Category: Regulation

  • Policy change can help manage the demand for graduate knowledge and skills

    Policy change can help manage the demand for graduate knowledge and skills

    “Our universities have a paramount place in an economy driven by knowledge and ideas.”

    These are the opening words of the 2016 white paper Success as a Knowledge Economy, which created the funding and regulatory architecture governing English higher education today. The arrangements are founded on a broad faith in the economic benefits of generating and communicating knowledge.

    This vision assumes that an increasing supply of university graduates and research, coupled with open markets that reward enterprise, leads to endogenous economic growth. That can happen anywhere because ideas are boundless and non-rivalrous, but particularly in England because our universities are among the best in the knowledge business.

    English higher education has grown by integrating the development of specific skills for the workplace alongside universally applicable knowledge. This is clear from the progress of most English universities from institutes established for professional and technical training towards university status, the absorption of training for an increasing range of professions within higher education, and the way in which universities can now articulate the workplace capabilities of all graduates, regardless of their discipline.

    Notwithstanding this, the reforms proposed in 2016 emphasised knowledge more than skills. By that time, most of the cost of teaching in English universities had been transferred to student tuition fees backed by income-contingent loans. So, the reforms mostly focused on providing confidence for the investments made by students and the risks carried by the exchequer. This would be delivered through regulation focused on issues important to students and the government, whilst positioning students as the pivotal influence on provision through competition for their choices.

    Universities would compete to increase and improve the supply of graduates. This would then enhance the capacity of businesses and public services to capitalise on innovation and new technologies, which would yield improved productivity and jobs requiring graduates. That is a crude characterisation, but it provides a starting point for understanding the new imperatives for higher education policy, which are influenced by challenges to this vision of nearly a decade ago.

    From market theory to experience in practice

    Despite an expansion of university graduates, the UK has had slow productivity growth since the recession of 2008–09. Rather than the economy growing alongside and absorbing a more highly educated workforce, there are declining returns for some courses compared with other options and concerns that AI technologies will replace roles previously reliant on graduates. Employers report sustained gaps and mismatches between the attributes they need and those embodied in the domestic workforce. Alongside this, ministers appear to be more concerned about people that do not go to university, who are shaping politics in the USA and Europe as well as the UK.

    These are common challenges for countries experiencing increasing higher education participation. The shift from elite to mass higher education is often associated with a “breakdown of consensus” and “permanent state of tension” because established assumptions are challenged by the scale and range of people encountering universities. This is particularly the case when governments place reliance on market forces, which leads to misalignment between the private choices made by individuals and the public expectations for which ministers are held to account. Universities are expected to embody historically elite modes of higher education reflected in media narratives and rankings, whilst also catering for the more diverse circumstances and practical skills needed by a broader population.

    In England, the government has told universities that it wants them to improve access, quality and efficiency, whilst also becoming more closely aligned with the needs of the economy and civil society in their local areas. These priorities may be associated with tensions that have arisen due to the drivers of university behaviour in a mass market.

    In a system driven by demand from young people, there has been improved but unequal access reflecting attainment gaps in schools. This might not be such a problem if increasing participation had been accompanied by a growing economy that improves opportunities for everyone. But governments have relied on market signals, rather than sustained industrial strategies, to align an increasing supply of graduates with the capabilities necessary to capitalise on them in the workplace. This has yielded anaemic growth since the 2007 banking crash, together with suggestions that higher education expansion diminishes the prospects of people and places without universities.

    In a competitive environment, universities may be perceived to focus on recruiting students, rather than providing them with adequate support, and to invest in non-academic services, rather than the quality of teaching. These conditions may also encourage universities to seek global measures of esteem recognised by league tables, rather than serving local people and communities through the civic mission for which most were established.

    Market forces were expected to increase the diversity of provision as universities compete to serve the needs of an expanding student population. But higher education does not work like other markets, even when the price is not controlled as for undergraduates in England. Competition yields convergence around established courses and modes of learning that are understood by potential students, rather than those that may be more efficient or strategically important for the nation as a whole.

    Navigating the new policy environment

    After more than a decade of reforms encouraging competition and choice, there appears to be less faith in well-regulated market forces positioning knowledgeable graduates to drive growth. Universities are now expected to become embedded within local and national growth plans and industrial strategy sectors, which prioritise skills that can be deployed in specific settings ahead of broadly applicable knowledge. This asks universities to consider the particular needs of industry, public services and communities in their local areas, rather than demand from students alone.

    Despite these different imperatives, English higher education will continue to be financed mostly by students’ tuition fees and governed by regulatory powers designed to provide confidence for their choices. We suggest four ingredients for navigating this, which are concerned with strategy, architecture, regulation and funding.

    The government has promised a single strategy for post-16 education and a new body, Skills England, to oversee it. A more unified approach across the different parts of post-compulsory education should encourage pathways between different types of learning, and a more coherent offer for both learners and employers. But it also needs to align factors that influence the demand for graduates, such as research and innovation, with decisions that influence their supply. That requires a new mindset for education policy, which has tended to prioritise national rules ahead of local responsiveness, or indeed coherence with other sectors and parts of government.

    Delivery of a unified strategy is hampered by the fragmented and complex architecture governing post-16 education. Skills England will provide underpinning evidence, both influencing and drawing on Local Skills Improvement Plans (LSIPs), but it remains uncertain how this will be translated into measures that influence provision, particularly in universities. A unified strategy demands structures for convening universities, colleges, employers and local authorities to deliver it in local areas across the country.

    That could be addressed by extending the remit of LSIPs beyond a shopping list of skills requirements and enhancing the role of universities within them. Universities have the expertise to diagnose needs and broker responses, aligning innovation that shapes products and services with the skills needed to work with them. They will, though, only engage this full capability if local structures are accompanied by national regulatory and funding incentives, so there is a unified local body responsible for skills and innovation within a national framework.

    Regulation remains essential for providing confidence to students and taxpayers, but there could be a re-balancing of regulatory duties, so they have regard to place and promote coherence, rather than competition for individual students alone. This could influence regulatory decisions affecting neighbouring universities and colleges, as well as the ways in which university performance is measured in relation to issues such as quality and access. A clear typology of civic impact, together with indicators for measuring it, could shift the incentives for universities, particularly if there is a joined-up approach across the funding and regulation of teaching, research and knowledge exchange.

    Regulation creates the conditions for activity, but funding shapes it. Higher education tends to be a lower priority than schools within the Department for Education, and research will now be balanced alongside digital technologies within the Department for Science, Innovation and Technology. A new Lifelong Learning Entitlement and reformed Growth and Skills Levy may provide new opportunities for some universities, but any headroom for higher education spending is likely to be tied to specific goals. This will include place and industry-oriented research and innovation programmes and single-pot allocations for some MSAs, alongside the substantial public and private income universities will continue to generate in sectors such as health and defence. In this context, aligning universities with the post-16 education strategy relies on pooling different sources of finance around common goals.

    Closer alignment of this kind should not undermine the importance of knowledge or indeed create divisions with skills that are inconsistent with the character and development of English higher education to date. The shift in emphasis from knowledge towards skills reframes how the contributions of universities are articulated and valued in policy and public debate, but it need not fundamentally change their responsibility for knowledge creation and intellectual development.

    This appears to have been recognised by ministers, given the statements they have made about the positioning of foundational knowledge within strategies for schools, research and the economy. We have, though, entered a new era, which requires greater consideration of the demand for and take-up of graduates and ideas locally and nationally, and a different approach from universities in response to this.

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  • The Office for Students reviews TEF… again

    The Office for Students reviews TEF… again

    The Office for Students has been evaluating the last iteration of the Teaching Excellence Framework (TEF), which happened in 2023.

    The 2023 TEF was a very different beast to previous iterations, focusing more on qualitative (submissions from providers and students) evidence and less on the quantitative experience and output measures. But to be clear, this work does not appear to assess the impact or likely effects of these changes – it treats the 2023 exercise very much as a one off event.

    We get an independent evaluation report, written by IFF research. There’s the findings of a survey of students involved in preparing the student submissions (aspects of which contribute to a student guide to evidence collection for TEF), findings from a survey of applicants (conducted with Savanta), and an analysis of the estimated costs to the sector of TEF2023. The whole package is wrapped up with a summary blog post, from OfS TEF supremo Graeme Rosenberg.

    Of all this, the blog post is the only bit that touches on what most of us probably care about – the future of the TEF, and the wider idea of the “integrated quality system”. Perhaps predictably, OfS has heard that it should

    “build on the elements of the TEF that worked well and improve on areas that worked less well for some providers.

    The top-line summary of everything else is that OfS is pleased that TEF seems to be driving change in institutions, particularly where it is driven by student perspectives. There’s less confidence that the TEF outcomes are useful for prospective students – the regulator wants to explore this as a part of a wider review of information provision. And while institutions do find TEF valuable, the cost involved in participation is considerable.

    How much does TEF cost then?

    It cost OfS £3.4m, and the mean estimate for costs to the wider sector was £9.96m. That’s about £13.4m in total but with fairly hefty error bars.

    What else could the taxpayer buy for £13.4m? There’s the much-needed Aylesbury link road, an innovation hub in Samlesbury near the new National Cyber Force headquarters (promising jobs paying upwards of £3,000 according to the headline), or enough money to keep Middlesbrough Council solvent for a while. In the higher education world, it’s equivalent to a little under 1,450 undergraduate annual tuition fees.

    The sector numbers come from a survey involving 32.3 per cent of providers (73: 52 higher education providers, 21 FE colleges) involved in the 2023 TEF conducted in September and October 2024 (so significantly after the event). It looked at both staff costs and non-staff costs (stuff like consultancy fees).

    As you’d probably expect, costs and time commitments vary widely by institution – one provider spent 30 staff days on the exercise, while for another it was 410 (the median? 91.6). Likewise, there was variation in the seniority of staff involved – one institution saw senior leaders spend a frankly astonishing 120 days on the TEF. Your median higher education provider spent an estimated £37,400 on the exercise (again, huge error bars here). It is asserted that Gold rated providers spent slightly more than Silver rated providers – the data is indicative at best, and OfS is careful not to assert causality.

    We also get information on the representations process – the mechanism by which providers could appeal their TEF rating. The sample size here is necessarily tiny: 11 higher education providers, 8 colleges – we are given a median of £1,400 for colleges and £4,400 for higher education providers.

    Was it worth it?

    The picture painted by the independent IFF evaluation is positive about the TEF’s role in driving “continuous improvement and excellence” at providers. The feeling was that it had encouraged a greater use of data and evidence in decision making – but in some cases these positive impacts were negligible given the volume of the input required. Students were also broadly positive, citing limited but positive impacts.

    The evaluation also made it clear that the TEF was burdensome – a large drain on available staff or student resource. However, it was generally felt that the TEF was “worth” the burden – and there was a broad satisfaction about the guidance and support offered by OfS during the process (although as you might expect, people generally wanted more examples of “good” submissions – and the “woolly” language around learning gain was difficult to deal with, even though the purpose was to drive autonomous reflection on measures that made sense in a provider context).

    One of the big 2023 cycle innovations was a larger role for the student submission – seen as a way to centre the student perspective within TEF assessment. This wasn’t as successful as OfS may have hoped – responses were split as to whether the process had “empowered the student voice” or not – the bigger institutions tended to see it as replicating pre-existing provider level work.

    Students themselves (not many of them, there were 20 interviews of students involved in preparing the submissions) saw this empowerment as being limited – greater student involvement in quality systems was good, but largely the kind of things that a good provider should be doing anyway.

    But the big question, the overall purpose, really needs to be whether TEF2023 raised the value of the student experience and outcomes. And the perspective on this was… mixed. Commonly TEF complemented other ongoing work in this area, making it difficult to pick out improvements that were directly linked to TEF, or even to this particular TEF. Causality – it’s difficult.

    If we are going to have a big, expensive, exercise like TEF it is important to point to tangible benefits from it. Again, evidence isn’t quite there. About half of the providers surveyed used TEF (as a process or as a set of outputs including the “medals” and the feedback) to inform decision making and planning – but there were limited examples of decisions predicated on TEF offered. And most student representatives were unable to offer evidence of any change as a result of TEF.

    Finally, I was gratified to note that coverage in “sector publications like Wonkhe” was one key way of sharing good practice around TEF submissions.

    The value to applicants

    Any attempt within the sector to provide a better experience for, or better outcomes for students is surely to be welcomed. However, for a large and spendy intervention the evidence for a direct contribution is limited. This is perhaps not surprising – there have been numerous attempts to improve student experience and outcomes even since the birth of the OfS: by the regulator itself, by other sector bodies with an interest in the student experience (the Quality Assurance Agency, Advance HE, the sector representative bodies and so forth) and autonomously by institution or parts of institutions.

    Somewhat curiously, the main evaluation document has little to say about the realisation of TEF’s other main proposed benefit – supporting applicants in choosing a provider to study at. Providers themselves are unsure of the value of TEF here (feeling that it was unlikely that applicants would understand TEF or be able to place due weight on the findings of TEF) though there is some suggestion that a “halo effect”, drawing in part from the liberal use of logos and that job lot of gold paint, could help present a positive image of the provider. It is a hell of a reach, but some noted that the fact that institutional marketing and recruitment efforts used TEF and the logos presents evidence that someone, somewhere, thinks it might work.

    The thing to do here would be to ask applicants – which OfS commissioned Savanta to do on its behalf as a separate exercise. This research was based on six focus groups covering 35 prospective students aged between 17 and 20 and applying to England. In four of these groups, participants had heard of the TEF – in two they had not – and in every case the applicants had ended up applying to silver rated universities.

    This is backed up by what initially looks like a decent survey instrument – a big (2,599 respondents, covering various existing online panels, and weighted via the use of quotas on age, gender, ethnicity and post fieldwork by provider type, mode of study, domicile, and neighbourhood participation marker) survey conducted in April and May of 2024. The headline finding here is that 41.7 per cent of applicants (n=798) had seen TEF ratings for any university they had looked at.

    Somewhat mystifyingly, the survey then focuses entirely on the experience of those 333 applicants in using the TEF information, before asking whether applicants may think TEF would be important in applying to university of the whole sample (52.2 per cent reckoned they would be important, despite a fair number of these applicants not having even noticed the ratings).

    Can I just stop here and say this is a weird methodology? I was expecting a traditional high n survey of applicants, asked to rate the importance of various factors on application choices, ideally with no prompting. This would give a clearer picture of the current value of TEF for such decisions, which is what you would expect in evaluation. That’s not to say that the focus groups or a specific awareness or use survey wouldn’t be a valid contribution to a proper mixed methods analysis – or as a means of generating a survey instrument for wider use.

    Even so, participants in the focus groups were happy to list the factors that affected their choices – these included the obvious winners like location, course content, and graduate outcomes, plus a “significant role” for the cost of living. Secondary (less important) factors included university reputation, teaching quality, and other personal preferences. Though some of these factors are covered within the TEF exercise, not one single applicant mentioned TEF results as a primary or secondary factor.

    For those that had heard of TEF it was seen as a “confirmatory tool rather than a decisive factor.” Applicants did not understand how TEF ratings were determined, the criteria used, or what the meaning of – say – gold rather than silver meant when comparing providers.

    The focus groups chucked the supplementary information (panel statements, submissions, the data dashboard) at applicants – they tended to quite like the student statements (viewing these as authentic), but saw the whole lot as lengthy, overcomplicated, and lacking in specificity.

    I enjoyed this comment on the TEF data dashboards:

    I feel like there is definitely some very useful information on this page, but it’s quite hard to figure out what any of it means.

    On the main ratings themselves, participants were clear that gold or silver probably pointed to a “high standard of education,” but the sheer breadth of the assessments and the lack of course level judgements made the awards less useful.

    There was, in other words, a demand for course specific information. Not only did applicants not mention Discover Uni (a government funded service that purports to provide course level data on student outcomes and the student experience), the report as a whole did not mention that it even existed. Oh dear.

    Unlike IFF, Savanta made some recommendations. There needs to be better promotion of the TEF to applicants, clearer ratings and rationales, and a more concise and direct presentation of additional information. Which is nice.

    What to make of it all

    Jim will be looking at the student submission aspects in more detail over on the SUs site, but even this first reading of the evaluation documents does not offer many hints on the future of the TEF. In many ways it is what you would expect, TEF has changed mainly when OfS decided it should, or when (as with the Pearce review) the hand of the regulator is forced.

    While providers are clearly making the best of TEF as a way to keep the focus on the student experience (as, to be clear, one stimulus among many), it is still difficult to see a way in which the TEF we have does anything to realise the benefits proposed way back in the 2015 Conservative manifesto – to “recognise universities offering the highest teaching quality” and to allow “potential students to make decisions informed by the career paths of past graduates.”

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  • Competition law is a constraint to collaboration in HE but it need not be an impediment

    Competition law is a constraint to collaboration in HE but it need not be an impediment

    There has been much discussion in recent months about financial pressures in the higher education sector and what could be done by stakeholders in the sector – government, regulators and higher education institutions themselves – to address these.

    One such proposal is a strategy of “radical collaboration” between institutions, ranging from mergers to federations, or shared services and centrally operated services. Indeed, the Office for Students (OfS) has cited radical collaboration as a likely response to the financial challenges in the sector:

    Where necessary, providers will need to prepare for, and deliver in practice, the transformation needed to address the challenges they face. In some cases, this is likely to include looking externally for solutions to secure their financial future, including working with other organisations to reduce costs or identifying potential merger partners or other structural changes.

    This notion of radical collaboration goes beyond the traditional practice of academically driven collaboration. Instead, in this context radical collaboration refers to deeper, more extensive and far-reaching strategic collaboration, involving institutions working together to achieve a strategic shared mission and/or efficiencies. This might include, for example, curriculum sharing, or collaborating on a regional basis where institutions collectively decide which is best placed to deliver particular courses or subject areas.

    While the notion of “radical collaboration” may present a potentially appealing way of responding to the challenges that the sector is facing, there is, however, a significant tension between the principles of such transformational integration and the principles of competition law. As things currently stand, many forms of greater integration between institutions, particularly in relation to curriculum mapping and sharing the provision of courses, would breach the competition rules.

    UK competition law and higher education

    Competition laws seek to safeguard free and fair competition between “undertakings” (ie any entity that is engaged in economic activity) for the benefit of consumers, with the aim of creating competitive markets which benefit from the efficient allocation of resources; innovation; lower prices; increased choice; and better-quality products and services for customers.

    Competition laws therefore prohibit agreements and understandings between independent “undertakings” that have, as their object or effect, the prevention, restriction or distortion of competition. Some agreements are regarded as being so harmful to competition in their nature that they are prohibited outright, for example, agreements between competitors to fix prices, share markets, limit output, or co-ordinate or rig tenders. These types of agreements are highly likely to attract vigorous enforcement action by the competition authorities, including the imposition of substantial fines. A finding that an organisation has breached competition rules (or even an allegation of a breach) would inevitably lead to negative publicity and reputational harm.

    While the higher education sector may not bear all the hallmarks of a traditional, fully competitive market, it does fall within the scope of the UK’s competition law regime. Higher education institutions are “undertakings” for the purposes of competition law because they are engaged in “economic activities”; they provide education and other ancillary services to undergraduate and postgraduate students, create jobs which benefit their local and the national economy, as well as develop new products and services.

    Moreover, higher education institutions have to compete to “win” students, competing to a certain extent on price, in the context of international or postgraduate provision, but primarily on non-price factors of competition, such as choice of course/course content; quality of provision; reputation; and the range and quality of ancillary services, such as sports provision, accommodation and other student services. Higher education institutions also compete in “upstream” labour markets to attract and retain talent (ie teaching and research staff).

    Collaboration between sector participants can undoubtedly be positive and pro-competitive. Such arrangements may be permitted by competition law if (among other things) the collaboration produces efficiencies which benefit consumers. For example, when properly structured, benchmarking exercises or arrangements between institutions to share facilities can lead to the more efficient allocation of resources. However, collaboration between sector participants which dampens or reduces the levels of competition that would otherwise exist between them, and/or which produces no clear benefits for consumers, risks breaching the competition rules.

    A clear understanding of where the line is drawn between collaboration which promotes competition and delivers consumer/student benefits, and collaboration which reduces or distorts competition, is therefore important. If this boundary is not well understood, or the boundary itself is not appropriately drawn, the competition rules could act as a barrier to the very innovation and collaboration which the OfS and the government are relying upon to alleviate some of the pressures facing the sector. Indeed, in an interview last week, vice chancellor of Cardiff University Wendy Larner commented that competition law was preventing the kind of collaboration on course provision that she felt was necessary.

    Competition regulation from OFT to CMA

    More recent regulatory scrutiny of the sector has focused on consumer law aspects. Nonetheless, the Competition and Markets Authority (CMA) and its predecessor, the Office of Fair Trading (OFT), have reviewed mergers between higher education institutions – for example, the University of Manchester / Victoria Manchester / University of Manchester Institute of Science and Technology merger in 2005. And in 2014, the OFT conducted a call for evidence in order to gain a better understanding of how choice and competition were working in the higher education sector in England in response to policy developments that sought to foster the development of a competitive market.

    The OFT’s report, following the call for evidence, noted that the most “serious and prevalent” concerns raised by stakeholders related to the extent to which fears of breaching competition law might hinder beneficial cooperation between institutions. However, the report also noted that despite “many generic references” by stakeholders to the potential (perceived) tensions between collaboration and competition, “there were no substantive examples that would justify, because of their relevance and/or novel nature, the production of specific OFT guidance beyond that already available.”

    That said, the report also noted that there was scope for the (then incoming) CMA to highlight that:

    • cooperation which delivers countervailing consumer benefits (ie benefits to students) may not pose a problem – examples given included benchmarking data; academic partnerships; sharing facilities; joint procurement activities.
    • where cooperation between higher education institutions can promote efficiencies, collaboration should be allowed to take place.

    The OFT’s report was published a decade ago at a time when the sector was arguably in a different place. The types of collaborative activities identified by the OFT in its report as being beneficial and delivering benefits to students were very much the more traditional forms of cooperation and certainly some way removed from the radical collaboration concepts being discussed at present.

    It also appears to be the case that a lack of concrete examples demonstrating where the competition rules had, in practice, posed a barrier to beneficial collaboration influenced the OFT’s thinking. It is perhaps for this reason that the OFT’s findings were limited to acknowledging that cooperation which results in efficiencies should be allowed to take place and reminding institutions of the possibility of relying on an individual exemption from the competition rules.

    An individual exemption involves the institution(s) in question conducting a self-assessment of whether the proposed agreement restricting competition will benefit consumers to an extent that outweighs the harm to competition. In practical terms the notion of relying on a self-assessed individual exemption may not be attractive to many institutions. Four cumulative criteria must be met for the exemption to apply and, if the agreement is challenged, the party relying on the exemption bears the burden of proof for substantiating, with specific evidence, that the exemption criteria are met.

    Undertaking the self-assessment process in advance of entering into any agreement around radical collaboration would be a significant, evidence driven compliance exercise involving financial and economic modelling. However, even if institutions (and their advisors) were to conclude that it is likely that the exemption criteria are met, there would always be the risk that the CMA or a court might take a different view of the evidence and would disagree. Institutions may not be prepared to proceed with a high-stakes radical collaboration against this backdrop of uncertainty.

    Moreover, the criteria for individual exemption include the requirement that an agreement must improve production or distribution, or promote technical or economic progress, “while allowing consumers a fair share of the resulting benefit.” Consumers in this scenario means students. In other words, to rely on the exemption, any benefits accruing to the participating institutions from the collaboration must be passed on to a sufficient extent to the students. It would have to be demonstrated, with evidence, that the collaboration would result in lower prices, or better choice and quality, for students. It would not be enough for participating institutions to demonstrate that benefits merely accrue to them.

    It is also worth remembering that the CMA may offer non-binding views on the application of the competition rules to “novel” questions. The CMA has in fact expressed that it is open to hearing from the sector, perhaps in response to the vice-chancellor of Cardiff University’s critical comments.

    While seeking a non-binding view on a proposed form of radical collaboration may sound appealing, it is open to debate whether some of the collaboration proposals which have been mooted are genuinely “novel” in competition terms. For example, an agreement between competing institutions about who will offer certain courses would almost certainly be characterised as market sharing, a serious breach of the competition rules.

    What will it take to get things moving

    There’s an argument to be made about whether a wider national agenda from government on driving forward radical collaboration in higher education is needed, which takes into account the competition law issues. Similar questions to those facing higher education were recently debated in the competition law community in the context of how the competition rules apply to sustainability agreements – agreements between industry participants which are aimed at preventing, reducing or mitigating the adverse impact that economic activities have on the environment, or assist with the transition towards environmental sustainability. Specifically, a number of organisations had voiced concerns that the fear of inadvertently breaching the competition rules was preventing beneficial sector and industry collaborations aimed at delivering sustainability goals.

    In response, a number of competition authorities – including the CMA – proactively published guidance to help organisations apply the competition rules to sustainability agreements and collaborations. The CMA published its Green Agreements Guidance in October 2023 containing a clear statement of intent, along with practical and user-friendly guidance, that competition law should not impede legitimate collaboration between businesses that is necessary for the promotion or protection of environmental sustainability.

    The guidance also sets out welcome details of an open-door policy, by which businesses considering entering into an environmental sustainability agreement can approach the CMA for informal guidance on their proposed agreement if there is uncertainty on the application of the guidance. This policy also provides some reassurance that the CMA would not expect to take enforcement action against environmental sustainability agreements that correspond clearly to the principles set out in the guidance.

    To date the CMA has published two opinions under its open-door policy. These in turn form the beginnings of a body of decisional practice which will help inform organisations, as well as advisors, on the CMA’s approach to collaboration in this area, aiding self-assessment and informed decision-making.

    Given the extensive challenges facing the higher education sector, and the passage of time since the OFT’s call for information in 2014, this might be an opportune moment for the CMA to consider the specific issues facing the sector and to engage with the sector more extensively on how the competition rules apply in the sector.

    Taking steps to support a viable, flourishing higher education sector which, among other public goods, boosts economic growth, would undoubtedly be aligned with the government’s growth mission and, in turn, aligned with a key pillar of the CMA’s strategy of driving productive and sustainable growth. To the extent that the competition rules are perceived by institutions as presenting a barrier to collaboration that would deliver benefits to students, and where there are examples which show this, there may now be a case for specific higher education focused guidance, similar to the approach taken to the Green Agreements Guidance. Clear guidance, including worked examples on how the individual exemption should be applied and understood in the context of the higher education sector, could be a positive and welcome step forward.

    In a recent speech interim Executive Director for Competition Enforcement at the CMA Juliet Enser noted the work of the CMA in ensuring that its enforcement activities do not have a chilling effect on pro-competitive collaborations between competitors, referring to the sustainability guidance and the CMA’s work on competitor collaborations in the pharmaceutical sector. Enser said “where we are convinced on the evidence that there is a real risk, that absent our providing appropriate comfort, the economy will lose out on beneficial collaboration then we are prepared to act.”

    This is a positive statement from the CMA, signalling a proactive willingness to engage. In turn, the higher education sector could seize upon this invitation and commence a dialogue with the CMA, providing examples and evidence of where clarity on the application of the competition rules to the sector is needed, so that stakeholders can work towards pro-competitive collaborations which may ultimately benefit students, the higher education sector and the economy at large.

    This article is published in association with Mills & Reeve. Join us on Tuesday 4 March 12.00-1.00pm for Connect more, a free online event exploring the potential for more system-wide collaboration in higher education in England. Find out more and register here.

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  • New legislation in Scotland increases the SFC’s powers, but only up to a point

    New legislation in Scotland increases the SFC’s powers, but only up to a point

    Post-school reform in Scotland continues to chug along, following last month’s announcement of the preferred future shape of the funding body landscape.

    Today sees the legislation that will enact the changes introduced in Holyrood: the Tertiary Education and Training (Funding and Governance) (Scotland) Bill.

    We’ve been over how responsibilities for further education student support and apprenticeships and skills funding will shift around, and the bill also contains expected changes to the governance arrangements of the Scottish Funding Council (SFC), as well as some technical changes relating to fees and private provision.

    But what’s emerged as perhaps the more pressing question for the higher education sector is how the legislation will change SFC responsibilities and powers, as these apply to its work with universities. The legislation sets out the route the Scottish government will take here, and it’s a fairly balanced one – we are still a long way from an England-style “boots on the ground” regulatory environment, likely to the relief of many.

    Tell us about your finances

    Much of what the bill will do legislatively is through modifications to the Further and Higher Education (Scotland) Act 2005. Section 22(4) of this gives the SFC various powers to “pull” information from universities – or strictly, from their governing bodies – but only where the funder knows that the information exists, or may exist.

    The new legislation aims to create a landscape in which post-16 education bodies must “proactively notify SFC of certain developments of which the SFC might otherwise be unaware” in what the bill’s policy memorandum characterises as a “push” of information – a responsibility to notify the funding council of things it would not have known otherwise. Those who are more used to other UK systems will probably be thinking of “reportable events”.

    It’s suggested that notifications would likely be sought in the following kinds of situation:

    • Where a university is planning voluntary or compulsory severance (so no daily refreshing of the QMUL UCU cuts tracker for the SFC)
    • Where a university has reached a certain threshold in a rapidly worsening financial viability situation
    • A major data breach, such as resulting from a cyberattack.

    But exactly how this will work is not specified on the face of the legislation – it would be determined by ministers via the laying of regulations, with consultation and an affirmative procedure in the Scottish Parliament, “given that they could potentially place significant obligations on post-16 education bodies.” But this does mean that there is a lack of clarity on exactly what the bill is going to mandate.

    Part of the rationale for beefing up the legislation from what was previously anticipated (and let’s be honest, what was in the consultation) seems to be that ministers have not received enough clarity about the financial challenges being faced by certain universities and colleges. When the policy memorandum notes that “there can be challenges for SFC in getting information from post-16 education bodies about their financial sustainability,” you feel that really the issue is about ministerial oversight and the sense of having active levers to pull. This is given an explicit tweak elsewhere in the bill (again, quoting the policy memorandum):

    New section 15A(2) allows the Scottish Ministers to seek information and advice from the SFC relating to post-16 education bodies, this could be an individual body or the bodies as a whole. Section 15A(3) requires the SFC to respond to any such request from the Scottish Ministers and the SFC may also offer information proactively when it considers it appropriate to do so. This is necessary because unforeseen circumstances may arise of which the Scottish Ministers might otherwise be unaware (and so would not know to enquire).

    So what are you going to do about it?

    Also in the 2005 Act is provision for the SFC to “secure the promotion or carrying out of studies designed to improve economy, efficiency and effectiveness in the management or operations of any fundable body” – but no such power exists where the matters are not related to financial support.

    The new legislation would amend this, with the intention of making the SFC able to “address a broader range of matters to assist with performance improvement.” So in scope for an efficiency study would now be the needs and interests of learners:

    The policy intention is that the SFC could, particularly where notified of certain adverse circumstances (such as course closures), instigate studies or reviews of the impact on students and learners so that assistance could be provided to ensure they are not negatively impacted. For example, if a college was heading towards needing to close courses before students could complete them, the SFC could help to make arrangements for the students to continue their education at different colleges.

    Bringing the student interest in scope sounds sensible in theory, but there remains the question of what changes on the ground, beyond the production of a study. The 2005 Act allows the SFC to attend and speak to an institution’s governing body – the new section 15(4) of this bill will extend this to the issuing of a set of written recommendations.

    So the SFC will be able to recommend setting specific improvement targets, or requiring the development of an improvement plan. And it will now even be able to publish these, “where there is wider interest amongst institutions, or the public, in the recommendations and they are not sensitive.” But it won’t be obliged to.

    And what if its recommendations are ignored?

    As with the SFC’s right to address meetings, already provided for in section 16 of the 2005 Act, there is no corresponding duty on the fundable body to do anything in response to the recommendations. However, as a matter of good governance and practice, the Scottish Government would expect the fundable body to consider them appropriately.

    But beyond these recommendations, in the legislation as it stands there would be proper statutory powers for the SFC to influence educational institutions’ behaviour, through the issuing of guidance, which currently is “purely administrative” (though presumably always very welcome). The Tertiary Education and Training Bill will change this, so that institutions must have regard to the guidance, in the carrying out of their funded activities (note that “have regard to” is quite woolly language – something that the Office for Students has exploited frequently within the way HERA was drafted). But the SFC will have to consult both ministers and institutions in issuing guidance.

    It could have been otherwise

    Various alternative approaches were considered and rejected. The use of codes of conduct (“for example to address concerns around breaches of fair work conditions”) was felt to potentially lead to complex interactions with other requirements, and diminish autonomy. Plus there would have been a need for “appropriate enforcement mechanisms,” which is a whole other question.

    More powers of audit and investigation were also considered and not taken forward, which would have been a move towards a “more interventionist SFC.” Likewise for stronger enforcement and intervention action, including serving enforcement notices or the removing, suspending, or appointing of officers or governing body members.

    But this would have been “a fundamental change to SFC’s role which requires more careful consideration” – and would have gone way beyond what was originally consulted on.

    There’s still a long way to go here – Universities Scotland is already noting the “new, very broadly defined provisions regarding the monitoring of the financial sustainability of institutions,” and raising concerns that too much change in the relationship between the SFC and universities (or universities and the Scottish government) could jeopardise the classification of universities in the Office for National Statistics classification.

    The Scottish government seems to be aware of this particular risk – but there are certainly MSPs keen for the SFC to become more “interventionist”, and the legislation now faces a complicated passage through a Parliament in which the SNP does not hold a majority. The ministerial statement to Holyrood launching the bill saw Ross Greer of the Scottish Greens concerned about whether the SFC would have the ability to intervene in matters relating to fair work – higher education minister Graeme Dey said he would be happy to discuss the issue further.

    For now the legislation aims at a delicate balancing act between juicing up the SFC’s role and preserving universities’ autonomy. The next question is whether this persists in the face of deeper scrutiny and parliamentary compromises.

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  • When OfS reopens its register, there will be implications for everyone else

    When OfS reopens its register, there will be implications for everyone else

    The process may be paused right now, but if you are thinking of registering with the Office for Students (by choice, or following the requirement for larger franchise providers to get on board) the game is changing.

    The Office for Students has issued a consultation on two new initial conditions of registration.

    Interested parties have until 23 April to offer feedback, with the overwhelming majority of conditions due to come into force from August – at the point where OfS is planning to resume registration activity following the current pause.

    This will have a particular impact on providers who are currently planning (or preparing to restart) submissions quashed when the pause started. Expectations and requirements will change – and while OfS hopes to primarily assess documents a provider will already have, these things do tend to be tailored to fit requirements.

    C5: Treating students fairly

    New condition C5 replaces C1 (consumer law) and C3 (protection plans) as initial conditions – an assessment will be based on identifying behaviours that constitute unfair treatment of students (there is a list) from documents providers already have.

    There are implications from that one that reach far beyond new applications to the register – Jim Dickinson has covered those in detail elsewhere on the site.

    E7: Effective governance

    This new initial condition replaces the current E1 (on public interest governance) and E2 (on management and governance), though those two remain as ongoing conditions. OfS offers a rationale:

    We are increasingly finding that newly established providers (with less experience of delivering higher education) are less sure about what is required in terms of the self-assessment we ask for at registration. This leads to inefficiencies in the assessment.

    Providers have been engaged in substantial back-and-forth conversations with OfS about what is expected during registration. The regulator has noted that people are describing existing documents where it would be quicker to submit them, and has spotted that what is submitted can often be poorly written and excessively tailored to paint a rosy (and hopefully successful) picture.

    Some applicants have been borrowing and adapting plans and documentation from other providers that are inapplicable (a small, single subject, provider using processes developed for a traditional, multi-faculty, university) – in part because of perceived expectations that newly established providers need to have the same range of processes and policies.

    So the self-assessment aspect will go – the plan is that providers should submit actual governance documents, a five year action plan, and other bits on the knowledge and experience of those involved.

    One surprising shift is that there will no longer be an explicit test of “public interest governance” (the Nolan principles and suchlike) in the registration process. OfS reckon that the strengths of the rest of these new requirements, plus the continued inclusion in ongoing condition E1, makes up for this.

    Ditto the absence of the (largely toothless) student protection plan – the line being that this should be visible to students via the documentation provided, which is a win for all those applicants who read governance documentation before they decide where to apply. See Jim’s piece for more detail.

    Documentation

    So what would you now need to submit:

    • The governing body’s terms of reference (or similar), which would cover purpose, membership, appointment procedures, responsibilities, decision-making procedures, meeting frequency and the arrangements for reviewing effectiveness
    • Establishing documents – like a Royal Charter or articles of association
    • A scheme of delegation (or anything else useful) about who makes decisions and how
    • Documentation pertaining to risk and audit – the operations of the committee responsible is given as one example
    • A policy on conflict of interest

    These are, to be clear, governance documents, not detailed operational arrangements – although of course such policies would need to be operationalised for ongoing conditions E1 and E2.

    In assessing these documents, OfS intends to look at the “appropriateness of arrangements”, bearing in mind a provider’s size, complexity, context, and business plan.

    Oh yeah, you need a five year business plan too. The regulator hasn’t been impressed with what has been seen so far.

    Some providers applying for registration have not been able to demonstrate that they have sufficient understanding of how the higher education sector operates. This can result in a provider making unrealistic assumptions in its planning, such as overestimating its ability to recruit students in a competitive market, which can pose risks to the ongoing viability of the provider and cause associated harm to students.

    Part of being sufficiently equipped to deliver higher education is preparing to meet the relevant regulatory requirements. We have encountered issues where newly registered providers were not sufficiently aware of the regulatory framework and so did not have robust plans in place to meet ongoing requirements

    And there’s a telling indication that problems multiply pretty quickly when the plans get hit with a dose of operational reality.

    Where a provider does not have robust plans in place, it may encounter financial challenges after registration. Providers have at times taken steps to address this without fully considering the risk of doing so, for example:

    a. Rapidly entering into new partnership arrangements because of the unexpected withdrawal of a current partner without having the governance and management processes needed to manage this change properly.

    b. Employing financially incentivised external recruitment agents to meet recruitment targets that are too ambitious.

    c. Taking out additional unplanned borrowing to fund unanticipated expenditure.

    All of these behaviours can result in negative consequences for students and taxpayers

    Being objective

    Who could possibly have foreseen, eh? Going forward OfS would like business plans to be comprehensive and clearly written – and demonstrate an understanding of the sector, of managing risks, and of the conditions of registration.

    It’s all standard stuff (objectives and targets and how to achieve them, risks and how to manage them, regulatory compliance) over a challengingly long five-year period. OfS’ assessment will not be based on the targets themselves, but whether the provider can deliver these in practice given their resources and prevailing sector conditions. As an overriding primary consideration the plans need to focus on the interests of students.

    There’s no expectation that there will be an assessment of the objectives in and of themselves (or whether they are a proper thing for the provider to pursue), and OfS would not endorse these objectives – it’s more a matter of understanding a provider’s chosen approach in looking at the plans it has to deliver. A neat distinction.

    People who need people

    So who will be delivering these plans? The new condition would set out key knowledge and expertise for the chair of the governing body, accountable officer, and where applicable, the person with overarching responsibility for financial management and an independent member of the governing body. There’s a sensible sounding list on pages 30-33, but the big shocker is that these would be assessed via an interview with OfS officers!

    Yes, you read that right: 30 to 60 minutes based on key questions allowing said knowledge and experience to be demonstrated. On one level it feels sensible to talk to the people involved as a way of establishing the credibility of plans, but the feeling that OfS is appointing (or approving the appointment of) your chief financial officer is a hard one to shake.

    In contrast the “fit and proper persons” test is pretty much as expected, with additional requirements to supply new information (if you are disqualified as a director or trustee, or declared bankrupt) during the course of the application process. This is a welcome admission that these processes can take a long time to work through.

    You’ve probably spotted that OfS and government are now very focused on fraud in the sector – and assessment of arrangements to prevent fraud will focus on an institution’s track record where it has already been delivering higher education as part of a franchise or partnership arrangement.

    Other requirements for registration applications

    Got all that? Well strap in, there’s more.

    There’s the new C5, the new E7, and OfS intends to beef up their financial information requirements from August 2025 too.

    Financial viability and sustainability is currently assessed via initial condition D – providers already submit full, audited, financial statements for up to three years alongside four years of forecasts and a commentary on these. OfS has noted that new registrants tend to defer their first year of recruitment (setting up a HE provider is hard!) and substantially under recruit when they do – with current financial and recruitment pressures this isn’t going to improve any time soon.

    The new requirement is an addition to the template, which allows a provider to model financial viability against different yet plausible scenarios: zero growth over four years and 40 per cent below forecast followed by three years of zero growth for those currently delivering HE – zero growth followed by 80 per cent below forecast for the next three years for those entirely new to the sector.

    These aren’t set in stone – OfS reserves the right to tweak them based on emerging sector issues. And we may also get an alternative for providers whether the business model is not predominantly balanced on higher education provision.

    The commentary to this new table would let the provider set out mitigations, or provide evidence that these scenarios are unrealistic. But even so, there is a risk here that condition D becomes the hard one to pass – OfS reckon this is fair enough given short– and medium– term challenges to the sector. Although one cannot help but think of the many existing registered providers that would not pass these tests.

    By OfS request

    There’s another welcome recognition that applying for registration takes ages in the requirement for a provider to submit updated finances, student numbers, and commentary in the late stages of application by OfS request. While this makes sense in that the regulator isn’t relying on year-old (and the rest…) numbers this is a hard sell for those prospective registrants now expecting to submit similar data twice – although it could be argued that this gets them used to regular submissions while registered.

    Likewise, if the financial year turns over during the registration process you’ll need to put an extra batch of audited financial statements in for that year.

    And, wonderfully, OfS wants an ownership and corporate structure diagram too – it’s been finding some structures “complex”, poor thing.

    If your provider is or has been under investigation by another regulator – or awarding organisation, professional body, funding body, statutory body, and so forth – you’d better believe that OfS wants to know about that up front too. Apparently it keeps finding out about such things midway through the assessment process – and it does tend to be relevant, even if it is not an automatic fail.

    The rules are for the 60 months proceeding application, any investigation that closed or opened during the application period is something OfS wants to know about: a brief description, the responsible body, the dates, and the findings and/or outcomes.

    And if you are looking forward to the exciting world of “reportable events”, something similar now applies during registration. If stuff happens (there’s a long and familiar list on page 42) then you’d best drop OfS a note within 28 days.

    Finally, from January 2026 you won’t be able to reapply within 18 months of an unsuccessful registration application. This “double jeopardy” rule is a new one, and it looks like it is aimed at ensuring that OfS capacity is not clogged with resubmissions of poor quality applications where identified weaknesses are not addressed. We learn that 40 per cent of applications don’t comply with the existing guidance.

    There is the possibility of individual exemptions from this rule, for example where there have been IIT problems or where information that was not available for reasons outside of the provider’s control is now available.

    How this will be done

    The changes to application requirements were done via the same “manner of application” loophole – section 3(5) of HERA – that was used to pause the registration process. It is, as we said at the time, a reach in terms of legislative interpretation but it is difficult to argue against many of the principles here.

    It is regrettable that the same group of providers that have been forced to delay or resubmit applications due to the pause will now have to do considerable extra work to get these into the new format.

    While the principle of assessing existing documents rather than new ones is a good one, the reality of this is not as neat as regulators sometimes think. For an expected influx of new registrations – the franchise thing, and whatever ends up happening with the lifelong learning entitlement is expected to flush out at least a few – it makes sense to have all this in order. But there are always winners and losers with these things, and the losers have lost several times in a row here.

    The only other disappointment is probably that these new approaches will apply only to new registrations – there’s clearly a lot of benefit to similar approaches (especially for C5 and the financial requirements) to be extended to existing registered providers, and it is likely that there is more to come on that front.

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  • DfE steps in to require franchise partners to register with OfS

    DfE steps in to require franchise partners to register with OfS

    The Department for Education is consulting on a requirement for providers delivering courses under a franchise model to register with the Office for Students in order that they and their students can access student finance. We also get an impact assessment and an equalities assessment.

    The consultation defines “franchise” as follows:

    A ‘franchised student’ is one who is registered with a lead provider, but where more than 50% of their provision is taught by a delivery partner

    The proposals suggest that should a provider delivering teaching as part of a franchise arrangement (a delivery partner) have over 300 (headcount) higher education students in a given year it would need to be fully registered with the Office for Students under the existing Approved or Approved (Fee Cap) rules. A failure to register would mean that the institution could not access fee loans, and that students could not access maintenance loans.

    There would be some exceptions: providers already regulated elsewhere (schools, FE colleges, NHS trusts, local authorities, and Police and Crime Commissioners) would be exempt. Providers (not courses) would be designated (by DfE) as being eligible to access student finance, meaning that providers running courses regulated by a Professional Statutory Regulatory Body (PSRB) would not be exempt.

    The consultation (which closes 4 April 2025) will inform regulation from April 2026 onwards, with the first decisions about designation made in September 2027 (based on 2026-27 student data) for the 2028-29 academic year. Once up and running this pattern will continue: providers will be designated (based on student numbers from the previous academic year) for the academic year starting the year after. This gives newly designated providers a year to register with OfS.

    Student numbers would not be allowed to breach the 300 threshold without registration – the expectation is that providers should register the year before this happens. Should the threshold be breached, the provider will lose a year of eligibility for student finance for new students: the upshot being that if an unregistered provider had 300 or more students in 2026-27 and then registered with OfS, it would lose a year of designation (so would not be able to access student finance in 2029-30).

    In November of each year, DfE intends to publish a list of designated providers for the following academic year – providing a point of reference for applicants looking to access finance. Interestingly, despite the requirement being to register with OfS it is intended that DfE runs the process: making decisions about eligibility, managing appeals, and communicating decisions.

    The background

    We’ve been covering some of the issues presented by a subset of franchise providers on Wonkhe for quite a while, and it is now generally accepted that higher education in the UK has a problem with the quality and ethics at the bottom end of such provision. Students either enrol purely to access student finance, or are duped (often by higher education agents rather than providers themselves) into accessing fee and maintenance loans for substandard provision. Continuation and completion rates are very low compared to traditional providers, and the qualification awarded at the end (despite bearing the name of a well-known university) may not open the career doors that students may hope.

    We knew that an announcement on this issue was supposed to be coming in January via the government’s response to the former Public Accounts Committee’s report on franchising, which was sparked by a National Audit Office (NAO) report on the issue from a year ago – so the announcement today has just squeaked in under the Treasury’s wire.

    There is a slightly longer backstory to all of this – and we’re not referring to the various bits of coverage on potential abuses in the system that we’ve run in recent years. It was back in 2023 when the Department for Education’s heavily belated response to the Augar review reached a conclusion – promising to “drive up” the of franchised provision, in part by promising to:

    …closely consider whether we should take action to impose additional controls, in particular regarding the delivery of franchised provision by organisations that are not directly regulated by any regulatory body.

    Given the NAO and the PAC’s interventions since, and the work of the OfS in addressing franchise (and other academic partnership failings) via the coming round of quality (B3) investigations, special investigations, and enhanced data gathering, it is perhaps a little surprising that it is DfE that is in the lead here.

    There’s an important lesson in that to be drawn at some stage – the repeated pattern seems to be that an issue is raised, the sector is asked to self-regulate, it seemingly can’t, the regulator is asked to step in instead, and then it is discovered that what we actually need is secondary legislation.

    How big a deal is franchising

    Despite a number of years trying, OfS has never managed to compile full data on the extent of franchised, validated, and other partnership provision – the details are not in any current public dataset. It’s important here to distinguish between:

    • Franchised provision: where a student is registered at one institution, but teaching is delivered at another
    • Validated provision: where a student is both registered and taught at one institution, but receives an award validated by another institution on successful completion of their course
    • Other academic partnerships: which include arrangements where students are taught by more than one institution, or where existing providers partner to allow students to apply to a “new” provider (like a medical or veterinary science school)

    Of the three, it is just franchised provision that is in the scope of this new DfE requirement. It’s also (helpful) the most easily visible of the three if you are a fan of mucking about with Unistats data (though note that not all courses are in the unistats release, and the other vagaries of our least-known public data release continue to apply).

    DfE has done a bang-up job in pulling together some statistics on the scale of franchise provision within the impact assessment. We learn that (as of 2022–23 – usual student numbers caveats for that year of data apply):

    • There were currently 96 lead providers, franchising to 341 partners, of which 237 were unregistered.
    • 135,850 students were studying via a franchise arrangement – some 80,045 were studying at unregistered providers (a proportional fall, but a numerical rise, over previous years)
    • These students tended to study business and management courses – and were more likely to be mature students, from deprived areas, and to have non-traditional (or no) entry qualifications.
    • An astonishing 92 per cent of classroom based foundation years delivered as an intercalated part of a first degree were delivered via franchise arrangements.
    • There were 39 franchise providers teaching 300 students or more – of which four would be subject to the DfE’s proposed exemptions because of their legal status. These providers accounted for 66,540 students in 2022–23.

    A note on OfS registration

    Office for Students registration is confusing at the best of times. Though the registration route is currently paused until August 2025, providers have the choice of registering under one of two categories:

    • Approved (fee cap) providers are eligible to access fee loan finance up to the higher limit if they have an approved access and participation plan, receive direct funding from OfS, and access Research England funding.
    • Approved providers can access fee loan finance up to the “basic” fee limit. They are not eligible for OfS or Research England funding – but can directly charge students fees that exceed the “basic” fee limit.

    In the very early stages of developing the OfS regulatory framework it was briefly suggested that OfS would also offer a “Basic” level of registration, which would confer no benefits and would merely indicate that a provider was known to the OfS. This was speedily abandoned, with the rationale being that it would suggest OfS was vouching in some way for provision it did not regulate.

    The long and painful gestation of the Lifelong Learning Entitlement (LLE) also yielded suggestions of a third category of registration, which would apply to providers that currently offer provision backed by the Advanced Learner Loans (ALLs) that would be replaced by the LLE. We were expecting the Office for Students to consult on this new category, but nothing has yet appeared – and it does feel unlikely that anyone (other than possibly Jo Johnson) would be keen on a riskier registration category for less known providers that offers less regulatory oversight.

    Statutory nuts and bolts

    The proposal is to lay secondary legislation to amend the Education (Student Support) Regulations 2011 – specifically the bit that is used to designate types of courses for student finance eligibility. There is currently a specific section in this SI – section 5 part 1 subsection d, to be precise – that permits registered providers to franchise the delivery of courses to partners.

    The plan appears to be to amend this section to include the stipulation that were more than 300 higher education students (in total, excluding apprenticeships) are taught at a given franchise provider (I assume in total, across all franchise arrangements) then it must be registered with the Office for Students in order to be designated for student finance (allowing students to receive maintenance loans or providers to receive fee loan income).

    This might seem like a small technical change but the implications are surprisingly far reaching – for the first time, the OfS (as regulator and owner of the register) has the ability to decide who can and cannot deliver UK higher education. If anyone – even a well established university – is removed from the OfS register it will be unable to access fee loans (and students will be unable to access maintenance loans) for intakes above 300 students, even if it enters into a partnership with another provider.

    Let’s say, for example, that a large university becomes financially unsustainable and thus breaches the conditions of registration D1 or D2. Under such circumstances it could no longer be registered with OfS and thus would no longer be able to award degrees. The hope would be that student interests would be protected with the support of another university, and one way that this could happen is that someone else validates the awards offered to students so they can be taught out (assuming temporary financial support is forthcoming from government or elsewhere). Under the new rules, this arrangement would only work for 300 students.

    What might go wrong

    OfS has classically regulated based on the registered student population – the implication being that providers involved in franchise provision would be responsible for the quality and standards of teaching their students experience wherever they were taught. There have been indications via the B3 and TEF dashboards that students studying at franchise partners tend to have a worse experience overall.

    This does pose the question as to whether franchise partners who registered with OfS would now be responsible for these students directly, or whether there will be some sense of joint responsibility.

    There’s also the question of how providers will respond. Those franchised-to providers who either worry about their own outcomes (no longer judged within a larger university’s provision) wouldn’t cut it might stay that way – an outcomes based system that is always playing catch up on experience could see some poor provision linger around for many years. On the other hand, if they are now to be subject directly to conditions like those concerning transparency, finances and governance, they might as well switch to validation rather than franchising, which will change the relationship with the main provider.

    We might in aggregate see that as a positive – but that then raises the question as to whether OfS itself will be any better at spotting issues than universities have previously been. They could, of course, not fancy the scrutiny at all, and disappear with a rapidity that few student protection plans are designed to withstand.

    It’s also worth asking not just about OfS’ capacity or regulatory design, but its powers. Many of the issues we’ve identified (and that have been called out by the NAO and the PAC) concern how the courses are sold – OfS’ record on consumer rights is at best weak, and completely untested when the profit incentives are so high.

    And even if the sunlight of better outcomes data puts pressure on over outcomes, we do have to worry about how some of the providers in this space get there. In at least one of the providers that we have seen an OfS report for, a call centre team in another country that is supposed to offer support to students sounds more like a debt collection agency, chasing students up to submit, with academic staff paid partly on outcomes performance. Remember, providers that do this are already registered with OfS – so clearly the registration process itself is not enough to weed out such practices.

    The impact assessment is very clear that it expects some (an oddly precise four in the first year and two in subsequent years) unregistered franchise partners to drop out of HE provision altogether rather than applying for registration. The unspoken codicil to this is that everyone hopes that this will be the poor quality or otherwise suspect ones – but many excellent independent providers (including a number of Independent HE members) have struggled to get through a lengthy and often bureaucratic process, even before registration was temporarily closed because OfS decided it didn’t have capacity to run it this year.

    The line between supporting students and spoon feeding them is often debated in HE, but we might worry that a decent dose of it in a way that few would think appropriate could enable providers to evade regulation for some time – especially if validation (and therefore less risk to the validator) becomes the norm.

    And naturally, this is an approach that ignores two other things: whether a demand-led system at the edges should respond to the sort of demand that seems to come from those profiting from selling more than it does from students themselves, and whether it’s right. Even if you accept some for-profit activity, for anyone to be arranging for predominantly low-income and disadvantaged students to be getting into full tuition fees debt when sometimes more than half is kept in profits, and what is spent seems to include high “acquisition” costs and quite low delivery and support costs.

    In other words, one of the tests should be “does any of this change the incentives,” and it’s not at all clear that it does.

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  • Institutions may be holding themselves back by not sharing enough data

    Institutions may be holding themselves back by not sharing enough data

    Wonkhe readers need little persuasion that information flows are vital to the higher education sector. But without properly considering those flows and how to minimise the risk of something going wrong, institutions can find themselves at risk of substantial fines, claims and reputational damage. These risks need organisational focus from the top down as well as regular review.

    Information flows in higher education occur not only in teaching and research but in every other area of activity such as accommodation arrangements, student support, alumni relations, fundraising, staff and student complaints and disciplinary matters. Sometimes these flows are within organisations, sometimes they involve sharing data externally.

    Universities hold both highly sensitive research information and personal data. Examples of the latter include information about individuals’ physical and mental health, family circumstances, care background, religion, financial information and a huge range of other personal information.

    The public narrative on risks around data tend to focus on examples of inadvertently sharing protected information – such as in the recent case of the Information Commissioner’s decision to fine the Police Service of Northern Ireland £750,000 in relation to the inadvertent disclosure of personal information over 9,000 officers and staff in response to a freedom of information request. The same breach has also resulted in individuals bringing legal claims against the PSNI, with media reports suggesting a potential bill for those at up to £240m.

    There is also the issue of higher education institutions being a target for cyber attack by criminal and state actors. Loss of data through such attacks again has the potential to result in fines and other regulatory action as well as claims by those affected.

    Oversharing and undersharing

    But inadvertent sharing of information and cyberattacks are not the only areas of risk. In some circumstances a failure to ensure that information is properly collected and shared lawfully may also be a risk. And ensuring effective and appropriate flows of information to the governing body is key to it being able to fulfil its oversight function.

    One aspect of the tragic circumstances mentioned in the High Court appeal ruling in the case concerning Natasha Abrahart is the finding that there had been a failure to pass on information about a suicide attempt to key members of staff, which might have enabled action to be taken to remove pressure on Natasha.

    Another area of focus concerns sharing of information related to complaints of sexual harassment and misconduct and subsequent investigations. OfS Condition E6 and its accompanying guidance which comes fully into effect on 1 August 2025 includes measures on matters such as reporting potential complaints and the sensitive handling and fair use of information. The condition and guidance require the provider to set out comprehensively and in an easy to understand manner how it ensures that those “directly affected” by decisions are directly informed about those decisions and the reasons for them.

    There are also potential information flows concerning measures intended to protect students from any actual or potential abuse of power or conflict of interest in respect of what the condition refers to as “intimate personal relationships” between “relevant staff members” and students.

    All of these data flows are highly sensitive and institutions will need to ensure that appropriate thought is given to policies, procedures and systems security as well as identifying the legal basis for collecting, holding and sharing information, taking appropriate account of individual rights.

    A blanket approach will not serve

    Whilst there are some important broad principles in data protection law that should be applied when determining the legal basis for processing personal data, in sensitive cases like allegations of sexual harassment the question of exactly what information can be shared with another person involved in the process often needs to be considered against the particular circumstances.

    Broadly speaking in most cases where sexual harassment or mental health support is concerned, the legislation will require at minimum both a lawful basis and a condition for processing “special category” and/or data that includes potential allegations of a criminal act. Criminal offences and allegations data and special category data (which includes data relating to an individual’s health, sex life and sexual orientation) are subject to heightened controls under the legislation.

    Without getting into the fine detail it can often be necessary to consider individuals’ rights and interests in light of the specific circumstances. This is brought into sharp focus when considering matters such as:

    • Sharing information with an emergency contact in scenarios that might fall short of a clear “life or death” situation.
    • Considering what information to provide to a student who has made a complaint about sexual harassment by another student or staff member in relation to the outcome of their complaint and of any sanction imposed.

    It’s also important not to forget other legal frameworks that may be relevant to data flows. This includes express or implied duties of confidentiality that can arise where sensitive information is concerned. Careful thought needs to be given to make clear in relevant policies and documents when it is envisaged that information might need to be shared, and provided the law permits it.

    A range of other legal frameworks can also be relevant, such as consumer law, equality law and freedom of information obligations. And of course, aside from the legal issues, there will be potential reputational and institutional risks if something does go wrong. It’s important that senior management and governing bodies have sufficient oversight and involvement to encourage a culture of organisational awareness and compliance across the range of information governance issues that can arise.

    Managing the flow of information

    Institutions ought to have processes to keep their data governance under review, including measures that map out the flows and uses of data in accordance with relevant legal frameworks. The responsibility for oversight of data governance lies not only with any Data Protection Officer, but also with senior management and governors who can play a key part in ensuring a good data governance culture within institutions.

    Compliance mechanisms also need regular review and refresh including matters such as how privacy information is provided to individuals in a clear and timely way. Data governance needs to be embedded throughout the lifecycle of each item of data. And where new activities, policies or technologies are being considered, data governance needs to be a central part of project plans at the earliest stages to ensure that appropriate due diligence and other compliance requirements are in place, such as data processing agreements or data protection impact assessments are undertaken.

    Effective management of the flow ensures that the right data gets in front of the right people, at the right time – and means everyone can be confident the right balance has been struck between maintaining privacy and sharing vital information.

    This article is published in association with Mills & Reeve.

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  • An early look at 2023–24 financial returns shows providers working hard to balance the books

    An early look at 2023–24 financial returns shows providers working hard to balance the books

    In most larger UK providers of higher education, the 2023–24 financial year ended on 31 July 2024.

    Five months and two weeks after this date (so, on or before 14 January 2025) providers are obliged to have published (and communicated to regulators) audited financial statements for that year.

    I’ve got a list of 160 large, well known, providers of higher education who should, by now, have made this disclosure – 43 of them are yet to do so. Of the 117 that have, just 15 (under 13 per cent) posted a deficit for that financial year (to be fair, this includes eight providers in Wales, where the deadline – for bilingual accounts – is the end of the month). This was as of the data of publication, there’s been a few more been discovered since then and I have added some to the charts below.

    If you’ve been aware of individual providers, mission groups, representative bodies, trade unions, regulators, and politicians coming together to make the case that the sector is severely underfunded this may surprise you. If you work in an institution that is curtailing courses, making staff redundant, and undergoing the latest in a long series of cost-cutting exercises, the knowledge that your university has posted a surplus may make you angry.

    But these results are not surprising, and a surplus should not make you angry (there are plenty of other reasons to be angry…) Understanding what an annual account is for, what a surplus is, why a university will pull out all of the stops to post a surplus, and what are the more alarming underpinning signals that we should be aware of will help you understand why we have what – on the face of it – feels like a counter-intuitive position in university finances.

    Why are so many results missing?

    There’s a range of reasons why a provider may submit accounts late – those who are yet to publish will already be deep in conversation with regulators about the issues that may have caused what is, technically, a breach of a regulatory condition. In England, this is registration condition E3. which is underpinned by the accounts direction.

    If you are expecting regulators to get busy issuing fines or sanctions for late submissions – you should pause. There’s a huge problem with public sector audit capacity in the UK – the big players have discrete teams that move on an annual cycle between higher education, NHS, and local government audit. You don’t need to have read too much into public finances to know that our councils are under serious pressure right now – and this pressure results in audit delays, hitting the same teams who will be acting as external university auditors.

    That’s one key source of delay. The other would be the complexities within university annual accounts, and university finances more generally, that offer any number of reasons why the audit signoff might happen later than hoped.

    To be clear, very few of these reasons are going to be cheerful ones. If a provider has yet to publish its accounts because they have not signed off their accounts, it is likely to be engaging with external auditors about the conditions under which they will sign off accounts.

    To give one example of what might happen – a university has an outstanding loan with a covenant attached to it based on financial performance (say, a certain level of growth each year). In 2023–24, it did not reach this target, so needs to renegotiate the covenant, which may make repayments harder (or spread out over a longer period). The auditor will need to wait until this is settled before it signs off the accounts – technically if you are in breach of covenant the whole debt is repayable immediately, something which would make you fail your going concern test.

    We’ve covered covenants on the site before – a lender of whatever sort will offer finance at an attractive rate provided certain conditions are met. These can include things like use of investment (did you actually build the new business school you borrowed money to build?), growth (in terms of finances or student numbers), ESG (are you doing good things as regards environment, society, and governance?) and good standing (are you in trouble with the regulator?) – but at a fundamental level will require a sense that your business is financially viable. If covenant conditions are breached lenders will be keen to help if they hear in advance, but your cost of borrowing (the interest rate charged, bluntly) will rise. And you will find it harder to raise finance in future.

    This is an environment where it is already hard to raise finance – and in establishing new borrowing, or new revolving credit (kind of like an overdraft facility) many universities will end up paying more than in previous years. This all needs to be shown in the accounts.

    Going concern

    When your auditor signs off your accounts, you would very much hope that it will agree that they represent a “going concern” – simply put, that in most plausible scenarios you will have enough money to cover your costs during the next 12 months. If your auditor disagrees that you are a going concern you are in serious trouble – all of the 117 sets of accounts I have read so far have been agreed on a going concern basis.

    This designation tells everyone from regulators to lenders to other stakeholders that your business is viable for the next year – and comes into force on the day your accounts are signed off by the university and external auditor. This is nearly always for a specific technical reason – additional information that is needed in order to make the determination. For some late publications, it is possible that the delay is a deliberate plan to make the designation last as far into the following financial years as possible. This year (2024–25) is even more bleak than last year – anything that keeps finance cheaper (or available!) for longer will be helpful.

    Breaking even and beyond

    So your provider had a surplus last year – that’s good right? It means it took in more money than it spent? Up to a point.

    In 2023–24 we got the very welcome news that Universities Superannuation Scheme (USS) has been revalued and contributions reduced for both members and employers. From the annual accounts perspective, this will have lowered staff costs (very often one of the most significant costs, if not the most significant cost, for most) in USS institutions. Conversely, the increase in Teachers Pension Scheme (TPS) contributions will have substantially raised costs in institutions required by law (yes, really!) to offer that scheme to staff.

    That’s some of the movement in staff costs. However, for USS, the value of future contributions to the current calculated scheme debt (which is shared among all active employers in the scheme) has also fallen. Indeed, as the scheme is currently in surplus, it shows as income rather than expenditure This is not money that the university actually has available to spend, but the drop shows out in staff costs – though most affected separate this out into a separate line it also shows up in the overall surplus or deficit (to be clear this is the accounting rules, there’s no subterfuge here: if you are interested in why I can only point you to BUFDG’s magisterial “Accounting for Pensions” guidelines).

    For this reason, many USS providers show a much healthier balance than accurately reflects a surplus they can actually spend or invest. This gives them the appearance of having performed as a group much better than TPS institutions, where the increase in contributions has made it more expensive to employ staff.

    Here I show the level of reported surplus(deficit) after tax, both with and without the USS valuation effect. Removing the impact of valuation puts 35 providers (including big names like Hull, Birmingham, and York) in deficit based on financial statements published so far.

    [Full screen]

    And here I show underlying changes in staff costs (without the USS valuation effect). This is the raw spend on employing staff, including pay and pensions contributions. A drop could indicate that economies have been sought – employing fewer staff, employing different (cheaper) staff, or changes in terms and conditions. But it also indicates underlying changes in TPS contributions (up) or USS contributions (down) with respect to current employees on those schemes.

    [Full screen]

    Charts updated 11am 27 January to remove a handful of discrepancies.

    Fee income

    For most universities the main outgoing is staff costs, and the main source of income is tuition fees. Much has been made of the dwindling spending power of home undergraduate fees because of a failure to uprate with inflation, but this line in the accounts also includes unregulated fees – most notably international fees and postgraduate fees. The full name of the line in the accounts is “tuition fees and educational contracts”, so if your provider does a lot of bespoke work for employers this will also show up here.

    Both of these areas of provision have seen significant expansion in many providers over recent years – and the signs are that 2023–24 was another data point aligned with this trend for postgraduate provision. For this reason, the total amount of fee income has risen in a lot of cases, and when we get provider level UCAS data shortly it will make it clear that just how much of this is due to unregulated fees. International fees are another matter, and again we need the UCAS end of cycle data to unpick it, but it appears from visa applications and acceptances that from some countries (China, for example) demand has remained stable, while for others (Nigeria, India) demand has fallen.

    Here I show fee income for the past two years, and the difference. This is total fee income, and does not discriminate between types of fees.

    [Full screen]

    One very important thing to bear in mind is that these are figures for the financial year, and represent fees relating to that year rather than the total amount of fees per student enrolled. For example, if a student started in January (an increasingly common start point for some courses at some institutions) you will only see the proportion of fees that had been paid by 31 July shown in the accounts. If you teach a lot of nursing students who start at non-traditional times of the year this will have a notable impact, as will a failure to recruit as many international students as you had hoped to do in January 2024 (though this will also show up in next year’s accounts).

    And it is also worth bearing in mind that income from fees paid with respect to students registered at the provider but studying somewhere else via an academic partnership, or involved in a franchise arrangement (something that has seen a lot of growth in some providers) shows up in this budget line.

    Other movements

    Quite a number of providers have drawn down investments or made use of unrestricted reserves. This is very much as you would expect, these are very much “rainy day” provisions and even if it is not actually raining now the storm clouds are gathering. Using money like this is a big step though – you can only spend it once, and the decision to spend it needs to link to plans not to need to spend it in the near future. So even if your balance looks healthy, a shift like this speaks eloquently of the kinds of cost-saving measures (up to and including course closures and staff redundancy) that you may currently see happening around you.

    Similarly, a provider may choose to sell assets – usually buildings – that it does not have an immediate or future use for. The costs of running and maintaining a building can quickly add up – a decision to sell releases the capital and can also cut running costs. Other providers choose to hang on to buildings (perhaps as assets that can be sold in future) but drastically cut maintenance and running costs for this reason. Again, you can (of course) only sell a building once, and a longer term maintenance pause can make it very expensive to put your estates back into use. I should note that the overall condition of university estates is not great and is declining (as you can read in the AUDE Estates Management Report) , precisely because providers have already started doing stuff like this. If the heating seems to be struggling, if the window doesn’t open, that’s why.

    In some cases we have seen decisions to pause capital programmes – not borrowing money and not building buildings as was previously planned. Here, the university makes an on-paper saving equivalent to the cost of finance if it was going to borrow money, or frees up reserves for other uses if it was using its own funds. Capital programmes don’t just include buildings – perhaps investment in software (the kind of big enterprise systems that make it possible to run your university) has been paused, and you are left struggling with outdated or unsuitable finance, admissions, or student record systems.

    Where we are talking about pausing building programmes it is important to remember that these exist to facilitate expansion or strategic plans for growth. The “shiny new building” is often perceived as a vice chancellor’s vanity project – in reality that new business school and the recruitment it makes possible may represent the university’s best hope of growing home fee income faster than inflation.

    What’s next?

    We see financial information substantially after the financial year ends – and for most larger providers this comes alongside the submission of an annual financial return to their regulator. We know for instance that the Office for Students is now looking at ways of getting in year data in areas where it has significant concerns, but financial data (by dint of it being checked carefully and audited) is generally historic in nature.

    For this reason what is happening on your campus right now is something that only your finance department has any hope of understanding, and there may be unexpected pressures currently driving strategy that are not shown (or even hinted at) in last years’ accounts. Your colleagues in finance and planning teams are working hard to forecast the end of year result, to calculate the KFIs (Key Financial Indicators) that others rely on, and to plan for the issues that could arise in the 2025 audit. The finance business partners or faculty accountants – or whatever name they have where you work – will be gathering information, exploring and explaining scenarios, and anticipating pressures that may require a change in financial strategy.

    The data I have presented here is drawn from published accounts – the data submitted to regulators that eventually ends up on HESA may be modified and resubmitted as understanding and situations change – for this reason come the early summer figures might look very different than what are presented here (I should also add I have transcribed these by hand – for which service you should absolutely buy me a pint) – so although I have done my best I may have made transcription errors which I will gladly and speedily correct.

    However scary your university accounts may be, I would caution that the next set (2024–25 financial year) will be even more scary. The point at which the home undergraduate fee increase in England kicks in for those eligible to charge it (2025–26) feels a long way off, and we have the rise in National Insurance Contributions (due April 2025) to contend with before then.

    There are a small but significant number of large providers looking at an unplanned deficit for 2024–25, as you might expect they will already be in contact with their regulator and their bank. Stay safe out there.

    If you are interested in institutional finances, I must insist that you read the superb BUFDG publication “Understanding University Finance” – it is both the most readable and the most comprehensive explanation of annual university accounts you will find.

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  • Ventriloquising the student interest | Wonkhe

    Ventriloquising the student interest | Wonkhe

    Following the devastating review offered by the 2023 report of the Industry and Regulators Committee of the House of Lords, the Office for Students’ (OfS) proposed strategy makes a great play of being centred around “the student interest”.

    But while it recognises that students have diverse and changeable views about their interests, it is still significant that it characterises these as “the student interest” rather than “students’ interests”.

    The reason for doing this is that it makes it much more rhetorically powerful to claim you are doing something in relation to an interest that is definitive, rather than interests which are multivarious and shifting.

    And be clear, the OfS proposed strategy shows a huge appetite to intervene in higher education in the name of “the student interest”.

    Much talk, no sources

    In the draft, OfS boasts that it has done a great deal of work to renew its understanding of the student interest – polling students, holding focus groups, hosting engagement sessions and talking to their own student panel.

    But two things are particularly noticeable about this work. First, whilst a lot of other sources are referenced in their strategy consultation, this is one area where no evidence is provided.

    This means the OfS interpretation of the outcomes of this consultation cannot be interrogated in any way. Clearly OfS knows best how to interpret this interest and isn’t interested in collective conversations to explore its ambiguities and complexities.

    Second, none of this work involves open ended engagement with students and their representative organisations (who appear to have been excluded completely, or at least their involvement is not detailed). They are all forms of consultation in which OfS would have framed the terms and agenda of the discussions (non-decision-making power, as Steven Lukes would have it). It’s consultation – but within tightly defined limits of what can legitimately be said.

    This seems to explain the remarkable number of priorities in the strategy (freedom of speech, mental health, sexual harassment) that are said to be in the student interest but previously appeared in ministerial letters outlining the strategic priorities of the OfS.

    Get a job

    Perhaps most concerning is that the government/treasury logic that the only real reason for going to university is to get a well-paid job is now central to the student interest. Sometimes this is done more subtly by positioning it in the (never-)popular student language of “a return on investment”:

    …in return for their investment of time, money and hard work they [students] expect that education to continue to provide value into the longer-term, including in ways that they may not be able to anticipate while they study (p.12).

    At other times, we are left in no doubt that the primary function of higher education is to serve the economy:

    Our proposals…will support a higher education system equipped to cultivate the skills the country needs and increase employer confidence in the value of English higher education qualifications. High quality higher education will be accessible to more people, and students from all backgrounds will be better able to engage with and benefit from high quality higher education, supporting a more equal society which makes better use of untapped talent and latent potential. The supply of skilled graduates will support local and national economies alike, while the ‘public goods’ associated with high quality higher education will accrue to a wide range of individuals and communities. Public goods include economic growth, a more equal society and greater knowledge understanding (OfS 2024 p.30-31).

    So what we are left with is a proposed strategy that makes powerful claims to be grounded in the student interest – but which could have easily formed part of the last government’s response to the Augar review.

    Whose priorities?

    Through its consultation on its proposed strategy, OfS has presented the priorities of the previous government as if they are drawn straight from its engagement with students.

    We don’t yet know the higher education priorities of the current government, but given the proposed strategy was published under their watch it looks like we are moving in a depressingly familiar direction.

    It is worth reflecting on the profound injustice of this. Students are expected to pay back the cost of their higher education and now have the previous government’s priorities presented as their interest so that OfS can intervene in higher education.

    Yes, you have to pay – but the government and its friendly neighbourhood regulator are here to tell you why you want to pay! It seems that despite the excoriating criticism of the House of Lords Committee, OfS have not really learned how to engage with students or to reflect and reconcile their interests.

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  • A new funding body landscape emerges in Scotland

    A new funding body landscape emerges in Scotland

    Last June the Scottish government set out two proposals for changing up the funding bodies in post-compulsory education, following James Withers’ damning indictment of a “lack of cohesive approach, common purpose, or strategic narrative” in how Scotland’s skills system was organised.

    There were two options on the table, and the less drastic reshuffle has prevailed following consultation: the Scottish Funding Council (SFC) will take on all the funding responsibilities from Skills Development Scotland (SDS), which currently handles apprenticeships and training. And the Student Awards Agency Scotland (SAAS) will take further education student support off SFC’s hands, rather than being dissolved as per the other consultation option.

    We’ll be left with one funder – SFC – and one student support distributor – SAAS. SDS will still exist, retaining its careers information and guidance roles. It all sounds fairly coherent, when put like that, though open to criticism that it is simply a rejiggling of the funding system component parts (Annex B to the business case presents an exhaustive list of all the possible permutations of changes to the landscape, which some poor civil servant had to go through). Certainly from what we’ve seen, many consultation responses stressed that when it came to funding, the burning question is “how much” rather than “who”.

    Whether student support responsibilities stayed with SAAS or became a department of SFC was probably at the end of the day a somewhat moot point, and the Scottish government doesn’t bother to give any particular justification for the decision, besides it being slightly preferred by consultation respondees (44 per cent to 35 per cent). It would likely have been a whole heap of organisational work for little strategic reward.

    But let’s not underestimate the overall change that’s going to take place. We’ve now got post-school funding responsibilities all in one place within the SFC, including apprenticeships and other training – a landscape-wide role for new chief executive Francesca Osowska (who starts this week) to get thinking about. It’s a similar tertiary lens to Medr in Wales, and the kind of thing that some commentators on the English system would bite your hand off for. That said, there’s no indication that the Scottish government will think about giving the SFC freer rein to assign funding across the skills system as it sees fit – we’ll still be puzzling over itemised budgets each December covering exactly how much will be spent where, for the foreseeable future.

    Legislation to enact the changes will now arrive “in the coming weeks”, with a view to it all being in place by autumn 2026. This may prove ambitious given that there are elections in Holyrood in the interim.

    Anyone for new powers?

    The consultation also asked for feedback on changes to SFC governance (all largely welcomed by respondents), as well as on “enhanced functions” for the funding council. This wasn’t a set of proposals, but more along the lines of a call for ideas, on issues like the information that those funded need to return to SFC, or the strengthening of data collection processes (respondents unsurprisingly were pro-strengthening rather than anti-strengthening).

    But it’s worth thinking about what’s changed since the consultation was launched. The financial situation at various Scottish universities has worsened significantly (meanwhile in England the sector has been hammering its regulator for not having collected more timely financial data). Higher education minister Graeme Dey has explicitly linked possible new powers with the SFC – for oversight and intervention – to its ability to respond to university financial crises.

    So in the consultation responses we see “calls for up to date information on the financial sustainability of institutions and skills providers, and the financial health of the skills sector as a whole” – moves here would seem to chime with ministerial thinking. On the question of new powers of intervention, there’s likely to be much more pushback:

    A number of fundable education bodies, individuals and others […] did not see any need for additional powers for SFC. These respondents suggested that SFC had all of the powers required for their current role, and that proposed reforms should be implemented before reviewing the need for new powers. This was also linked to a view that implementation of reforms should initially focus on policy and support.

    Today’s announcement on the preferred rearrangement of funding bodies is not accompanied by any indication of where government policy is going on powers and duties for the SFC – this will come with the legislation, and then almost certainly be the subject of parliamentary horse-trading during the bill’s passage through Holyrood.

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