UK University Ex-Chief on Libya Funding Controversy

The London School of Economics should not have accepted research funding from a foundation run by the son of Libyan leader Muammar Gaddafi, but cuts in government funding will force governments to raise money more aggressively, the outgoing director of the London School of Economics told CNBC Thursday.

Sir Howard Davies resigned from his post as director last weekover the university’s links to Gaddafi’s regime.

Davies, who is also a former deputy governor of the Bank of England, said the funds were used for a research program to develop civil society institutions in North Africa.

“We were doing something that we thought was good from the point of view of that region,” he said .

“Next year, when the government’s changes have come through, we will get less than 10 percent of our income from the government. So we are now in a marketplace…and we have to react to that,” he added .

The UK government has outlined plans to slash funding for universities which will shift much of the responsibility for funding from the taxpayer to students and donors.

UK universities were “miles behind” US institutions when it came to tapping alumni for funds, he said.

“If we are only prepared to take money or we’re only prepared to educate or train people from countries which have a Western-style democracy and governments that alternate every four years, then we’re not going to be doing very much education and training, “ Davies said.

Universities would have to distinguish between people who are associated with regimes such as Gaddafi’s, and those who are not.

Davies, who had been asked by the previous government to become an economic envoy to Libya, said in retrospect he should not have accepted that task as the London School of Economics had become “mixed up in things it shouldn’t have become mixed up in,” he said.

“The government had an objective at the time of trying to bring the Libyans into the fold, reform their financial system, that’s what I went to talk about. What I did I have no shame about because I think it was useful and will be useful under any kind of Libyan regime that emerges from events we’re seeing at the moment,” Davies said.