Get a grip on systemic challenges, MPs tell HE regulator

With 80 higher education institutions recently reporting annual deficits in England, the Office for Students (OfS), which was set up four years ago as the regulator and competition authority, urgently needs to get its house in order to ensure the financial sustainability of the higher education sector and the protection of students’ interests.

That’s the verdict from the influential House of Commons Public Accounts Committee (PAC) which voiced heavy criticism of the performance of the OfS since it took over responsibilities from the old Higher Education Funding Council for England (HEFCE) and the Office for Fair Access at the beginning of 2018.

In a damning report published on 15 June 2022, the committee of MPs noted that the proportion of providers with an annual deficit has increased in every one of the past four years, from 5% in 2015-16 to 32% (or 80 of the 250 higher education providers) in 2019-20.

It said the higher education sector survived the COVID-19 pandemic largely because of the resilience of individual institutions, financial assistance from government and because income from overseas students was not disrupted as feared, and the fact that large-scale tuition-fee refunds were not required.

Declining student satisfaction

The MPs’ report also expressed concern that student satisfaction, particularly regarding value for money, has fallen in recent years.

According to OfS measures, the proportion of undergraduates who said university offered good value for money fell from 38% in 2020 to 33% in 2021. The proportion saying it was not value for money rose from 48% in 2020 to 54% last year.

The National Student Survey, which is restricted to final-year undergraduates, saw a decline in overall student satisfaction from stable results around the 82%-83% mark between 2017 and 2020, falling to 75% in 2021.

Another poll, the 2022 student academic experience survey published last week by the Higher Education Policy Institute and Advance HE, said 35% of students in their survey reported getting “good” or “very good” value for money this year – up from just 27% in 2021 at the height of the COVID-19 pandemic, as University World News reported.

Financial pressures risk harming students’ experience

The MPs’ report said: “We are not convinced that the OfS has made sufficient progress in getting a grip on the long-term systemic challenges facing the sector and individual providers, meaning that financial pressures risk harming students’ experience of university.”

Those “systemic” long-term pressures on providers’ finances include pension fund deficits and predicted rises in employer contributions, inflation and rising costs, a continuing freeze in the cap on student fees, the impact of changes to loan repayment terms and potential policy reforms on, for example, minimum entry requirements.

Their report said: “The OfS relies heavily, although not exclusively, on financial metrics to identify risks to providers’ financial sustainability and has designed a regulatory approach that does not involve routine discussion with individual providers.

“However, the OfS currently lacks an integrated model that it can use to understand in a systematic way the combined effects of different pressures – such as changes in different costs, income streams or student numbers – on the sector and on individual institutions, although it told us that it is developing a model to allow it to do so in a more sophisticated way.”

The MPs want the OfS to write to them by the end of July 2022 “setting out the actions it will take to increase its understanding of the sector and pressures on providers – and how it will demonstrate to universities and students that it has done so”.

Dependence on growing overseas numbers

They also warned that some providers risk financial sustainability through their heavy dependence on growing overseas student numbers to cross-subsidise teaching and research.

The report said reliance on international recruitment “may not align well with the UK’s wider geopolitical interests”, adding that in 2019-20 almost half of 340,000 overseas students at English providers came from China or India.

Dr Janet Ilieva, founder and director of the global consultancy Education Insight, told University World News that not for the first time the government had been warned that policy changes, including a potential cap on home students going to university, and the freeze on tuition fees for UK students for another two years, meant UK universities were unable to expand on the domestic front.

“There will be increased pressure on international tuition fees to plug growing deficits for teaching and subsidise research as home fee levels are “substantially eroded by inflation”.

She welcomed the PAC report’s findings and told University World News: “HEFCE used to have large institutional teams, who were responsible for individual higher education institutions, and would routinely visit them, but these were scrapped when the OfS replaced HEFCE.”

Jonathan Grant, who was professor of public policy at King’s College London until he set up his own consultancy last year focusing on the social impact of universities and research, told University World News: “The concern about over-reliance on international premium fees for tuition is justified.

“It may be fine when you are an outward facing, welcoming country but becomes a potential issue when you are perceived to be hostile and unwelcoming to people from other parts of the world. That can be very challenging for universities, not least as there is not much they can do about that as the response must come from central government.”

Issues with how OfS was designed

Professor Andy Westwood, professor of government practice and vice-dean of humanities at the University of Manchester, told University World News: “I suspect a lot of the issues are not in how OfS does or doesn’t act, but more about how it was designed and established in the first place.”

Jim Dickinson, associate editor at the Wonkhe higher education think tank, described the PAC findings as “grim”. In a blog he wrote that while the Department for Education needed to hold the Office for Students to account, it was clear that the relationship with the sector would change when OfS took over from HEFCE.

He said: “There are legitimate questions about how ministers and OfS behave – and what is prioritised and done. Are ministers leaning too hard on OfS? To what extent does the independent regulator disagree and kick back? And so on.”

But there was also a need to look at “the extent to which ministers and the press” can interfere in the role of the OfS and its priorities.

OfS will carefully consider recommendations

Responding to the criticism from the PAC, Susan Lapworth, interim chief executive of the OfS, said they welcomed the committee’s focus on the financial sustainability of the higher education system and would carefully consider its recommendations.

She told University World News: “In the main, universities and other higher education providers entered the pandemic in good financial shape, and there is evidence that the sector in aggregate is well placed to recover from the challenges of the last two years.

“There will, of course, be variation in financial performance between individual universities, and it is important to remember that each institution is responsible for its own sustainability.

“If any higher education provider registered with the OfS runs into financial difficulties, the OfS will take steps to protect students,” she said, pointing to one provider closing in the last two years and the OfS working with the Department for Education and others to ensure that all students were offered a guaranteed place on a suitable alternative course.

“We continue to engage with a small number of providers where the information we hold suggests concerns about their financial position.

“It is important that all students can be confident that they will have a positive experience of higher education,” she said, adding that the OfS continues to listen to students’ views through national surveys, student panels and other student engagement mechanisms.

“We are actively intervening where we have concerns about the quality and outcomes of courses and will continue to do so. This is directly relevant to students’ views about value for money.”

Nic Mitchell is a UK-based freelance journalist and PR consultant specialising in European and international higher education. He blogs at www.delacourcommunications.com.