there has been some effect."

Two senior staff members are still facing an investigation over their role in last year's scandal, in which the university claimed £36.5m for students who had not passed their end-of-year appraisals.

Almost every member of the university governing body was forced to resign. An interim report by the legal firm Eversheds stated that additional investigations needed to be carried out into their role.

Professor Gillies, who was previously vice-chancellor of London's City University, told The Independent he had been "head-hunted" for the vacant post at London Met. His predecessor, Professor Brian Roper, resigned in the wake of the funding scandal.

The university operates on two main campuses and has 19 sites across the capital. But Professor Gillies said the university may consider building more virtual classrooms, with students learning through laptops.

Last week, a survey of university vice-chancellors' pay revealed that Professor Gillies' former employer, City University, had budgeted to pay him a total of £651,000 last year – the highest figure for any vice-chancellor in the country.

The figure included a £258,000 salary and £393,000 compensation package as a result of the disagreement between him and governors, a survey by Times Higher Education magazine revealed. In a statement, City University said that, in view of his move to London Met, Professor Gillies had decided to forgo a "significant" amount of the compensation package.