Of course, this is causing hyperventilation among the fainting classes:

Almost three quarters of universities are on course to be in deficit in the next academic year despite an increase in tuition fees, a report has found.

Nearly 200 universities in England are facing a financial crisis with the government’s raising of employers’ national insurance contributions wiping out extra tuition fee income, according to analysis by the higher education watchdog, the Office for Students (OfS).

Net income will be down by £3.5 billion and the sector will see a deficit of £1.6 billion without swift action, it predicts, and it did not rule out closures or mergers.

This is not a specific comment upon the funding levels. Rather, a broader point about closures and mergers.

There are, apparently, 285 higher education providers in the UK. Another count has 295 and another 276 Further Education Colleges. This might be the right number, might not be - again we are making a broader point.

Back when there were only two universities they could be, as they were, left to themselves. As the system expanded there was, as we know, more government involvement. But there becomes a size of the sector when detailed central management becomes impossible. This is just straight Hayek - increased complexity leaves us with no alternative management method other than markets.

Markets do mean that market forces have to be left alone to play out. The bad must be able to fail if we are to gain the incentives to improve. Surplus capacity must be culled, just as it must be possible to increase capacity if demand rises.

Once we’ve got a sector of a certain size - in any walk of life, profession or activity - then markets must be used as that management method.

Tertiary education with some 500 and counting providers is of that size. Therefore we must allow market forces to work. And closures and mergers of the dullards and unwanted is evidence of market forces at work; as is not allowing closures and mergers of the dullards evidence that market forces - recall, our only useful management method - are not being allowed to work.

We do not claim omniscience over who should close or merge. In fact, we admit to not having a clue which is rather our point. Nor does anyone else - which is why we’ve got to use markets.

Tim Worstall