- Martin Williams is Chair of the University of Cumbria and a former higher education policy official in the Department for Education.
It was interesting to read Jo Johnson’s 28 January HEPI blog about the OfS’s suspension of new applications to the Register and for Degree Awarding Powers (The Office for Students needs to walk and chew gum, by Jo Johnson). The OfS, apparently, is ‘failing to support the innovation vital to our success as a knowledge economy’. It is ‘abandoning its statutory duties to support innovation and choice’. By telling the world it is ‘snowed under with handling institutional failure’, it is sending bad messages to international students. I doubt that the recent OfS announcement of proposed new conditions for applications will have defused these criticisms.
As one of the main architects of the legislation that created OfS, Jo is certainly well-placed to assess how well it is delivering his vision of the future (and he is duly appreciative that OfS appears to be sticking with his particular love, the Teaching Excellence Framework.) He still believes in his policies. All credit to him.
Others, however, may ask whether that is because those policies have demonstrably worked for the public good, or because Jo does not want to question them.
Harsh though it is to place Jo Johnson alongside die-hard Brexiteers, there is something of the same conviction that the vision was glorious, but it was never properly implemented and has been sabotaged by the unbelievers. If the vision had been fully realised, English Higher Education should now be going through a period of unprecedented innovation, backed by massive entrepreneurial private investment, creating the best time ever to be a student and the best ever generation of students. If it isn’t, then those reliable whipping boys, Bureaucracy and Regulation, can be sent to the pillory. It cannot be that the vision was naïve, or even plain wrong in parts.
Perhaps we are indeed on the way to that golden age. After all, there are now more than 400 higher education providers on the OfS Register, which is a lot more than were there in the old HEFCE days. This means more institutions are competing for students, and students have more institutions to choose between. Jo quotes the innovative examples of the Dyson Institute of Engineering and Technology, the New Model Institute for Technology and Engineering, the London Interdisciplinary School and The Engineering & Design Institute: London as the tip of the innovation iceberg. They are the first fruits of the harvest that should now be blossoming even more bountifully, but for OfS’s narrow-mindedness.
And perhaps we aren’t. Mike Ratcliffe, whose MoreMeansBetter blogs shine a valuable light on the parts of the English higher education sector that most people haven’t heard of, commented under Jo’s article that ‘his list doesn’t include the providers who have recruited large cohorts… The four great providers, with their distinctive offerings, need to be put alongside a raft of business management, performing arts and theology providers. He instances the Applied Business Academy, currently being wound up. This institution, which went from 420 students in 2020/21 to 2,360 in 2022/23, has, on Mike’s estimates, in the most recent year, ‘had twice as many students as the four providers have had in their entire existence combined’.
The Applied Business Academy is just as much the result of Jo Johnson’s vision as the Dyson Institute.
Which takes us back to the vision itself.
It was rooted in the post-2012 settlement and the new possibilities it opened up. It was a bold and imaginative experiment, and I would certainly not want to assert it has failed. I don’t have definitive evidence either way. But an experiment it was, and it should be recognised as such. It now deserves to be evaluated, seriously and dispassionately, with no preconceptions. A new government, due to publish its own vision for higher education later this year, has the chance to commission such an evaluation.
How we got here
We got here because of the raising of the fee cap in 2012. This made it possible, for the first time, for serious profits to be made from providing higher education in England, with these profits underwritten by the public purse.
Both before and after 2012, the State has been the largest financial contributor to English higher education institutions – either directly, through grants, or indirectly via the student loan guarantee. However, before 2012 the State’s contribution to teaching was split fairly evenly between grants and loans. The maximum loan was around £3,500; the residual costs of providing a course were met by grants, paid by the Funding Council, HEFCE, according to the perceived costs of teaching different subjects (just over £6,000 per student was considered the minimum cost for a “classroom-based” subject like Law).
To control grant expenditure, there were also broad “targets” for each institution for the number of students they would take each year. This limited an individual institution’s room to grow. It also limited the number of new institutions that would be accommodated in the whole HE system.
The settlement reached after the 2010 Election very deliberately and fundamentally changed this system, as Nick Hillman has recently described:
- Raising the tuition fee loan cap to £9,000 sent it well above the ‘break-even point’ for most HE courses (whereas the previous £3,500 fee loan was well below it).
- Removing limits on funded student numbers meant that the State undertook to pay the fees for any student accepted by an eligible institution. Hence, it allowed the rapid expansion of institutions that could recruit students, including completely new institutions entering the market for the first time.
That – entirely intentionally – included for-profit institutions.
Where We Now Are
The regulatory environment that has been created incentivises institutions to recruit as many students as they can, while delivering courses as cheaply as they can. That applies to all providers, but is especially helpful to new for-profit providers, entering the market unencumbered by arrangements made under the previous system.
Some would simply call this efficiency. They would have a fair point. All institutions have to cover their costs and make sufficient surpluses to finance their futures. But there are some differences.
To illustrate, my own institution (University of Cumbria) is required by its governing documents to operate as a charity for the benefit of education in Cumbria. That is why we were created. When surpluses are made (and we are making surpluses!), they go towards that goal. Neither I, nor any of my Board, nor any external investor, benefits financially. We are an institution that is devoted, however imperfectly, to the public good.
In a for-profit institution, naturally, the picture is different. Very sensibly, they will locate themselves wherever they think offers the best prospects (usually big cities). If they are not prospering there, they will leave without a backward glance. If they are prospering, the profits may well leave too; they are not in business to invest in places. And a look through Mike Ratcliffe’s blogs gives a sense of some of the profits that are being made; in some cases, more than 25%, and tens of millions of pounds. The beneficiaries are the investors and the owners, wherever they may be, and the funds have come from the British taxpayer.
I am not trying to imply that there is anything wrong or unethical going on here. Any institution is entitled to operate within the regulatory system as it exists, and this is what these institutions have done. Of course they should be trying to minimise costs; they are for-profit institutions.
But I am saying that it is reasonable for the government, on behalf of the taxpayer and the citizen, to ask itself whether this demonstrates a higher education regulatory regime that is operating in the public interest.
That is a genuinely open question. I don’t have the information to do a cost-benefit analysis. Some of this boils down to gut reactions anyway. Offering good quality educational opportunities is a public benefit, whoever does it. If an agile, low-cost, slimmed-down provider can attract lots of students onto Business Studies courses in Birmingham or Manchester, and some of those students therefore don’t go to universities like mine, so what? Students are presumably exercising choice, and that is a good thing. Making money from providing a service is not against the public interest.
On the other hand, the current regulatory regime actively incentivises institutions like the Applied Business Academy to enter the market. It is an unusual market, because there is no need to compete on price; the taxpayer obligingly provides students with the money to pay an institution’s fees. This underpins the profits that can be made and pocketed by private investors anywhere in the world. Some people would feel this wasn’t the right use of taxpayer money. And if – it is a genuine if – the presence of a lot of ABAs were sucking some students away from the ‘public interest’ providers, and thereby destabilising them financially, the State, and the taxpayer, may find themselves with a further set of headaches. The fate of the University of Remoteshire, the largest employer in its area and the recipient of considerable public funding over the decades, is a matter of legitimate public concern.
What should happen now?
The new government should be asking itself, and OfS, about the system it has inherited. It should not automatically trash the work of its predecessors, but should also apply some common-sense scepticism to claims from those who have an obvious vested interest in preserving the status quo (which means the system created after 2012). It should seek an honest assessment of the costs and benefits in the round, recognising that there are both. And ultimately, it should decide for itself whether the new marks that are becoming visible on the face of English higher education are predominantly charming freckles, that add to the attractiveness of the whole, or something less benign.