Office for Students

Question for Short Debate

15:00:00

Asked by

To ask His Majesty’s Government what discussions they have had with the Office for Students about (1) its strategy for 2025 to 2030, and (2) its decision to pause applications regarding registering institutions, degree-awarding powers and university titles to allow greater focus on the financial sustainability of the sector.

My Lords, I am delighted to open this debate and to give a warm welcome to the Minister opposite, the noble Baroness, Lady Anderson of Stoke-on-Trent. She is the Education Whip in the Lords. I had over two years as a Whip in the other place during which time I had to remain totally silent, which was extremely frustrating. It is yet more evidence of the more liberal and tolerant approach in your Lordships’ House that we will hear directly from the Education Whip. We are all looking forward to that, especially as today is the day when she became engaged, on which many congratulations. I declare my interests as a visiting professor at King’s College London, a member of the council of the University of Southampton, and for helping Norland College to grow in Asia. This debate in many ways picks up from one of the very last debates of the previous Parliament. Indeed, in Grand Committee in this very Room on 21 May 2024, we debated the powerful report by the Industry and Regulators Committee on the Office for Students. In that debate there was a particularly trenchant contribution from my noble friend Lord Johnson of Marylebone. I know that he very much regrets that, because of a commitment to the British Council, he is unable to be with us today. Since then, the Office for Students has produced its new strategy for consultation, with the priorities of quality, the student interest and resilience. Those are absolutely understandable priorities. Then, on 2 December, came its announcement of a pause in some of its key activities, including registering providers and considering new candidates for degree-awarding powers and for university status. Its argument was that focusing on those responsibilities was inconsistent with its priorities, as set out in its strategy. That is a deep misunderstanding of the implications of those priorities; it is also a regrettable failure to discharge one of its statutory obligations. The task of registering higher education providers and considering them for degree-awarding powers and university titles is fundamental. Ironically, that is made clear by a third announcement—today’s announcement by the Government about tackling the understandable problem of franchising not always leading to high-quality provision. I completely support their engagement with that problem, which is a real problem. They say that they are—and this is out for consultation—proposing “a requirement that franchised providers with 300 or more students should be directly regulated by the Office for Students”. That will, of course, require yet more registration activity by the Office for Students, which then says, slightly shamefacedly, that after the pause it expects to start engaging in even more activity, registering those franchised providers. There could be dozens of those—it would be interesting if the Minister could tell us more about them—if not over 100. But my understanding is that, in the last year, it managed to register 12 new providers, so all that is happening is that the backlog of important work is getting worse and worse. Will the Minister assure us that the OfS will return as soon as possible to its key statutory responsibilities in this regard, and explain to the Committee why it can suspend its discharge of a duty set in legislation? I remember debating this issue at considerable length when the original legislation went through in 2016-17. Hardest hit by this pause in the process are providers which had been applying to register for degree-awarding powers. It looks as if the pause may mean that some of them have to go back to the beginning. The evidence that they are submitting will have become out of date. They will have to start all over again. This would be very regrettable. It looks from some of the OfS’s comments as if some of the existing cases under consideration will continue. Will the Minister ask the OfS at least to complete the consideration of applications that have already been submitted to it? The OfS says that it does not have the resource to do this and that it has to focus, therefore, on financial pressures facing universities. This is yet more evidence, of course, of the financial issues that universities face, and I, for one, think there is one obvious solution to this, which is to start once again raising fees, in line with inflation as a minimum, as the previous Labour Government did with surprisingly little fuss. However, there is a connection between financial resilience, the financial difficulties facing the sector and the registration function of the OfS, because some universities and other higher education providers that get into financial difficulties may then look at a rescue package that includes the reallocation of degree-awarding powers, a new partner entering the registry or a new entity being created, perhaps as a result of a merger or something else, which itself requires registration. The degree-awarding powers and university title are assets that a university could deploy if it were trying to avoid the total disaster of running out of money and going bankrupt, so these provisions for permitting new degree-awarding powers registration may be exactly what is needed as part of a financial rescue package for providers in difficulties. Will the Minister assure noble Lords that where a rescue package for a higher education provider in financial difficulties involves some transfer of degree-awarding powers or university title, or some other creation, perhaps of a new body on the register, that she will request the OfS as a matter of urgency to engage in the necessary process to consider that application? Finally, as time is tight, I just want to make one wider point about how the Department for Education and the OfS see higher education. There is a big, wide world of higher education out there, which includes very substantial global chains. I am a believer in the growth of higher education, and it seems to me very likely that part of the growth of higher education is bringing in much more professional management. Access to external finance involves those types of business models in higher education. They have not so far taken off in Britain—from a global perspective, ours looks like a cottage industry—but there are global chains of higher education providers that are very keen to invest here. I hope to see British higher education providers growing to a global role. For example, one of the bids reportedly delayed is an application by the Engineering Institute of Technology from Australia, which is a substantial provider of engineering courses and already has an engineering college of technology here. My understanding is that it was applying for degree-awarding powers, but that application has been paused. OMNES in France is a group of 12 French universities. It wanted nine further international campuses. It has been seeking to register and get degree-awarding powers for more than a year, but that is apparently paused. The IU group in Germany has a range of campuses with 150,000 students currently enrolled. It was trying to set up in Britain. We should be open to this type of high-quality provision. I completely accept that in some of the supply-side reforms that I tried to promote as a Minister, as did subsequently my noble friend Lord Johnson, sometimes the quality was not good enough, and it is right to crack down on that. I very much regret that we did not have a regulatory regime in those early days, but when we have got these big global chains coming in, surely we should welcome them. There are also some British potential candidates; the Oxford International Education Group, for example. I have been reading the Chancellor’s excellent speech, made yesterday, about the Government’s commitment to growth and their commitment that regulators should not stand in the way of growth opportunities. I wonder what would happen if these international higher education providers that want to invest in Britain, want to come and provide higher education in Britain, were to approach the Minister’s colleague, the excellent noble Baroness, Lady Gustafsson, who is the Minister for Investment and is supposed to be attracting international investment. How will the DfE and the OfS explain that, meanwhile, they are busy refusing to consider applications for international investment in a significant British growth sector? I think that we should honour the spirit of the Chancellor’s excellent speech yesterday and not allow the OfS to stand in its way.

15:10:00

My Lords, I thank the noble Lord, Lord Willetts, for his masterly introduction of this important debate. I regret that there are only four of us speaking today, but I also welcome the noble Baroness, Lady Anderson. In the glorious days of the coalition, I was appointed Minister for Olympic Sport and Media and as the Whip for Higher Education; I was never happier than when I had to stand in for the Minister because we had a number of people who transferred through that role. We are all aware that universities are going through a very difficult time financially. Student fees have not kept up with inflation and the previous Government made a number of difficulties for overseas students; this has resulted in a large decline in those very students who make such a significant contribution to finances. Since we were stupid enough to leave the EU, there have been considerable drops in EU students, too. I must say that, in reading this document, the mind boggles at the amount of additional administration that will be required “to gather and analyse data to understand student experiences, enhance and protect students’ rights, and address barriers that prevent students from fully benefiting from their education” —let alone all the financial data that will also be required. Thank goodness I was at university when we just got on with it. I ask the Minister what impact will these demands have, particularly on the further education sector? Colleges have been the main providers of publicly funded higher education at levels 4 and 5 for 90 years. If university staff feel that they are not adequately paid, spare a thought for college lecturers, whose pay compares poorly with that of schoolteachers and university staff. The pause in registering institutions for degree-awarding powers—DAPs—has had a dramatic effect on a number of colleges. Surely the financial sustainability of some providers should not come at the expense of limiting the possibility for others who could meet national and regional skills priorities. Collaboration between HE and FE is essential if we are to have any hope of meeting the Government’s ambitious growth strategy. Of course, HE is a relatively small part of college provision, but the regulatory costs and burdens are disproportionately high and risk limiting student choice and stifling innovation. Many students who study at higher levels in FE would not consider going away to university, yet their skills and aptitude may be just as good or even better than those of university students. Can the Minister say what consideration has been given to FE colleges in the Government’s grand plans? Seeking financial sustainability has led to universities suspending some of their courses. As a modern linguist, I dread reading that yet another university has dropped modern languages. I declare an interest: I was a child in France and a student in Spain, and I lived in Germany with my RAF husband. I have always felt European; Brexit was for me a sort of bereavement. It is now more important than ever that we speak the languages of our near neighbours, but the global markets also call for proficiency in Mandarin, Arabic and Japanese if we wish to trade in countries further afield. As Willy Brandt put it so powerfully: “If I’m selling to you, I speak your language; if I’m buying, dann müssen Sie Deutsch sprechen”. I apologise for flouting the rules of the Committee to say something in a foreign language—just to translate, that means, “You must speak German”. It is imperative that if we are trying to sell British goods and services, we must do so in the language of the buyer. The OfS is rightly concerned that on current trends 72% of providers will shortly be in deficit. Why have Governments not done more to safeguard our higher education providers, be they universities or colleges? Our UK universities regularly top the charts in international measurements. They are national stars, so what has gone wrong? I thank the Library, the Association of Colleges and, at the last minute, the Office for Students, for their helpful briefings, and note the criticism from Mr Alex Proudfoot, who is chief executive of Independent Higher Education, that: “The decision to suspend registration and” degree-awarding powers “processes until late in 2025 is a clear enough dereliction of their statutory duty. But to extend this to providers already in the process, effectively backdating this decision to the spring of 2024, is completely unjustifiable”. He goes on, “what the OfS is actually doing is picking winners and losers: deciding which providers are worth prioritising for financial sustainability, which students are deserving of the protection of the regulator and the funding to support their studies, and which are not”. These are fighting words, and we all know that the losers will be the most disadvantaged. We hear from the Office for Students that students want fair treatment from institutions that will listen to them, respond when things go wrong and set them up to succeed. They assume their education will be high quality, expect tailored learning experiences and access to academic resources and support, delivered in supportive and enriching environments. What students expect from higher education in the longer term is to acquire knowledge and develop skills that open doors to well-paid and rewarding employment and other opportunities. They expect higher education to have a positive and enduring impact on their lives and careers. The Office for Students states that it feels it is important to, “prioritise managing risks for students already in the system, ahead of the benefits that new institutions, or institutions with the ability to award their own qualifications, bring”. It points out that, despite the pause, it has continued with 17 DAP applications, 22 registration applications and six university title applications. So broadly its view of these measures is supportive, but they are, of course, already in the system, and we recognise that it will also need to care for those that follow them. We are all well aware of the parlous situation of many universities and colleges. It is shameful that government has let this happen. Successive Governments have been prepared to ignore further education, partly because virtually all Parliamentarians and civil servants have been university educated. I know I was completely unaware of the richness and value of colleges until I went to work for City & Guilds and discovered people with skills vastly greater than my own. My Oxford degree enriched my love of medieval French, which has not helped me in any way later in life. Finally, will the Minister say why there is no provision for integrating the lifelong learning entitlement funding model and what positive help the Government are prepared to offer to the beleaguered parts of this vital sector? Will they please rein in the OfS from the most damaging parts of this edict?

15:18:00

My Lords, I congratulate my noble friend Lord Willetts on securing this debate. His two brains have been working on overtime. I add my Benches’ congratulations to the Minister on her engagement. It is good to see her so happy. I speak in this debate on the recent report published by the Office for Students that identifies three key priority areas for the next five years: quality assurance, wider student interest and sector resilience. The Office for Students is focusing its efforts on monitoring financial sustainability to help create a secure future for our world-leading universities. This is in response to growing concerns about declining student recruitment, increasing operational costs and wider economic uncertainty. I want to explore the significant changes proposed by the Office for Students in its strategy for 2025-30, particularly its decision to close the register for new higher education providers and pause granting degree-awarding powers until August 2025. While these changes are framed as necessary to strengthen the financial sustainability of higher education, they also raise important questions about their impact on innovation, access and diversity in the sector. The Office for Students has decided to pause new entries in the register of higher education providers and temporarily halt the granting of degree-awarding powers. This decision is in direct response to the severe financial pressures facing many universities, particularly small, medium and specialist providers. New analysis suggests that up to 72% of higher education providers could be in financial deficit by the 2025-26 academic year, prompting the Office for Students to focus its resources on stabilising existing institutions rather than admitting new ones. I confess today that, unlike others in this Committee, I was not educated in a university. Instead, I attended the Salvation Army’s William Booth College, an international college at Denmark Hill. It is a great building, and I congratulate the Salvation Army on not selling it to some big developer to develop “Denmark Hill Village” but investing heavily in the college and its educational achievements. William Booth started the Salvation Army—I have time, I will do it—in 1865 as he was absolutely distraught at the poor educational attainment of the people, particularly in the East End, and their attraction to alcohol. They could not work because they could not keep their feet on the floor all the time. The first thing he did was get them off alcohol, off the grog, as he called it. The second thing was to find them a job. He persuaded somebody to buy a farm near Epping Forest, and people went to live there with their families, they were educated, they worked on the farm, and they got a life together. He even went as far as to buy land in Australia, and people, if they really did well, were able to have that land as a gift and develop their own business. He really was a social entrepreneur very early on in the whole setup. The college educates Salvation Army cadets, as they are called—officers—and it has now been an international college for some time. People come from all over the world to train there, and the impact that the Salvation Army has on people’s lives can never be underestimated. I guess that it also has great plans for the place. If noble Lords want to visit, I am happy to fix that up. It would be a travesty if something such as that that is managed well, has good people and does not have government money were not allowed to start today. Let us bear that in mind. Can the Minister explain how the Office for Students intends to balance the need for financial stability with the need for ongoing innovation in higher education, particularly in industries such as health, engineering and the creative arts, given that smaller specialist providers often cater for niche demands? Does the Office for Students risk limiting innovation and diversity of provision by closing the register to new providers? Will doing so have an impact on the economy growing? Furthermore, we must acknowledge the broader context of this financial instability, which is the growing student recruitment crisis in the face of declining recruitment numbers and rising operational costs. British universities are grappling with the challenge of attracting students. How does the Minister plan to address the issue of declining student recruitment, particularly considering the financial pressures many universities face? While stabilising the sector is necessary, what is being done to ensure that institutions are still able to offer the courses and opportunities that will meet future demand in student and workforce markets and in wider society? In conclusion, while the Office for Students’ strategy is designed to safeguard the financial sustainability of the sector and prevent further closures or disruptions, we must remain vigilant about the potential longer-term consequences. As we move forward, it is crucial that the Office for Students balances its financial oversight with a commitment to innovation, student access and diversity. The sector needs to be able to adapt to changing demands, and a robust plan to tackle the student recruitment crisis must be a central part of that strategy.

15:25:00

My Lords, what a genuinely engaging debate—I am also going for “joyful” today. I thank noble Lords for their congratulations. I am having a very good day, even if my husband-to-be’s credit card is probably not. Moving on to the debate, I begin by thanking the noble Lord, Lord Willetts, for opening the debate and, moreover, for the significant role he has played in shaping our world-class higher education. I never for a moment thought that I would ever be responding to “Two-brains” in an education debate, but I am delighted to do so. I agree with him on the joys of being a Whip at this end of the building. We are allowed to speak; the Chief Whip will decide whether that is for good or ill. The noble Lord’s ongoing contribution to the broader debate about the future of our universities is deeply valued. I also thank the noble Lord, Lord Johnson, for requesting this debate. I know that he, having been instrumental in setting up the Office for Students, continues to have a keen interest in the future of our universities and in securing the future of our higher education system for the benefit of our students, the taxpayer and the economy. Higher education is vital to the future of our country. Our universities are revered globally for excellence and act as one of the country’s greatest enablers of two of this Government’s missions. First, higher education is the engine for growth. It ensures that we have a highly skilled workforce and delivers world-class research that underpins long-term innovation and economic growth. In many communities, it acts as an anchor for local economic development and civic impact. It adds billions of pounds of value to our economy each year, supports hundreds of thousands of jobs and generates over three-quarters of all our education exports. Higher education also provides opportunity. It enriches the lives of learners, regardless of their background, and how they access education—including at the Salvation Army, which, for the record, is where my mother was born. For many, it is a truly transformational experience. Graduates have better choice, better paid employment and are better able to contribute to the economy and society as whole, challenging understanding and developing new ideas. This contributes to a healthier, more cohesive society for us all. I have first-hand experience of this. I am the first person in my family to have gone to university. My grandmother, from the East End of London, would have been somewhat confused by where I ended up, but I know only too well how higher education can transform lives to ones of aspiration and achievement. Secondly, higher education is an engine not only for the economy but for social mobility. This lies at the heart of the Government’s commitment to build skills for opportunity and growth, so that every young person can follow the pathway towards a better future that is right for them, whether at university or elsewhere. Technical education and further education are also key to ensuring that people have the right role for them and are able to find joy and happiness at work, which is what we are doing today. The Office for Students is fundamental to all this through its effective and independent regulation of the sector. The noble Lord, Lord Willetts, touched on the fact that there was no regulator in place when some genuinely challenging elements came into being. It is vital that we now have one, making it work in a way that delivers for the sector and the country. The primary purpose of regulators is to protect the public. At the point when most students enter higher education, through tuition fees, they make the single biggest investment that they are ever likely to make. These fees are, of course, largely underwritten by the taxpayer through the student loans system. Therefore, it is vital that our universities and colleges offer high-quality provision that ensures a good return on that investment for students and the country, and it is right that independent regulation should seek to ensure this, while protecting and promoting the student interest. What is the need for stronger regulation and the new strategy? We need to take a step back. Noble Lords will recall the report from the Industry and Regulators Committee on the Office for Students, published in September 2023, which provided a stark assessment of the regulator’s past performance. Indeed, it was entitled Must Do Better. Last July, the Government published the report of Sir David Behan’s review of the OfS. The review sought to be forward-looking and create a platform for change, but Sir David was very clear that the environment within which the OfS operates has changed considerably since the noble Lord, Lord Browne of Madingley, first made the case for the regulator in 2010 and, indeed, since the noble Lord, Lord Johnson, articulated his vision for higher education in the 2017 White Paper Success as a Knowledge Economy. The current situation is volatile, uncertain, complex and ambiguous. Navigating this uncertain terrain will be a challenge for many providers, their students and, as it has proved, the OfS itself. Sir David found that the case for regulation was clear. He recognised the improvements the OfS had made since the publication of the Industry and Regulators Committee report but recommended that the OfS should focus on the key priorities of quality, financial sustainability, acting in the student interest and protecting public money. In short: do less but do it better. Following the resignation of the noble Lord, Lord Wharton, as chair of the OfS, and while a permanent replacement is recruited, the Secretary of State has appointed Sir David as interim chair to oversee the implementation of his review. The OfS has begun this work, setting out a proposed road map for the next five years in the consultation currently running on its strategy, which are discussing today. However, while this important long-term work progresses, immediate priorities and risks must be assessed and addressed. Central to Sir David’s analysis was a focus on the financial sustainability of the sector. Concerns about the sector’s finances have continued to grow, even appearing in the news this week. In November, the OfS published analysis of the higher education sector’s financial health for the 2022-23 financial year and forecasts for the next four years. It made for troubling reading, finding that both domestic and international recruitment are below the sector’s expectations; that by 2025-26, income could be £3.4 billion lower than provider forecasts; and that up to 72% of providers are expected to be in deficit if they do not take significant mitigating actions. As a result, the OfS made the decision to temporarily pause the processing of applications regarding the OfS register, degree-awarding powers and university titles, to refocus their resources on managing the critical risk of financial sustainability in the sector. I reassure noble Lords that Education Ministers and officials meet with the OfS on a regular basis, and this specific issue was discussed with the OfS in November and again in December. Of course, this is not the ideal decision for the OfS to make, and I do not underestimate the impact on those providers whose business models rely on achieving registration or progressing with degree-awarding powers, but it is a decision for the OfS as an independent regulator, not for Ministers. Furthermore, it is in line with the recommendations of the independent review and with expectations set out in the regulator’s code to prioritise resource to manage the greatest risk. The pause is limited to new and early-stage applications. The OfS expects to restart the process in August, or earlier if possible, and will review every three months until then. Affected providers have been contacted individually and will be informed of progress and changes. I recognise the concerns that this stifles growth, but it is about keeping the show on the road while we deliver our long-term strategic ambitions for higher education. On that note, I will answer some of the specific questions put to me by noble Lords. In response to the noble Lord, Lord Willetts, there are unlikely to be more than 100 applications from franchised providers. We require only those with over 300 students to register for the new franchising model, and the largest 10 unregistered providers account for 58% of all franchised students at unregistered providers. This will work quite quickly and effectively with the largest suppliers. With regard to the “Strengthening oversight of partnership delivery in higher education” consultation, we think that it is important to make progress towards strengthening the regulation of franchised higher education. The OfS has currently paused the registration of new higher education providers in order to support the sector with financial sustainability concerns, as I said, but this is being reviewed every three months. With regard to institutions that are already in process, which the noble Lord, Lord Willetts, touched on, the OFS has said that it will process applications that are already well advanced. If the noble Lord has knowledge of where that is not happening, I would be grateful for the information. It will also review that every three months. Given what we are talking about between now and August, that seems proportionate, but, if there are specific concerns, I would like to hear from the noble Lord. On global chains and the pause, I think it is fair to say that education is global. The best of education, as we discuss regularly in the House, allows people’s brains to flourish. Universities are cathedrals for learning, whether they are here or elsewhere; the more exposure we have to more people, the better position we are in to move society forward. On global change, it is for providers and universities to make decisions about business models, including international investment. However, I can reassure noble Lords that this is temporary to address a critical risk. If there are people with whom we need to engage in the interim, we will endeavour to have those relationships to reassure those institutions. The OfS will consider such applications as soon as the process restarts but will, I hope, seek to work with partners as the pause is ongoing. I believe that I have answered on the next bit. We are getting through the questions. All three noble Lords asked: why so much regulatory burden now? Individuals and the taxpayer have invested hugely in higher education. It is right that this should be regulated. However, regulation has to be proportionate and not stifle growth. I agree that the Chancellor’s speech yesterday was excellent. We must also make sure that we are all contributing to the delivery of growth in order to continue to invest in the public services that I, for one, care so much about. The Office for Students must, and does, abide by the Regulators’ Code and should not impose unnecessary burdens, but students’ experience and outcomes are critical. We need to ensure that students are getting what they pay for. With regard to further education colleges, as raised by the noble Baroness—am I okay for time, Mr Whip?

Yes.

Thank you. It is quite nice to be on the other side. FE colleges form an essential part of the HE landscape. We are very aware of the burden on colleges that are regulated by a number of different bodies. That is why, for example, we are proposing to exempt FE colleges from the new proposed requirements for franchising. I emphasise again that the pause is temporary. If FE colleges wish to register, they will be able to do so from this summer. On the wider education strategy, in answer to the noble Baroness, Lady Stedman-Scott, the Secretary of State has been clear and has announced five priorities for the reform of higher education. Given the time, I will not outline them but will write to the noble Baroness with the details. I am very grateful for the thoughtful contributions that noble Lords have made during this debate. There is a great deal of higher education expertise in your Lordships’ House—some of which is a little terrifying—and I welcome this opportunity to benefit from it. I conclude by commending the efforts of the OfS. The Government continue to maintain their strong support for the regulator and its important work in protecting the interests of students. I also recognise the risks that universities and, by extension, students are facing. I assure noble Lords that both the Government and the OfS maintain a keen focus on overcoming these challenges to ensure that we maintain the secure, stable and world-class higher education that we are all so rightly proud of.

15:39:00

Sitting suspended.