Written evidence from Independent Higher Education, IHE (WOS0065)

About IHE

Independent Higher Education (IHE) is the UK’s representative body for independent providers of higher education, professional training and pathways. Our 72 members are highly student and teaching-focused and include many small and specialist providers. One of IHE’s principal aims is to facilitate an SME model of higher education, enabling new approaches and innovation to flourish within a flexible and proportionate regulatory environment.

Introduction

1.     IHE represents a wide range of organisations, some of which have delivered higher education for decades and some of which are newer, but all operated outside of the previous publicly funded system of higher education under HEFCE in England. The advent of the OfS and the reforms enshrined in the Higher Education and Research Act (HERA) 2017 represented a hugely important and significant moment. It promised a level playing field, a single system by which they could access the same benefits and platform as better-known and larger publicly funded higher education institutions should they meet the required standards for quality and governance
 

2.     A principal aim of HERA was to provide a clear, transparent, accessible and fair pathway for higher education providers to demonstrate the quality of their provision, their financial resilience, the effectiveness of their governance and their potential for growth and innovation, and in doing so to access the same benefits and regulatory status as the established universities and colleges in the publicly funded sector. This would stand in stark contrast to the arrangements previously in place, which offered little consistency and no comparability between public and privately funded providers, to the detriment of competition, innovation, student choice and student protection. HERA offered the opportunity to significantly expand the number of regulated providers, and while falling short of a licence to operate, had the potential to significantly increase the number of higher education students protected by robust regulation. The HERA impact statement[1] estimated there to be 131 HEIs, 244 FE colleges offering higher education, and 110 “Alternative Providers” already accessing student loan funding out of a possible 690 private providers teaching higher education students. That is a potential 1,065 providers who could have registered with the OfS, where five years later the register sits at 418.
 

3.     It was for the reasons above that IHE were strong supporters of the legislation, and we remain so today, albeit we believe some changes to how the OfS prioritises its various duties are required in order to serve the student interest better. The long list of statutory duties today was underpinned originally by a coherent, clear and compelling vision for the sector. This would be a sector that is committed to widening student choice through competition, new ideas, and new entrants. The principle of student choice recognises that every student is different, the challenges they face and their ambitions are different, and it recognises that technological and economic change will inevitably mean that the way in which students learn and access education in future will change as well.
 

4.     This level of strategic vision is a necessary condition for achieving truly world-class regulation which realises the full potential of HERA and its recent companion statutes in driving tertiary education reform, the Skills and Post-16 Education Act 2022 and the Lifelong Learning (Higher Education Fee Limits) Bill. Meeting the UK’s economic and societal needs for tertiary education over the next decade will require a laser-like focus from funders, regulators, policy makers and the sector which does not allow room for mission creep or inefficiencies in the form of disproportionate regulatory interventions.

OfS’s statutory duties and its performance against them

5.     HERA established the OfS and gave it a long list of duties to undertake. Their wide range is notable but unsurprising as it reflects the complexity of the higher education sector and the many ways in which education touches different aspects of our lives, our communities and our local and national economies.
 

6.     The competing priorities represented by these duties do, however, speak to the need for a coherent vision and an overarching mission to underpin them. Without the discipline and focus that such a mission can impose on a large and complex organisation, the OfS risks being distracted by whatever issue is at the top of the political agenda today, regardless of whether this is in the best interests of students. While the OfS enjoys considerable resources, they are not unlimited. To the outside observer there appears to be little ringfencing of core activities in such a way as to guarantee a certain standard of service, while there has been a clear opportunity cost from the OfS’s not prioritising work which would have supported new providers, and could have helped to realise more of the positive impacts of competition on quality, innovation and value for money.
 

7.     The original vision of HERA saw market dynamics as generating benefits for students and taxpayers through more fair competition, better-informed consumers, and a shifting of incentives from research towards teaching. Both the Office of Fair Trading in 2014 and the Competition and Markets Authority in 2015 noted significant barriers to new providers entering the English higher education system, despite the need for growth and the UK-wide economic benefits of increasing the number of universities. This was to be achieved through a combination of encouraging new entrants to the sector, better data on student outcomes and experiences, better presentation of this data via online platforms, and utilising the Teaching Excellence Framework to challenge preconceived notions of the ranking of institutions based in the past primarily on research excellence.
 

8.     While other considerations and external pressures have clouded it somewhat since, the vision behind HERA carried enough weight that a notable shift in the higher education landscape in England has occurred since its enactment. Over 100 independent providers have joined all of England’s publicly funded universities and a large proportion of its publicly funded further education colleges on the new OfS Register of Higher Education Providers, although this still largely reflects those providers that were already accessing student loans directly through the Department for Education. These providers do, however, enjoy a new level of prominence and a growing public awareness of what makes them special, their often privileged place within their industry or community, and what they can uniquely offer to students from different backgrounds and those with particular interests, ambitions and needs. The regulation has also had some success for students, some of whom can now access loans for the full cost of tuition for the first time, or a visa to study in the UK. A small number of these providers have also secured a transformative amount of capital investment or access to high-cost subject grants. Their interests and the interests of their students are now recognised across government and their voice is heard individually and as a collective through IHE.

Increasing capacity – a new mission to support one million applicants by 2030

9.     While the experiment in market dynamics may have been judged only partially successful in terms of driving up standards, a more pressing challenge now faces the sector which can breathe new life and assign new significance to the existing duties of the OfS. UCAS forecasts that rising demand for higher education in the UK will see one million applicants every year by 2030, up from just over 700,000 in 2022. The majority of this increase is expected in England, and it includes increases in non-traditional students including mature students whose numbers are expected to rise by more than 10%. This growth could be underestimated if the lifelong loan entitlement meets its aim to change the student journey and allow more mature students to return to study. A dramatic increase in capacity is required if the sector is to meet this demand, necessitating growth both in the size of existing institutions and in the number and range of individual providers in the sector – the majority of which will be located in England and fall under the OfS’s regulatory purview.

10. Supporting the sector to respond boldly to this unprecedented demand, while still maintaining quality and standards, should become the OfS’s primary mission over the next 8 years. This could incorporate a new vision for the sector that would help the OfS strike a more successful balance between its many duties, adjust its appetite for risk, and help it to prioritise its core functions over the tempting distractions of mission creep or political ephemera. Adopting a pro-growth mindset would see the OfS recognise diversity and flexibility as a means of achieving greater system capacity while adapting to a changing student population.
 

11. The additional capacity in the system will need to be distributed across a greater number of providers, locations and delivery models. Student choice must once again become a priority for the OfS, as the evidence shows that non-traditional learners are more prevalent in non-traditional providers. HESA data from the year before the OfS was created demonstrated this. Data from “Alternative Providers” showed that 40% of students were over the age of 30 at registration, compared to less than 20% in the publicly funded sector. Students from BME backgrounds were also more represented in these providers, with 54% students identifying as BME compared with 23% in the publicly funded sector. It should be an OfS priority to better understand this student choice, otherwise regulatory actions could constrict the sector to the detriment of underrepresented students. While the OfS’s recent typology of providers is a first step in understanding the sector they now regulate, OfS has not yet demonstrated an understanding of the interplay between provider, delivery model and student choice. This is critical for not only assessing risk, as the OfS is committed to doing, but to ensure that regulation can play a more positive role in the availability of teaching models that benefit students. More work needs to be done to understand the value for money for students in many of these models. 
 

12. Many IHE providers offer accelerated undergraduate degrees, some exclusively so, giving them a more efficient delivery model than providers who rely on the traditional three-year model. Government analysis of accelerated degree models showed only 750 students on accelerated degrees in publicly funded providers, but over 2500 students in independent providers.[2] Students on accelerated degrees normally study year-round, with just small breaks throughout their study. For providers this means that they can also employ teaching staff and make use of their facilities all year round. Staff are employed on a 12-month basis, which can better match industry roles they may have had previously reducing recruitment costs. This also increases the retention of part-time staff who can match their teaching and industry roles more effectively instead of being beholden to the academic calendar which is rarely used by most industries. Facilities do not lie dormant or underutilised during the summer months, which is a benefit for not only providers but also students who can access often state of the art facilities related to their industry all year round.
 

13. Accelerated degrees are often in subjects which are highly practical, and their curriculums are designed to integrate industry experience within and alongside ‘classroom’ study. Students do not need to wait until summer breaks to apply their knowledge and upon finishing their studies are closer to the latest thinking and technologies having graduated only two years after they started studying. The year-round study model allows for a much more flexible use of space, with more time in the calendar to integrate study periods in industry, maximising the use of space on campus as well as in industry spaces. Some of our members have permanent bases within industry partners as students cycle through this space year round, and are not restricted to the academic calendar. Accelerated degrees however are not considered when regulatory changes are made, and this has resulted in unsuitable data models being applied to these courses which measure success by a three year degree timeline. They are also currently underfunded by 20% in their tuition fee loan, and even more so in the maintenance loans available.
 

14. The flexible timetables of many independent providers make more efficient use of the space available. Almost half of the students at IHE members who offer qualifications at level 6 and below are over the age of 30. For several of our members, the primary focus of their business model is teaching mature students who have caring responsibilities and/or who choose to study alongside their job, and they design their timetables carefully to accommodate these responsibilities. This allows them to not only maximise space and staffing, but to aid retention of a group where continuation benchmarks can be lower than their younger counterparts. Current funding regulation for providers who teach some or all of their course on weekends or evenings is not clear, and regulation introduced to support students is often based on models where students attend classes Monday-Friday for short periods between 9-5. The OfS must do more to ensure that their regulatory burden is not greater for these flexible providers, but to date it has produced no evidence that it understands the impact of regulation on these models.

Regulating in the interest of student choice – efficiency and proportionality

Registration and new providers

15. One of the core duties of the OfS is to broaden student choice in precisely the way alluded to above, by ensuring that new providers and providers of all different sizes and shapes can compete with established and more traditional institutions, and that students are supported and protected equally wherever they choose to study.
 

16. New providers need a stable regulatory environment with transparent processes, consistent decision making and proportionate costs and requirements – the benefits must outweigh the burden, and investors should see a clear route to returns. This means clear and reliable service standards, fast response times to enquiries, and a fast track for high-quality new providers to prove themselves and earn equal privileges as established competitors. A well-regulated market will boost investor confidence, but this requires processes to be reliable, transparent and efficient, and decisions to be consistent and well evidenced.
 

17. The initial registration period from April 2018 was best by difficulties and delays for independent providers, and almost exclusively for independent providers. Almost all English universities were registered within 5 months, whereas the average wait for independent providers was between 12 and 18 months, with some applications taking well over two years to reach a conclusion. Other government departments and authorities which depended upon the conclusion of this process were forced to put in place temporary permissions and extended transitional measures for the providers in limbo, simply to deal with the constantly slipping timelines from the OfS as well as their refusal to communicate transparently about the delays they were experiencing.
 

18. It was October 2022 before the OfS gave anyone an indicative timeline for the registration process, which is now indicated as being between 36-44 weeks to register, with more complex decisions taking more than a calendar year to reach a final decision. We can see no justification for why it took so long to create a simple timeline in order to give providers and their students some realistic expectations for registration. The opportunity cost of registration is higher the longer a provider has to wait, and there needs to be a far greater sense of urgency and priority given to this core work of the regulator in fulfilment of its most important statutory duties.
 

19. The OfS still maintains a policy that assessing the eligibility of any single provider for registration requires a full application. At one point IHE took the initiative to devise a checklist which OfS registration staff made use of for a short time, to determine if a provider meets the minimum criteria for eligibility. At the moment, however, short of submitting a full application, there is no publicly stated way for providers to determine if they are in fact eligible or not, and to be able to move to more appropriate regulation if they are eligible. It is a waste of everyone’s time to complete and review a full application only to conclude that a provider is ineligible. Our estimates from the initial registration period suggest that simply preparing the registration application costs a provider on average £14,500 in staff resources alone. There is no practical need for a full application to determine eligibility and a process for eligibility short of an application should be developed. The OfS can retain the right to say that they aren’t able to assess eligibility without a more complete application where they feel cases are complex.
 

20. Example: international business school (anonymised)

IHE is supporting a business school headquartered in Asia to establish a subsidiary London campus. It has set up as a legal entity in England, to support its operations here but it is wholly owned by the Asian parent company. All financial and academic control is vested in this parent institution which delivers higher education to students across a range of academic departments. All students studying in Asia and in the UK do so under academic partnerships, through validation with several UK universities. The UK entity represents <5% of the student body of the parent organisation. It is clear that the business school does not meet the criteria for activity in England and it would not take an assessment of their quality, compliance with consumer legislation, or finances to do so. A clear eligibility process focused on the point of English Provider (paragraph 75b of the regulatory framework) could provide the OfS with the evidence they need to allow the provider to seek alternative regulation to access student visas for example.
 

Switching categories on the OfS Register

21. HERA gave the OfS the power to create different categories of registration. The legislation allows governing bodies of providers to select their category and to change that category. The OfS currently requires providers to submit a new application to change category, and quite critically, to submit to a new assessment against the quality baseline. This is despite regulating these providers against the baseline since their initial registration, and having already assessed those providers against the baseline in their initial registration. Under the DQB model, the average cost for this was approximately £17,000. Add to this the cost in staff resources to draft an entirely new submission (approx. £14,500) and the cost for any provider before consultants and any additional work to meet the enhanced conditions (including access and participation plans) is already over £30,000. OfS lawyers believe that HERA requires them to take this approach, but this appears to be an example of where their interpretation of the legislation diverges quite starkly from the intention of those who drafted it, and indeed from common sense.
 

22. There are few differences in the application submission between Approved and Approved (fee cap) as indicated in the OfS’s own checklist: 
https://www.officeforstudents.org.uk/media/52742121-42b4-4b21-af35-e62ca4a7b6be/ofs_registration_checklist_for_providers.pdf. There are two additional governance principles that they must self-assess related to the receipt of public grant funding. There is the submission of additional information for students related to the receipt of teaching grant, which allows OfS to plan their teaching grant allocation. The largest change is the submission of an Access and Participation Plan rather than a statement. The OfS no doubt does additional assessments on the submissions but there is very little additional information required from the provider and nothing to justify a complete re-assessment against the baseline. This is not only additional cost to the provider but also additional cost to taxpayers as providers do not pay for their registration assessment but pay only when they are registered.

Understanding and protecting partnerships

23. The majority of OfS-registered providers do not have their own recognised awarding powers, meaning they must deliver higher education in partnership with an awarding body (typically a university), and this proportion is only increasing. These ‘validation’ and subcontracted (also known as ‘franchise’) partnership models have for a long time been the only route into the sector for new entrants who have something different to offer to students. Today they still form an integral if largely invisible part of the quality and standards landscape of UK higher education, ensuring that all degree programmes and other recognised HE qualifications offered in the UK align with the expected standards and common practices of the sector, as previously defined through collaborative work organised by QAA. A significant number of both validated and subcontracted providers continue to operate without registering with the OfS. For both registered and unregistered providers, however, the OfS needs to ensure that such partnerships are supported, promoted and protected in order to maintain and broaden student choice.
 

24. So far it is our view that the OfS has failed to prioritise adequately its duty to promote student choice by supporting new entrants to the sector, despite this being arguably the primary aim of the legislation and its associated policies. Specifically, the new regulator has done nothing yet to address the poor value, accessibility and power imbalances within the dominant validation model which governs the partnerships that the majority of English higher education providers rely upon to offer recognised qualifications such as degrees – a key plank of the reforms envisaged by Jo Johnson as the responsible Minister at the Department for Education. Indeed the OfS has only made the situation worse by imposing new regulatory responsibilities for these partnerships without evidence of having undertaken any evaluation of their current operating models, risk profiles or even the number of partnerships currently in operation. This has unnecessarily increased the risk factor for the awarding institutions, leading to higher costs and volatility for validated providers and their students. At no point did the OfS conduct a proper assessment of the impact of its proposals in relation to partnerships, despite IHE’s repeated requests that it do so.
 

Promoting regulation for the benefit of all students
 

25. There is no licence to operate as a higher education provider in England. Instead, certain benefits have been attached to the outcome of securing regulated status so as to encourage participation in a voluntary system of regulation. The benefits of regulation for an individual provider therefore need to clearly outweigh the cost and burden. If they do not then unregulated provision will proliferate, and this will work against widening student choice to the extent that this provision will be harder to discover and often inaccessible financially.
 

26. Regulatory requirements, burden and cost must be proportionate for the smaller and newer providers who need to exist to ensure this choice. The systemic risk of driving these providers out of the regulated sector must be weighed against the individualised risks on which OfS currently focuses. It is often the smallest providers who opt for a franchised partnership model, as they find the cost and burden of direct OfS registration to be too great for their small administration teams to manage. To the greatest extent possible, however, small providers should be supported and encouraged to register with the OfS themselves, and OfS systems and processes should be designed to empower them to do so without imposing disproportionate requirements which are not supported by a balanced assessment of the different risks.
 

27. One size cannot fit all and the burden of proving exceptions to a rule must not fall on the provider in question. The OfS framework, conditions and processes were designed with the majority of large HEFCE-funded universities in mind, and built on related assumptions about their systems, resources and capabilities. The reliance on a comprehensive collection of data for instance makes it almost essential to have a sophisticated student record system in order to automate much of the preparation for HESA submissions as well as to monitor the admission, progression and success of students with different characteristics and across different courses. It is currently, however, impossible to integrate such a system into an institution for less than £250,000, which remains a prohibitive amount of money for a small provider with fewer than 1,000 students, or indeed fewer than 100 in some cases.
 

28. The OfS could address this crippling data burden for the smallest providers by acknowledging the areas of its work where in practice a data-driven regulatory process does not produce any real benefit to students for providers below a certain size, and explicitly disapplying it in these cases. The unsuitability and disproportionality of data-driven processes in some circumstances is already explicitly acknowledged by Government and the regulator in the case of the Teaching Excellence Framework (TEF), where the process is voluntary for providers with fewer than 500 students. This same threshold could have been usefully applied to Access and Participation regulation as well, but instead (under the process in place before John Blake’s reforms this year) many small independent providers found themselves being issued with ridiculous targets which represented in some cases a fraction of a student. It is against these targets that smaller providers spend over 20% of their higher fee income (the additional £3,000 available on loan in the Fee Cap category) with almost one fifth of smaller providers spending over 40% of their higher fee income on access and participation simply to meet the demands of a system which expects them meet the same thresholds of activity and evaluation as the very largest of providers. An analysis of access and participation plans by IHE’s Access and Participation Network suggests that an average of 3% of small providers’ higher fee income (not just their access spend) goes to simply monitoring and evaluating access plans. These are student fees and should represent value for money for the students who paid them.
 

29. The OfS should also acknowledge times when the default student outcomes expected of all providers do not work for providers with a particular mission – so long as this mission and the intended outcomes of the course are clearly communicated to and endorsed by their students and other stakeholders – should disapply this test rather than demand an explanation for divergence. A clear example of such a provider would be Norland College, who deliver incredible results for their students, almost 100% of whom graduate directly into employment in their intended childcare profession and command starting salaries far in excess of the majority of new graduates, but who are automatically flagged by the OfS progression metric under the B3 condition as failing, because nannies are still classified by ONS as an unskilled occupation.
 

30. The OfS should build more nuance and discretion into its initial assessment of quality and standards (and the somewhat nebulous concept of value for money) rather than impose more regulatory burden and cost onto small and specialist providers like Norland College who have to explain their distinctive missions. Any assessment of the value for money of higher education provision can only be defined in relation to a provider’s particular mission and the explicit offer made to prospective students.
 

31. When it comes to the value for money of regulation, this should rightly be assessed in relation to individual students, who pay for the cost of regulation through their fees. The OfS should make it a priority to ensure that a broadly equal amount is contributed by each student. This would require a commitment to proportionality in its approach, a recalculation of registration fees and designated body fees on a per-student basis, and further action to enable smaller institutions to access capital funding and realise some of the economies of scale that larger institutions enjoy through collaboration and shared services.
 

32. It is clear that the OfS has not sufficiently prioritised the promotion of student choice as originally intended, and this has been exacerbated by a rapid turnover of Ministers whose personal political priorities have led to distractions and mission creep into areas which are not essential to the functioning of the higher education market, e.g. freedom of speech, sexual misconduct.

OfS powers, resources and expertise, and the Designated Quality Body
 

33. Our focus in this evidence is on the statutory duties of the OfS to promote competition and choice in the sector, and in this respect we believe the OfS already has the powers that it needs, some of which it has chosen so far not to use. Most notably the OfS has powers it could use in relation to validation and partnerships, which are such significant elements of the experience of new entrants and independent providers generally, as well as further education colleges. We have repeatedly urged the OfS to undertake a review of how partnerships are operating of sufficient depth to understand what is working and what is not, and what the impact is on student choice, but it has so far failed to do so.
 

34. The OfS also has all the powers it would need to disapply conditions of registration in certain cases or to adapt its processes to be more proportionate or appropriate to smaller providers. A ‘regulatory sandbox’ was promised in 2021 but has not yet materialised. This could be an excellent way of fostering innovation in provision, as well as offering a space in which different regulatory approaches could be tested. It could for example reduce burden as we have proposed above by exempting smaller providers from some of the data-driven requirements. It could encourage more risk taking in the name of innovation but with additional protections in place for the student cohorts involved. Past OfS statements have implied that this sandbox might end up becoming just another funding exercise (in the vein of their ‘challenge competitions’) and not a true sandbox where regulations can be disapplied in a controlled environment. This would be a huge missed opportunity.
 

35. The OfS may not have the skills and knowledge internally that it needs to understand the sector it regulates and therefore to regulate effectively. Its possibly excessive nervousness about regulatory capture has seen much of the residual expertise in higher education (inherited from HEFCE) driven out of its permanent staff. The need to provide the assessment services no longer delivered by QAA as the DQB has seen the OfS urgently attempt to build its capacity for independent academic judgements, but the structure of OfS decision making in this area will see the judgement of the independent academic experts it engages subordinated to existing OfS bureaucrats, with their dwindling supply of HE experience.
 

36. HERA explicitly intended for expert assessments of quality and standards to be made independently of the regulator, and the role of the DQB was defined with QAA in mind. There is no realistic prospect of an alternative body taking on this role instead of QAA, and we would welcome a rapprochement between the two bodies which allowed the DQB to operate as intended with the necessary independence to use its expertise on quality and standards in a way which complements the regulatory activities of the OfS, as well as meet the expectations and needs of international stakeholders in the UK’s quality system.
 

37. As a strictly temporary but necessary state of affairs, the OfS must ensure it is able to deliver these assessment functions, and take advice from relevant sector experts in the design and delivery of these activities, backed by open and honest dialogue with sector representatives, to ensure it has the confidence of the sector in fulfilling this role.
 

38. In the longer term, the UK Government and devolved administrations should work together to agree a common set of expectations and practices in relation to quality and standards so as to support the coherence, value and perception of a UK higher education brand. This is essential to both intra-UK student mobility and academic partnerships, as well as the sustained success of UK education exports and the associated exercising of our soft power.
 

39. There is a natural role for QAA to play here as a trusted UK-wide body, with whatever reforms to its governance and its methodologies are deemed necessary, as the effective international guardians of this UK HE quality brand.
 

40. For new providers it is entirely appropriate that their quality and standards be assessed against a UK benchmark in the form of a quality code and a qualifications framework, and for this initial gateway to be a necessary (but not sufficient) step towards regulated status in each of the home nations, and attaining all of the funding and other benefits associated with their respective regulatory systems.

Financial sustainability and business models
 

41. Financial risks are different for the smaller providers which make up the vast majority of the independent sector. Cash flow and the profiling of student loan payments remain a big issue and a longstanding one. The SLC policy of holding back 50% of the tuition fee loan payments until almost the end of the academic year makes many providers reliant upon reserves or increasingly expensive commercial lending just to meet their day-to-day spending.
 

42. Unfortunately the OfS’s own delays and lack of transparency in its work have generated some of the biggest sources of financial risk to new and independent providers. The OfS’s approach to regulating partnerships also creates more risk for validated and franchised providers. Not enjoying the same economies of scale and OfS not delivering proportionality in its regulation also put smaller institutions under intense pressure to grow, even if their particular mission is actually best served by remaining small, e.g. they specialise in preparing people for professions and industries which have a natural limit in their human resource needs.
 

43. Business models are quite diverse in the independent sector. Many independent providers offer short courses, modules, and stackable qualifications, and more will do so in response to LLE. Most IHE members deliver higher education in different ways from the traditional university model, with a proliferation of accelerated degrees; online and blended learning; evening, weekend and block release timetabling; flexible stop/start options and one year/level at a time rather than committing to three years of a full degree. Foundation years, access and pathway courses aimed at widening participation are also widely available.
 

44. Research activity is mostly limited to knowledge exchange within a community, profession or industry. Most independent providers are specialists so there is little opportunity for cross-subsidy between courses or departments. International students are important but the premium charged vs domestic students tends to be smaller than at universities, especially those which are most highly ranked internationally.
 

45. Most independent providers are teaching institutions first and foremost, and their income and expenditure reflects this focus. They are more likely to have developed a business model which is financially sustainable on teaching alone, whether this is through charging higher fees (in the Approved category), through corporate or charitable funding and endowments, or through more efficient use of facilities and human resources for the delivery of higher education programmes under the current fee cap and topped up by public funding, alternative provision (e.g. short courses), or bespoke contracts with the private sector in the UK and internationally.

46. Example: Matrix College of Counselling and Psychotherapy

Students at Matrix College are all mature, and many are already practitioners in mental health or related fields and are stepping into qualifications in counselling to become registered counsellors. Matrix teaches their group classes on weekends with one mid-week cohort allowing them to draw their part time tutor base from experienced practicing psychotherapists and counsellors. Students learn in intensive weekend or mid-week two day teaching units with independent learning and clinical practice completed during the week. Study is completed in-person one two day unit every three weeks and students can see the dates before starting the academic year, allowing them to plan around their study more effectively. All students work alongside their study. Matrix rotates years and groups to make best use of space. This benefits both the provider and students – 96% of their final year students felt the course is well organised and runs smoothly. During the week Matrix College offers rooms to a local voluntary counselling organisation who use the small rooms that students use for skills practice for counselling their clients. Introductory counselling skills courses are also run as well as CPD courses for their industry to maximise space.

47. Example: The College of Osteopaths

The College of Osteopaths operates from two locations, London and Staffordshire, and are one of the only osteopathic training courses north of London. They have a small base with the majority of their space hired from local universities. Their entire college is part-time students, allowing them to maximise the number of students using their space, including the clinical space they provide for students to undertake practical training. They deliver primarily on weekends allowing students to travel only when they need to study and live where suits them best and using space left unused by local universities.
 

48. Example: The Institute for Optimum Nutrition (ION)

ION was founded in London in 1984 by Patrick Holford as a private college with double Nobel Prize winner Professor Linus Pauling as patron. Today the Institute is the leading educational establishment in the UK for training and supporting nutritional therapists, and one of the most respected bodies of its kind in Europe. ION has over 2,000 alumni, and currently over 600 students registered and in training. ION graduates represent approximately one third of the total number of members on the official register for nutritional therapists, which is regulated by the professional body The British Association for Nutrition and Lifestyle Medicine (BANT). They offer a range of qualifications designed to suit aspiring and current nutritional therapists as well as those across the health profession looking to integrate nutrition into their practice. These include professional accreditations accredited by the Nutritional Therapy Education Commission (NTEC) and undergraduate and graduate qualifications through their validating University, the University of Portsmouth. Their business model is successful as it is tailored to their subject community and develops with their industry. They offer students different pathways through provision, and this allows them to combine learners studying part-time, diploma, degree, and at micro credential level, to not only ensure viability of courses but create a really unique and integrated student community. Students from other medical professions or allied health fields can study alongside those on a pathway to registration as a nutritional therapist, learning from each other. Students can also accumulate smaller qualifications to access degree study when they are ready. It is through this flexibility that ION have been successful for almost 40 years without any access to student grant or loan funding. 

It is, however, this same flexibility that will pose challenges when ION applies to register with the Office for Students. Their students follow pathways much different than others in the “other undergraduate” category of data. How they will meet the thresholds on continuation, and in particular graduate outcomes will demand additional resource to explain to OfS and possible “investigations” which they will have to pay for. Their successful business model might cost them more in registration then they gain in access to funding. They want to diversify their profession, and ensuring students have access to student loans is a proven way to do this. The cost of regulation is likely to be prohibitive, however, and could result in the course costing students more than it currently does.

ANNEX A

BRIEFING ON SIX BARRIERS TO INVESTMENT AND INNOVATION IN ENGLISH HIGHER EDUCATION

– produced in February 2022 for Lord Wharton, Chair of the OfS
– minor updates for accuracy in April 2023

Introduction – what became of the challenger institutions?

49. The creation of the Office for Students (OfS) marked the advent of a single regulatory system for higher education in England, after decades of divergent rules and quality processes which maintained a strict division between publicly funded and private institutions and imposed a high barrier for entry to the sector, limiting student choice. But while the OfS initially promised to offer a regulatory home at last to all the hundreds of independent providers delivering education at Level 4 and above, the reality has been different and more incremental in the progress towards equality.
 

50. Official forecasts by the Department for Education (DfE) in 2018 anticipated that 606 providers would be registered by 2023/24, but today’s number stands at just 415. Hundreds of independent providers have either found themselves to be ineligible for registration or have not yet been persuaded that the prospective benefits outweigh the burden and cost of regulation. Many of the smaller providers who offer undergraduate or postgraduate degree programmes have chosen to operate entirely under a subcontract from a larger institution which has the resources and capability to shoulder this burden.
 

51. The largest grouping of providers who could expect to come under the regulatory purview of the OfS in future, but at present have been advised of their ineligibility, are those independent providers who deliver more vocational education and short professional courses at the equivalent of Level 4 and above, mostly aligned to the Regulated Qualifications Framework (RQF) rather than the Framework for Higher Education Qualifications (FHEQ). These providers sit outside of both FE (ESFA) and HE (OfS) regulation, teaching only students who are self-funding and/or are funded by employers, charities or community groups.
 

52. Some of these vocational education providers have secured the ability to recruit internationally (including since 2021 from Europe) by submitting to an Educational Oversight inspection from the Independent Schools Inspectorate (ISI), while others take international students for up to six months at a time by choosing accreditation from one of two bodies (BAC and ASIC) which operate what are effectively legacy schemes still recognised by the Home Office but not recently scrutinised.
 

53. While the Higher Education and Research Act 2017 (HERA) defines higher education broadly and gives the OfS the power to regulate all provision at Level 4 and above (on either framework), we understand why it has chosen so far to prioritise those courses which are aligned to the FHEQ. This may need to change, however, as new Higher Technical Qualifications (HTQs) are rolled out, aligned to both vocational and higher education frameworks and requiring consistent and effective regulation in order to access the funding system. The OfS’s role may change and expand further as the Government’s policy of a Lifelong Loan Entitlement (LLE) is designed and implemented.
 

54. The regulatory framework for higher education in England continues to mature, and as the OfS looks to reduce its activities and the regulatory burden for low-risk established providers, its focus will naturally turn more to new entrants to the sector, providers who apply to join its register for the first time, and providers who are not currently eligible to apply but who may become so as a result of changing Government policy. IHE is the only representative body in the UK to put helping new providers enter the higher education sector at the heart of its mission, along with supporting the steady stream of existing independent providers of post-18 education each year who choose to extend their provision into regulated higher education.

55. In October 2021 we published the IHE Strategy[3] for 2021 through 2024, which includes a clear strategic priority to promote innovation and investment in higher education. This calls for an expansion of new provision across all UK regions, responding to local and national labour market needs as well as recognising the role of specialist institutions in supporting economic growth in critical industries.
 

56. We see one of IHE’s most important roles as being helping regulatory bodies to avoid setting conditions which could stifle market entry, innovation or less traditional models of provision, as well as advocating policies to promote flexible lifelong participation in higher education and professional training, including digital, blended, modular and short course provision. IHE members are amongst the most diverse and innovative in the HE sector. Many are entrepreneurial by nature and are looking to grow, but continue to face significant barriers in doing so. We welcome the opportunity to share a brief picture of the most common barriers today.

Barrier 1: eligibility for OfS registration

57. The OfS’s interpretation of HERA in its Regulatory Framework creates strict and inflexible eligibility criteria for providers seeking to register with the OfS and access the associated benefits, but many of the tests which must be met cannot be found in any published guidance. This lack of transparency adds unnecessary costs to market entry and serves as a barrier to investment in new provision.
 

58. Investors in new provision need more transparency from the OfS’s public guidance in terms of the limits to the flexibility possible within the registration process and the extent of the preparations and changes that many providers will need to make before even considering an application. For example:
 

• Providers without a UK legal entity will need to create one.
• Providers with international activities will need to relocate certain aspects to the UK – and the OfS must clearly and consistently apply this test.
• Providers which are part of a larger entity will need to demonstrate where the control effectively sits, and register the entity with this control.
   

59. These issues did not emerge when the regulatory framework was first published, as the criteria are relatively straightforward for established English universities to meet. They can be fiendishly complex to satisfy, however, for the growing number of providers where the higher education provision is located in a division, department, formal or informal grouping within a larger charity or corporate structure.
 

60. In IHE’s membership it has been the modern multinational education companies who have experienced the most friction between how they naturally operate in the market, how their management and governance is organised, and what the OfS expects to see in a single distinct ‘institution’ independently governed from one location in England. The strict but altogether arbitrary interpretation of whether a provider is ‘English’ enough for registration falls short of accommodating the kind of agile and entrepreneurial providers who thrive in today’s global education market, and to whom the UK ought to offer a natural home as a beacon for innovation.
 

61. IHE members operating under umbrella charities, within endowed foundations, or interdependently with certain community groups, have also struggled to satisfy some of the requirements around independent governance and financial sustainability, despite in many cases boasting track records of successful delivery over decades.
These requirements are currently not clear enough; nor are they applied consistently by OfS staff in the registration team. The noble motive of protecting students from the risk of a future closure does need to be more balanced against the risk of restricting access in the first place to these often unique institutions whose particular programmes or pedagogy may not be available anywhere else.
 

62. International providers including accredited foreign universities who wish to offer their provision in England frequently find themselves in regulatory limbo with no clear route towards OfS registration, thereby restricting their ability to recruit international students as well as barring their UK students from accessing loans.
 

63. Prestigious international providers such as India’s Institutes of Technology would find it almost impossible to open branch campuses in England under the current rules, despite enthusiasm for this idea by Lord Johnson of Marylebone, who as Universities Minister oversaw the passage of HERA into law.
 

64. The OfS could review the suitability of its current eligibility criteria for registration, and the consistency of their application, considering the impact on competition and student choice, and work with Government to clarify whether suitable alternatives exist for ineligible providers.

Barrier 2: appropriate support and guidance for SMEs and new providers

65. The registration process is considered currently by SMEs and new providers to be opaque, complex, slow and unpredictable. What they tell us is most needed is clear and accessible guidance which avoids assumptions about the size, structure and experience of a provider and its staff. They would like to see a more streamlined and transparent process, giving constructive advice on the preparations necessary before submitting an application; a process also which keeps them informed of their progress at each stage of consideration, with clear timelines allowing the provider to make its necessary plans and to keep students and other stakeholders appropriately informed.
 

66. New entrants and their investors need to be able to understand the requirements and expectations of the regulator with sufficient accuracy and reliability in advance to judge the cost of market entry and the timespan for a return on their investment. They also need confidence that the OfS’s regulatory approach is genuinely supportive of start-up and scale-up businesses, offers a stable environment for long-term investment, and encourages growth, agility and innovation both through the consistent application of predictable rules and where appropriate through a regulatory sandbox which allows experimentation.
 

67. Now that all of England’s Universities are on the OfS Register, along with all of the publicly funded Further Education Colleges who were willing and able to meet the necessary conditions, the vast majority of new applications for registration as well as applications to switch registration category will come from the independent sector – from organisations who closely resemble at least one of IHE’s 72 members.
 

68. Most of these applicant organisations will be SMEs, and they will either be new start-up providers or they will be extending their provision into regulated higher education after a number of years delivering further education, vocational qualifications, shorter professional courses or other forms of industry-specific training.
 

69. The UK Government and its regulators across different sectors of the economy already recognise the particular challenges that SMEs and start-ups face in meeting their regulatory responsibilities, so in line with the Regulators’ Code they will often adapt their processes and requirements to define an SME model for regulation of their sector. This is not about lowering standards or offering special treatment but about recognising the importance of proportionality as well as the value that a regulator can add through accessible information and constructive communication.
 

70. The OfS could review the breadth, depth and accessibility of its guidance for new applicants in the light of the diverse providers which have registered, as well as commit to clear service standards for the processing of applications.

Barrier 3: course validation and market entry

71. The New DAPs policy of offering a probationary period for the granting of awards shows promise but is still at an early experimental stage and continues to evolve as both the OfS and QAA learn from their first few experiences. It is therefore seen as a risky venture by investors and by international providers, and remains a complex and unaffordable route into the sector for the majority of new providers who start small and often remain so, at least for their first few years. The more well-trodden path of a subcontract or validation agreement with a university is a far more cost-effective option and the only choice for SME providers without the quality assurance infrastructure and commensurate resources made possible by a larger scale provision.
 

72. The relationships between validating universities (Degree Awarding Bodies) and their validated partners often work very effectively in practice, and for extended periods of time, but almost all of them suffer from a severe power imbalance which increases the risk of volatility and student protection issues. For the validating university, the relationship generates a certain amount of useful additional income. For the validated provider, the relationship is business critical: if relations with its validator were to break down with no alternative partner lined up to replace them, it would be impossible to continue operating as a higher education provider.
 

73. This power imbalance is sustained currently by the limited number of universities willing to consider new partners, the still more limited number of universities with the experience and capability to validate the specialist courses of many independent providers, and the commercial imperatives which militate against most universities working with providers that they consider to be direct competitors, or validating new courses that might compete with their own (or indeed those of an existing partner).
 

74. The entire system is (in some respects intentionally) opaque to new entrants and depends upon the individuals involved (or the consultants they hire) having direct experience of the quality assurance processes in validation, detailed knowledge of the availability and suitability of different universities as validating partners, and usually personal contacts within these potential partner universities who can open the doors to a new arrangement. There is very little transparency from most universities about the costs involved and few if any guarantees for the long-term sustainability of a partnership.
 

75. IHE carried out a major piece of research on validation[4] in 2016-17 in collaboration with QAA and the Open University, which highlighted many of the effects of this power imbalance as well as the absence of any consensus across the sector around the costs, quality and common practices of UK validation services. The final report recommended the adoption of 11 principles of good practice in validation, and made further recommendations directly relating to the role of the Office for Students in supporting the provision of validation services across the higher education sector.
 

76. The Green and White Papers which preceded HERA identified validation as a critical element of market entry for higher education in the UK, and thus an essential focus for reform in order to promote innovation, efficiency and student choice. Both independent providers and FE colleges made strong and repeated representations that the market for validation services in 2016 was dysfunctional, opaque, unreliable and anti-competitive.
 

77. The OfS itself recognised from day one the importance of improving the validation market, committing itself in the regulatory framework to a series of actions and interventions aimed at removing barriers, increasing transparency, and if necessary entering into commissioning arrangements with universities or even directly offering a validation service where it was not otherwise possible to remove the barriers to entry faced by new providers by recourse to existing validation options.
 

78. While the OfS’s business plans for both 2018-19 and 2019-20 included “review the validation system”, no such review nor any of the actions detailed above have yet taken place, while every year IHE receives more reports from its members and new providers that universities are withdrawing from validation, or reducing the number of partners they work with, or raising their prices for what is for hundreds of higher education providers an essential and already expensive service.
 

Barrier 4: data capability and student records systems

81. The commercial market on its own has failed so far to deliver a suitable Student Records System (SRS) product which can meet the needs of OfS-regulated independent providers at a price which is affordable to SMEs, or at least without eroding the level of resource dedicated to the teaching and learning of students.
 

82. The OfS recently consulted on different options for a new approach to data collection under the Data Futures programme. Each option under consideration would add to the already high data burden for SMEs and exacerbate the impact already being felt by the absence of a suitable SRS product for SMEs.
 

83. Jisc receives significant sums of public money each year to support all regulated higher education providers, but has failed so far to allocate spending towards the products and services that independent providers, SMEs and new entrants most urgently need. By contrast, many millions of pounds have been invested over the years in infrastructure which is of use only to the established universities, while newer SME providers have been actively excluded – de facto as well as de jure –from the cost-sharing mechanisms of services such as JANET, creating a massive financial disparity and market imbalance between established and newer SME providers.
 

84. Jisc has a natural and essential role to play in supporting SMEs in higher education, but has shown continued reluctance to embrace this fully, and so we believe it is necessary that the future conditions of its public funding should make clear that this is a priority.
 

85. Another way of ensuring that due priority is given to these needs is for them to appoint an SME Champion within their governance structures with whom IHE could engage to raise the issues of importance to our members. Jisc’s clear prioritisation to date of the needs of one part of the HE sector over another is an inevitable consequence of the unrepresentative composition of its Board and its company members, both of which exclude IHE or an IHE nominee who might be able to articulate and champion the interests of independent providers.
 

86. Jisc is now the Designated Data Body after its merger with HESA was completed, but in common with other similar organisations who either provide essential services to the sector or contribute an important element of the wider regulatory and quality assurance system, it still suffers from the incomplete representation of different types of provider within its governance.
 

87. The OfS and/or DfE should commission Jisc or another organisation with suitable expertise to develop, bring to market, and maintain ongoing support for an SRS that is affordable to SMEs and enables them to meet their current and future obligations towards reporting data for regulatory purposes.

Barrier 5: delivering more HTQs and professional courses

88. Many independent providers specialise in courses which are closely aligned to specific industries and to the training and continuing development of professionals. These institutions are the natural torchbearers of the Government’s drive for a new generation of HTQs at Levels 4 and 5 which can offer a high-quality alternative to a traditional academic degree.
 

89. Many IHE members first established themselves as providers of primarily technical and professional education, only later extending their curriculum to include degrees partly in response to student demand and partly due to the persistent difficulty of finding a university partner willing to validate their more vocational and shorter (and hence less profitable in validation fees) Level 4/5 courses.
 

90. The delivery and marketing of such courses is made more difficult by unclear rules and guidance, the inaccessibility of funding, and the unnecessary burden of overlapping and duplicative regulatory regimes. There is currently no clear path to fund HTQs where the qualification is awarded on the RQF at Level 4+. These courses are not eligible for student finance through the OfS and are not fundable by ESFA. Some providers including IHE members who teach solely on the RQF have been unable to proceed with OfS registration because their courses do not align sufficiently with the FHEQ.

91. The only clear route towards establishing funded HTQs currently is to award the course on the FHEQ thus making it eligible for HE funding; this however requires DAPs or validation from a Degree Awarding Body. Independent providers who offer courses predominantly at Level 5 and below are currently blocked from applying for their own Taught Degree Awarding Powers (TDAPs) by an archaic and bureaucratic requirement in the OfS DAPs guidance[5] that more than 50% of their students must be studying at Level 6 or above. For small providers the creation of new Level 4/5 courses will shift the balance further away from Level 6 and make even more of them ineligible to apply for TDAPs.
 

92. Between a rock and hard place, independent providers are also currently blocked from applying for Foundation Degree Awarding Powers (FDAPs), powers which exist for the very purpose of circumventing the 50% requirement of TDAPs in order to allow more technical and vocational education providers to award their own qualifications at Level 5. A self-evidently protectionist clause which limits the granting of FDAPs only to publicly funded Further Education Colleges was regrettably maintained by HERA.
 

93. HTQs and professional courses will also have a major role to play in the future export success of UK higher education. Surveys of international students consistently show that employability is the number priority and motivation for this globally mobile student population. There is an increasing demand in many of the fastest-growing source countries for international students not just for the traditional academic higher education that the UK has successfully exported for decades, but for more vocationally oriented programmes and professional training opportunities as well. The UK is well placed to meet this demand with its world-renowned Chartered Institutes and professional bodies, and it is also home to many world-leading specialist higher education providers aligned to specific industries and professions.
 

94. The new generation of HTQs and professional courses should be highly sought after by international students, but it will first be essential to ensure that the regulatory framework which supports these new qualifications is appropriate and that offering these courses in the UK is not seen by providers as placing undue risk or unnecessary additional burden on their existing operations. The regulatory underpinning for these HTQs will need to allow providers to offer them to international as well as UK students. This will help to boost their international recognition and reputation, making them more portable and valuable for the first HTQ graduates, as well as boosting and sustaining the growth of specialist vocational provision and alternative delivery models around the UK in support of Levelling Up.
 

Barrier 6: Access and Participation in small and specialist providers

97. IHE believes that higher education has the power to transform lives, and that every person who has the potential to benefit from a course should have the opportunity to access it and be given the necessary support to participate successfully in their own learning.
 

98. The large majority of independent providers are SMEs, and the provision in many of them is specialist in nature, focusing on particular disciplines or industries. Their small size makes it impossible on their own to achieve the economies of scale which are available to large universities and which make it feasible to carry out the full range of activities commonly expected in support of Access and Participation Plans.
 

99. IHE members typically report spending a significantly higher per-student amount on A&P activities than the averagely sized university. A number of smaller providers have chosen to pool their resources in a shared service model simply in order to have the capability necessary for the monitoring and evaluation of APPs. The Specialist Evidence, Evaluation and Research (SEER) service is supported by IHE and delivered by our partners Applied Inspiration, and three years after its launch can offer useful evidence of the potential for a shared service model to support best practice for SME providers in this area.
 

100.         The specialist nature of many independent providers necessarily shapes their approach to and priorities in relation to Access and Participation, and defines the extent of the impact that they can expect to have within different groups of students. For example, increasing the participation of women will be one of the top priorities for a specialist engineering provider, as it will also for a specialist provider of coding or music technology courses.
 

101.         Small independent providers often design their curriculum and service delivery specifically to address the balance for widening participation students. This type of inclusive practice, where employability is embedded in the curriculum and pivoted towards those who traditionally have not gone to university, where support and soft skills are part of the delivery and not an add-on, is normal and natural in a small environment. Yet these providers must adhere to an access and participation structure built for larger and more established providers where Access and Participation can be an afterthought.
 

102.         The mechanisms to make visible and evaluate Access and Participation activities require providers to either limit these activities to those in the OfS’s target groups – regardless of how few students this is in a small population – or to create additional standalone activities that duplicate what is already being done. This is a clear waste of resources and A&P regulation must catch up with the type of innovative inclusive practice being demonstrated by IHE members.
 

10 May 2023