Eighth Report - Financial sustainability of the higher education sector in England

Select Committee

Public Accounts Committee HC 257 15 June 2022

Report Status Government responded

Conclusions & Recommendations 26 items (9 recs)

Source View on Parliament website

Government Response (AI assessment · 24 of 26 classified)

Accepted 9

Not Addressed 6

Recommendations

9 results

2 Not Addressed

Despite a background of deteriorating financial health of an increasing number of providers, the Department...

Recommendation

Despite a background of deteriorating financial health of an increasing number of providers, the Department is not effectively holding the OfS to account. The Department is responsible for the overall regulatory framework of the sector and for holding the OfS … Read more

Government Response Summary

The response does not address the recommendation of establishing robust performance measures and targets, and instead discusses internal performance measures and consultations with the sector.

HM Treasury

3 Accepted

Protections for students, in the event of providers facing financial distress, are not strong enough.

Recommendation

Protections for students, in the event of providers facing financial distress, are not strong enough. The OfS requires providers to have a student protection plan in place to address the risk of continuity of study for its students, but it … Read more

Government Response Summary

The government agrees that the OfS should prioritize ensuring that all providers’ published student protection plans are fit for purpose and sufficiently clear, highlighting the OfS's risk-based approach, the introduction of Registration condition C4, and intentions to begin discussions with the sector to update and revise requirements, with a target implementation date of March 2023.

HM Treasury

4 Acknowledged

We are concerned that the financial sustainability of some providers is being put at risk...

Recommendation

We are concerned that the financial sustainability of some providers is being put at risk by their heavy dependence on their ability to continue growing overseas student numbers. Many providers are already highly dependent on cross-subsidy to make up deficits … Read more

Government Response Summary

The government agrees with the Committee’s recommendation and states the financial sustainability of the higher education sector depends on the continuing contribution made by income from overseas students.

HM Treasury

5 Accepted

Student satisfaction with the value for money of their courses is at a worryingly low...

Recommendation

Student satisfaction with the value for money of their courses is at a worryingly low level. One of the OfS’s four regulatory objectives is that students receive value for money. OfS says that students should receive the academic experience they … Read more

Government Response Summary

The OfS is introducing an enhanced quality regulatory regime including student outcome thresholds and new registration conditions covering students’ academic experience; it is also considering how it measures value for money and is reviewing blended learning.

HM Treasury

6 Acknowledged

The Department failed to adequately assess the current and future financial impacts on providers of...

Recommendation

The Department failed to adequately assess the current and future financial impacts on providers of disruption to A-level assessments. The use of locally assessed grades in place of A-level exams during the COVID-19 pandemic led to substantial grade inflation in … Read more

Government Response Summary

The government agrees with the Committee’s recommendation and has undertaken careful monitoring of applications and providers’ offer- making in the 2022 admissions cycle.

HM Treasury

8 Accepted

We asked the OfS whether satisfaction rates among students had changed as a result of...

Recommendation

We asked the OfS whether satisfaction rates among students had changed as a result of the pandemic, and what the impact of hybrid learning had been on students. The OfS told us that, following the widespread use of online provision … Read more

Government Response Summary

The government agrees to improve the quality of higher education provision and ensure students are satisfied with value for money, with the OfS introducing an enhanced quality regulatory regime and reviewing blended learning, with a target implementation date of Autumn 2022.

HM Treasury

11 Accepted

The National Audit Office reported that the OfS does not yet have a complete and...

Recommendation

The National Audit Office reported that the OfS does not yet have a complete and transparent set of performance measures to demonstrate its own performance as a regulator.21 Of the 26 performance indicators the OfS sets out on its website, … Read more

Government Response Summary

The government agrees to work with the OfS to establish a complete set of robust, published performance measures and targets, including structured feedback from providers, to hold the OfS to account for its effectiveness, with a target implementation date of September 2022.

HM Treasury

12 Accepted

The OfS assured us that it consulted widely on changes to its regulatory framework and...

Recommendation

The OfS assured us that it consulted widely on changes to its regulatory framework and holds meetings and workshops with stakeholder groups. However, there is no routine way in which it captures structured stakeholder feedback through which it can gather … Read more

Government Response Summary

The OfS is in the process of concluding the review of its key performance measures, with a view to these being published by September 2022 and the Department for Education is working with the OfS to agree an aligned suite of internal performance measures which will help the department to hold the OfS to account better.

HM Treasury

13 Accepted

Publicly funded teaching and research make a loss across the sector once the full economic...

Recommendation

Publicly funded teaching and research make a loss across the sector once the full economic costs of those activities are taken into account. Providers’ financial viability depends on subsidising these activities from the surplus generated by non-publicly funded teaching – … Read more

Government Response Summary

The government agrees to set out the risks to achieving continued forecast growth in overseas student numbers and explain how it is mitigating those risks, noting the importance of the International Education Strategy (IES) and diversification of international student recruitment.

HM Treasury

Conclusions (17) Observations and findings — click to expand

1 Conclusion Acknowledged

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Education (the Department) and the Office for Students (the OfS) on the financial sustainability of the higher education sector in England.1

Government Response Summary

The government acknowledges the report and states that the response is the government’s response to the Committee’s report.

7 Conclusion

The OfS carries out the annual National Student Survey to collect students’ views on, for example, the quality of teaching and learning they are getting. The 2021 survey ran from January to April and was open only to final-year undergraduates.13 The OfS commissions a separate survey each year, seeking students’ …

9 Conclusion

To create and maintain its regulatory independence, and seeking to minimise regulatory burden, the OfS does not maintain close ongoing contact with individual providers it considers at low risk. The OfS explained that it collected “a basic core from every registered university and college” but beyond this it considered its …

10 Conclusion Acknowledged

In addition to setting higher education policy, the Department is responsible for the overall regulatory framework for the sector.19 It holds the OfS to account through quarterly performance reviews with the OfS’s leaders and has regular discussions about the performance indicators which the OfS uses to measures its own performance.20

Government Response Summary

The government agrees with the Committee’s recommendation, with the OfS concluding the review of its key performance measures, with a view to these being published by September 2022.

14 Conclusion Acknowledged

The medium- and long-term financial sustainability of some providers is heavily dependent on continued growth in student numbers, particularly overseas students. In 2018, providers forecasted that the number of non-EU students would grow by 29% between the 2019/20 and 2024/25 academic years, compared with a 17% increase in UK student …

Government Response Summary

The government agrees with the Committee’s recommendation and states the financial sustainability of the higher education sector depends on the continuing contribution made by income from overseas students.

15 Conclusion Not Addressed

We received written evidence from the Universities and Colleges Admissions Service (UCAS), which told us that it also projected growth in recruitment of both domestic 18-year-olds and international students between now and 2026. UCAS projected that the 2026 admissions cycle would have one million applicants compared with just over 700,000 …

Government Response Summary

This response is a duplicate of the response to ID 15155 and does not address the specific observation about UCAS projections for growth in student recruitment and the need for providers to remain financially viable if projections don't materialize.

16 Conclusion Not Addressed

In 2019–20, more than 340,000 overseas students came from 204 countries worldwide (excluding the EU and UK): 35% of those came from China and 14% from India.30 We received written evidence from Universities UK that this income stream may be subject to pressure from wider concerns, with overreliance on certain …

Government Response Summary

This response is a duplicate of the response to ID 15155 and does not address the specific point about diversification of international student recruitment and over-reliance on certain countries.

17 Conclusion Not Addressed

The Department described the responsibility for maximising international student participation as being a shared one between government as a whole and individual institutions. We expressed concern about potential tensions between the aims of the Department, along with the Department for Business, Energy and Industrial Strategy, to see more students coming …

Government Response Summary

This response is a duplicate of the response to ID 15155 and does not address the specific concern about tensions between the aims of different departments regarding international students and migration control.

18 Conclusion Acknowledged

During the COVID-19 pandemic, the government moved to a system of locally- assessed grades in place of the usual A-level examinations. This led to significant grade inflation in 2020 and 2021 and meant that many more students than expected were able to take up places at their first-choice providers and …

Government Response Summary

The government agrees with the Committee’s recommendation and has undertaken careful monitoring of applications and providers’ offer- making in the 2022 admissions cycle.

19 Conclusion Acknowledged

As most degree courses last three or four years, there is an ongoing negative impact on the income of providers who are unable to recruit enough students to match their forecast numbers.35 Oversubscribed providers can also face adverse financial consequences from exceeding their planned recruitment as domestic students are, overall, …

Government Response Summary

The government agrees with the Committee’s recommendation and has undertaken careful monitoring of applications and providers’ offer- making in the 2022 admissions cycle.

20 Conclusion Acknowledged

The Department told us it had not modelled the impact on providers of grade inflation in 2020 because nobody had anticipated the last-minute decision to use locally assessed grades. For the 2020/21 academic year, it provided an additional £10 million to support oversubscribed providers that were teaching high-cost subjects, and …

Government Response Summary

The government agrees with the Committee’s recommendation and has undertaken careful monitoring of applications and providers’ offer- making in the 2022 admissions cycle.

21 Conclusion Acknowledged

As a condition of registration, the OfS requires each higher education provider to have in place and publish a student protection plan setting out what it would do to safeguard students’ interests—such as by making arrangements for continuity of study— if it, as an institution, were in difficulty.40 The OfS …

Government Response Summary

The OfS introduced a new registration condition in April 2021 to strengthen its ability to ensure the rigour of a provider’s plans to protect students against the risk of the provider ceasing to deliver higher education and intends to begin discussions with the sector to update requirements where appropriate.

22 Conclusion Accepted

The OfS told us that one of the things it became very aware of during the early days of the pandemic was that it did not have the tools needed to intervene quickly if facing a provider failure. It said that, because addressing that issue was urgent, in early 2020 …

Government Response Summary

The government agrees with the Committee’s recommendation and the OfS focus has been ensuring that protections are as robust as possible in those providers which might face financial distress.

23 Conclusion Not Addressed

We asked the OfS how it made sure that providers had the relevant preparations in place to access support in the event that their financial sustainability was under threat, since some risks could materialise quite quickly. It described a process of escalating requirements, starting with discussions with the provider when …

Government Response Summary

This response is a duplicate of the response to ID 15144 and does not address the specific question about how the OfS ensures that providers have the relevant preparations in place to access support if their financial sustainability is threatened.

24 Conclusion Accepted

The results of the National Student Survey show that overall student satisfaction was stable at 82–83% between 2017 and 2020, falling to 75% in 2021.44 The OfS measures students’ perception of value for money in a separate survey, which, unlike the National Student Survey, is not restricted to final-year undergraduates. …

Government Response Summary

The government agrees with the Committee’s recommendation, with the OfS introducing an enhanced quality regulatory regime to tackle the pockets of low-quality provision.

25 Conclusion Not Addressed

The OfS told us that it did not have a definition of value for money because it believed that it could mean different things to different people at different times. In 2018 it had commissioned a consortium of student unions to look at what the definition of value for money …

Government Response Summary

This response is a duplicate of the response to ID 15150 and does not address the specific finding that the OfS lacks a definition of value for money.

26 Conclusion Accepted

The OfS suggested to us that students’ satisfaction with their courses and assessments of value for money were also related to their perceptions of what they were getting for the tuition fee. During the pandemic, there were calls for higher education providers to refund a proportion of tuition fees in …

Government Response Summary

The OfS is introducing an enhanced quality regulatory regime including student outcome thresholds and new registration conditions covering students’ academic experience; it is also considering how it measures value for money and is reviewing blended learning.