Written evidence from the London Higher (WOS0028)

 

London Higher is the representative body for nearly 50 universities and higher education institutions across the capital, making it the largest membership body of its kind in the UK. London Higher represents the full diversity of the capital’s higher education sector, from small, specialist conservatoires and research institutes to large, multi-faculty universities. London’s student population of over half a million is equally diverse. The city hosts more than 179,000 international students from 159 countries, and also 147,045 London-domiciled students (almost half of all home students).  Over half (51%) of entrants to higher education in London are from a non-white ethnic minority background, compared with 21% in the rest of the UK.

 

Introduction

 

The Office for Students (OfS) was established to undertake an important regulatory role that placed students at the heart of higher education in England. Regulation of the sector is both important and necessary, that is not in question. The higher education sector has undergone huge challenges since the formation of the OfS. Uncertainty and disruption resulting from Covid-19 and structural changes following the UK’s exit from the European Union have both had a major impact. This, followed in quick succession by a cost of living of crisis impacting both students and institutions, was further exacerbated for institutions in London following the sudden removal of the London weighting from the annual teaching grant allocated to providers in England. This £64m combined loss for higher education in London has put immense pressure on the sector.

 

Now is the time, then, for a constructive dialogue between the sector, the regulator and government to ensure students are well served with a diverse and financially sustainable body of higher education institutions. London Higher was grateful, on behalf of all its members, to the OfS for the recognition of the acute pressure on higher education providers during the Covid pandemic. This was publicly expressed in Susan’s Lapworth’s letter of 17 March 2020 and is the spirit in which we want to continue, and work with the OfS together to ensure a pragmatic, balanced and supportive approach within the sector.

 

London Higher has been engaging with its members during the compilation of this submission and the below reflects their views and experiences.

 

 

  1. Are the OfS’ statutory duties clear and appropriate? How successful has the OfS been in performing these duties, and have some duties been prioritised over others?

 

The duties of the OfS are generally viewed as clear by most institutions, but there are a number of our members who believe there can be inconsistencies in terms of focus. Consequently, any issues that may exist arise not so much in the clarity of duties, but in how these duties are fulfilled and prioritised then communicated to the sector.

 

An example arises from the current HE Bill on the Lifelong Loan Entitlement (LLE) which focuses on supporting students to take modules individually, across institutions and over several years as applicable. The question that then arises about how this relates to the relationship with the OfS’s B3 conditions.

 

There is some concern that the OfS prioritises certain subjects, which is perhaps short-sighted. For example, there was a cut in the price group funding for certain subjects when the groups C1 and C2 were created. This resulted in some media arts courses being taken out of a funded price group into a non-funded one. Media arts is actually a strategically important subject and the creative industries are a significant area of growth, technical expertise and opportunity for the UK, especially in London. Similarly, the B3 thresholds focus on progression into graduate roles does not take account fully of the types of roles some graduates choose to move into.

 

It should be acknowledged that although there is considerable alignment between the aims of the OfS and higher education institutions, the OfS remit of ‘students’ is narrower than the remit of institutions which also fulfil additional roles across enterprise, research and civic impact.

 

 

  1. How closely does the OfS’ regulatory framework adhere to its statutory duties? How has this framework developed over time, and what impacts has this had on higher education providers?

 

There is a sense that the OfS has over-extended its regulatory activities beyond its existing capacity and that its regulatory approach has become prescriptive over time.

 

New approaches to regulation on specific issues are continually being added to the OfS’s remit to the extent that it has gathered additional duties and responsibilities, but without taking steps to engage sufficiently well with the sector on how things should be taken forward, so it is not always clear about why it is holding providers to account on each issue. This means that a regulatory intervention often takes longer than it should, to the detriment of institutions and their students. The lack of transparency and the increasingly prescriptive approach means that institutions are not aware of where the tolerances are and lack the information that could and should be provided by the OfS to better manage their risk profile. This approach to consultation exercises means that providers take a very compliance driven approach, which is more resource-intensive than might otherwise be necessary.

 

We have also been informed of instances where the OfS has been unable to provide adequate clarity on the length of time it will take for it to provide a response. Regulatory correspondence has also, reportedly, been vague and worded imprecisely, which leads to confusion and uncertainty within institutions. Our members would welcome clearer and more transparent communication from the OfS in these situations.

 

With further roles for the OfS on the horizon, such as lifelong learning, harassment and sexual misconduct, and freedom of speech, a shift towards a more risk-based approach will, arguably,  be a necessity.

 

 

  1. What is the nature of the relationship between the OfS and the Government? Does this strike the right balance between providing guidance and maintaining regulatory independence?

 

There is a perception within some of our membership that the OfS's priorities are influenced to some degree by current political priorities. The OfS’s removal of the London weighting from the DfE-allocated teaching grant at short notice in summer 2021 (in terms of its impact on financial planning) is an example of this. As the OfS’s report on the consultation outcomes confirms, the decision was ostensibly taken in the context of the ‘levelling up’ agenda. This was despite the OfS acknowledging that London providers face higher operating costs than those elsewhere in England and that the regulator was ultimately bound by the terms and conditions placed on it by the then-Secretary of State. There is, therefore, a strong feeling that not enough consideration was given to the significant impact this decision would have on London-based institutions which have higher costs than those outside the capital and, importantly for this inquiry, that the regulator is not pushing back forcefully enough against the Government when the evidence reveals a clear threat to the health of the sector it regulates. The OfS’s regulatory independence is therefore in question, a concern which has also been exacerbated by the appointment of the current OfS Chair – a serving peer taking the Conservative whip.

 

Maintaining regulatory independence is paramount, but this should not require a trade-off against providing guidance.

 

 

  1. Does the OfS have sufficient powers, resources and expertise to meet its duties? How has its expertise been affected by the Quality Assurance Agency for Higher Education’s decision not to continue as the OfS’ Designated Quality Body?

 

There are concerns that the OfS does not have sufficient resources to undertake its regulatory responsibilities, especially as new duties are added to its remit.  Proper thought needs to be given to the impact of changes taking place in the sector, how these will be resourced, collaborated on, and given appropriate guidance and timings. For example, with the Government’s prioritisation of Degree Apprenticeships there is unease that there are not enough staff to cover the wide range and growing number of such degree programmes within the sector.

 

The consultations on student outcomes measures and the introduction of the ‘B3’ thresholds have added significantly to the OfS’s workload and it remains to be seen what benefits this brings. The investigations into institutions who have failed to meet these thresholds are only just beginning, and it is as yet unclear how many will be investigated in total, what the consequences might be and whether and when any resulting measures might be implemented. Furthermore, there are over 400 registered providers on the OfS register as of this year. The majority of these providers were approved to be added to the register in the past 2-3 years. This increase brings some concerns about the shape and scale of regulation needed, particularly when many such providers are new, small and offer alternative types of provision. The diversity of providers in the London Higher membership alone shows that a ‘one-size-fits-all’ approach to the investigations will not be sufficient to account for cases and situations unique to certain provider types.

 

The de-designation of the QAA as the designated quality body (DQB) leaves the OfS in a situation that was never intended by the HERA, which made provision for an independent DQB. The present situation, where the OfS is also taking on the role of the DQB, risks overstretching OfS resources – and into areas outside its expertise – as well as exacerbating a perception of the regulator exerting undue influence over higher education in England.

 

Taking into account the concerns outlined above and despite being aware of the financial pressures on providers, the OfS is still consulting on imposing a hefty 13% price hike on registration fees. This appears insensitive, particularly at a time when providers are facing a real-terms cut in the value of student fees and a cost of living crisis. A recognition from the OfS that its activities could be rationalised, rather than trying to expand fixed to its current operating model, should be an area to explore.

 

 

  1. How does the OfS measure value for money for students? How can this be measured in an objective, tangible way that is not based on economic or political judgements about the value of subject areas or types of institution?

 

There are widespread concerns amongst our members around the role of the OfS in measuring and regulating value for money for students. “Value for money” is a very subjective measurement, and can vary greatly depending on the student, course, experience, and institution. Context is also extremely important when considering the individual profiles of students and their backgrounds.

 

Within creative and art courses, students are entering an economic model which operates differently from that of other sectors. For example, the OfS use of graduate earnings vs non-graduate earnings is not always the most appropriate measurement for art students who may have a different career pathway, typically characterised by ad-hoc portfolio working, to those working in other sectors.

 

 

  1. How does the OfS engage with students? To what extent does input from students drive the OfS’ view of their interests and its regulatory actions to protect those interests?

 

We accept the challenges of incorporating student views when informing regulation, but we believe that more could be done to engage fully with the student voice and include more co-creation, consultation and consideration of student opinions. We are aware of the student panel that currently exists but believe that wider student engagement should be encouraged, particularly from across the different regions, including London, taking account of different students’ circumstances and needs. For example, there seems to have been limited involvement of students in the development of plans for the Lifelong Loan Entitlement. Some understanding of the demand in the sector for this approach should come from discussion with students, applicants and other interested stakeholders – particularly since this initiative relies on the buy-in of currently under-represented student groups such as parents and mature students.

 

Without the diversity that student views provide, it is hard to demonstrate that the OfS is protecting students’ interests, especially within an equally diverse range of providers. This lack of broader engagement means that we hear reports that the OfS’s approaches seem to be concentrated on what might work in a high entry tariff, campus-based university, but not necessarily for smaller, specialist conservatoires or research institutes with a different student body, for example.

 

The OfS now also regulates sensitive areas which directly affect students, such as the new approach to regulating harassment and sexual misconduct affecting students currently under consultation. Effective, timely and considerate regulation in this area and others cannot be achieved without the input of students who have experienced this issue and can clarify the complexities of regulating in this space.

 

 

  1. What is the nature of the OfS’ relationship with universities? Does the OfS strike the right balance between working collaboratively with universities and providing robust challenge?

 

The current relationship should be more constructive and open than it is currently. Our members have expressed frustration at the lack of transparency and the length of time it takes to receive a response. OfS investigations do not indicate the specific grounds on which an individual provider has been selected for investigation and the framework for these investigations is ambiguous from a provider perspective – such as stages, timelines. A more open, direct and immediate dialogue between the regulator and institutions would be a significant step that would both improve the existing relationship and make for more effective regulatory oversight. Following the Shift Learning report, the Chief Executive of the OfS has promised to ‘refresh…engagement with providers’. We believe that a refresh of the relationship remains a priority and our institutions are open to strengthening the dialogue and exchange of ideas between the regulator and the sector. 

 

Better communication between universities and the OfS is crucial to ensuring that the relationship is improved. With a membership that arguably represents the most diverse cross-section of higher education in England, and a third of UK universities, we are well-placed to aid the OfS in bringing the views of these different provider types to the table and to help open this dialogue, yet remain excluded from the organisations that the OfS CEO and Chair actively engages with. It is in the interests of students, the OfS and universities that we have a sustainable, diverse and high-quality higher education sector.

 

The OfS’s commitment to ensuring the sector and individual providers deliver equality of opportunity is appropriate and welcome. The datasets which the OfS provides to help providers understand their performance and set targets for improvement and focused interventions are valuable, especially the formal inclusion of statistical significance markers. However, the effective expectation that higher education institutions make up for failings within the broader education system and issues within society more generally should be reassessed.

 

There has been a divergence of views on the role of QAA as the DQB for the sector in England. The OfS’s report claims that the ‘QAA’s performance has not been acceptable during the most recent year.’ However, the OfS has not convinced the wider sector that there was sufficient evidence to justify this position. In fact, the body is held in high esteem by the sector (as evidenced by the fact that most UK universities are voluntary members; all but four London Higher members currently belong to the QAA). A consultation was held earlier this year but was too late as the move to de-designate the QAA had already been implemented. Consultation and better engagement with the sector in these events would have been welcomed. There is clear consensus amongst our members that the long-term aspiration should be to seek the reinstatement of the QAA as the DQB for the higher education in England.

 

 

  1. What systemic financial risks are present in the higher education sector? Is there the potential for significant provider failures if these risks crystallise, for example through an unexpected reduction in numbers of overseas students or an unexpected increase in pension costs? Are these risks limited to particular groups of providers or are they widespread or systemic in nature?

 

In London Higher’s most recent member survey, financial sustainability was the most cited concern amongst our membership. The freeze in fee caps, the cost of living crisis, and the higher base costs in the capital (particularly following the removal of the London weighting) are all squeezing institutional budgets, resulting in fewer resources to manage unexpected financial shocks. The high proportion of international students in London (1 in 3) makes London higher education institutions more exposed if an unexpected reduction in overseas students were to take place, and this would be exacerbated by the budget pressures outlined above.

 

London Higher and our members would be interested to hear the OfS’s view on this question, given they are in possession of the financial data of all the higher education providers on the register. If there are any systemic and imminent risks to a broad section of higher education providers, we would expect the regulator to provide prior notification of this position to both government and the sector, so that it is able to mitigate against these risks.  We would also welcome greater proactivity to ensure the right discussions are taking place on the squeezed financial situation.  Since the OfS holds all the financial data, it is in a position to ensure government is fully aware of the implications of policy decisions and could garner trust from providers if it were to be seen to be advocating in the interests of the sector it regulates. 

 

 

  1. What business models are present in the UK higher education sector? Are these models resilient to the financial risks of the sector, and are universities focusing sufficiently on having a viable business model?

 

As mentioned in the previous response, a prevalent business model across London relies upon the success of our institutions in recruiting international students (1 in 4 international students in the UK study in the city). This has been cross-subsidising the drop in real terms income from UK students and from research and other funding bodies. Universities are aware of the risks and are taking action to mitigate risk through the diversification of their international student intake, however the impact of any change in government immigration and foreign policy would remain significant. The financial sustainability of providers is therefore determined by government policy and funding rather than the OfS’ regulation.

 

It should be noted, however, that the regulatory framework can actually shift resources away from providers supporting current students. For example, the requirement for Access and Participation Plans to include university work on outreach, advice and guidance in schools means that student fees are being used to supplement access initiatives in the school sector where resources have been scaled back, rather than being piped into supporting current students at a time when concerns over finances are high and mental health issues are rife following the pandemic.

 

A high proportion of institutions in London are small and specialist; 40 of the 68 institutions in England that are eligible to apply for world-leading status are located in London. For these providers, running courses in creative arts subjects costs more, regulatory burdens are relatively higher, and they lack the economies of scale for procurement. Additionally, with most being located in London, staffing and estate costs are also disproportionately higher. These institutions work incredibly hard to deliver essential skills in high-growth sectors, within a challenging regulatory and financial framework.

 

Insight from the OfS on what more universities could be doing to focus on viable (and growth) business models would be welcome. 

 

 

  1.        How does the OfS oversee the financial sustainability of higher education providers and the higher education sector? Is its approach clear, and is its oversight sufficient to spot potential risks early on and take action accordingly?

 

There is a widely felt perception among our membership that there is a lack of openness within the OfS in terms of their investigations and outcomes. This discourages the risk-based approach that the OfS and the sector are both calling for, and instead results in a detailed compliance-focused approach that adds bureaucracy, and therefore cost, to the process of assurance. A more genuinely risk-based and open approach could help financial sustainability and enable providers to focus on enhancement of learning and teaching in higher education.

 

 

  1.        What is the OfS’ tolerance for the failure of higher education providers, and what processes are in place to manage provider failure? Would the failure of a large provider follow a clear regulatory process or is there the potential for political considerations to play a role in such decisions?

 

The sector has been discussing this for some time.  A better focus to the one above would be how to avoid this taking place.  Accepting, however, that provider failure is a possibility, we would like to see the following points considered:

 

 

 

  1.        To what extent is the financial sustainability of providers determined by government policy and funding rather than the OfS’ regulation? Is there a need for policy change or further clarity to ensure the sustainability of the sector?

 

As already mentioned, our view is that the financial sustainability of higher education providers is largely determined by government policy through the fee cap, money made available via grant funding and policies relating to immigration and visas. 

 

We recognise the importance of regulation and compliance, but this does not come without financial risk - specifically around the OfS’ approach to publishing information on investigations and enforcement action. While there might be clear public interest for the OfS to make it known if they have had to penalise a provider for a severe breach, the regulator also has the power to publish the fact that it has started an investigation, and, indeed, its general position is that it will usually publish the identity of the provider and a summary of the matters being investigated.

 

Any investigation carries a severe reputational risk for a university with potentially significant impacts on recruitment and income as a result. The OfS’ current approach to publishing information risks financially harming universities that are ultimately not found to be in breach.

 

 

05 April 2023

 

 

 

 

 

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