Recommendations & Conclusions
9 items
4
Recommendation
Eighth Report - Financial sustainabilit…
Acknowledged
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 in publicly funded teaching and research. Much of this subsidy …
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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 in publicly funded teaching and research. Much of this subsidy comes from income from overseas students’ fees; in 2019–20, there were more than 340,000 overseas students at English providers, almost half of whom came from China or India. Many providers’ medium- and long-term financial forecasts assume continued growth in student numbers, particularly overseas students. The OfS monitors providers’ forecasts and has in the past found their student number projections to be over-optimistic. There are also risks associated with an over reliance on international recruitment which may not align well with the UK’s wider geopolitical interests. The Department asserts that it is aware of such risks and is encouraging the sector to diversify in terms of where providers recruit their students from. There are also cross-government considerations, such as how student recruitment is affected by, and potentially at odds with, the Home Office’s plans to control migration. The Department recognises that it is a very competitive market and that there are many countries around the world seeking to bring in more international students, for exactly the same reasons that UK providers are. Recommendation: The Department, drawing on OfS analysis as appropriate, should set out what it considers to be the risks to achieving the continued forecast growth in overseas student numbers universities are relying on for their future financial security, and explain how it is mitigating those risks. Financial sustainability of the higher education sector in England 7
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Government response AI 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.
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HM Treasury
6
Recommendation
Eighth Report - Financial sustainabilit…
Acknowledged
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 2020 and 2021. This meant that more students were able …
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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 2020 and 2021. This meant that more students were able to take up places at high-tariff providers, but left many medium- and low-tariff and specialist providers undersubscribed, who have therefore lost expected fee income. The Department had anticipated the likely impact of locally assessed grades on providers that would be oversubscribed and that could require additional funding for high-cost courses. But it had not considered the impact on those providers that would become undersubscribed. Being undersubscribed causes financial pressure on providers for an extended period, as most courses last at least three years. At the same time, oversubscribed providers risk not being able to maintain the quality of provision they have promised their students as they may not have sufficient teaching facilities or student accommodation. Recommendation: Learning from the disruption to the higher education market during the COVID-19 pandemic, the Department and the OfS should model and review the financial impacts on providers of changes to the number and profile of domestic students over the short, medium and longer terms. 8 Financial sustainability of the higher education sector in England 1 Oversight of financial sustainability in the higher education sector
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Government response AI 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.
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HM Treasury
1
Conclusion
Eighth Report - Financial sustainabilit…
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 AI summary
The government acknowledges the report and states that the response is the government’s response to the Committee’s report.
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HM Treasury
10
Conclusion
Eighth Report - Financial sustainabilit…
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
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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
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Government response AI 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.
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HM Treasury
14
Conclusion
Eighth Report - Financial sustainabilit…
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 …
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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 numbers and a 31% fall in the number of EU students. The OfS told us that it monitored providers’ student number projections closely to check whether they were credible. Having previously found a degree of over-optimism in some providers’ forecasts, it told us that it continued to encourage caution while recognising that there are reasons why providers might feel more confident about recruitment over the next few years. It explained that this included: an increase in the number of 18-year-olds because of demographic changes; and evidence on international student flows, which do not show signs of abating.26
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Government response AI 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.
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HM Treasury
18
Conclusion
Eighth Report - Financial sustainabilit…
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 …
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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 on high-tariff courses. This meant that many medium- and low-tariff and specialist providers recruited fewer students in 2021 than they had in 2019, despite a 10.8% overall rise in undergraduate entrant student numbers over the two years.34
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Government response AI 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.
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HM Treasury
19
Conclusion
Eighth Report - Financial sustainabilit…
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, …
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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, loss-making. There 29 Qq 6, 80–81 30 C&AG’s Report, para 2.10 31 FSE0005: Financial Sustainability of the higher education sector in England, Universities UK, 21 March 2022, page 2 32 Qq 6, 8, 11 33 Qq 6–7, 79, 81, 85–86 34 Qq 1–3; Correspondence from Susan Acland-Hood, Permanent Secretary, Department for Education, re PAC hearing on the financial sustainability of higher education providers 21 March 2022, dated 4 April 2022, page 2; C&AG’s Report, para 4.24 35 Q 3; C&AG’s Report, para 4.28 Financial sustainability of the higher education sector in England 13 are also risks to quality of provision and the overall student experience in oversubscribed providers. For example, some have offered students financial incentives to defer entry and some have struggled to provide accommodation for their first-year students.36
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Government response AI 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.
Read full response →
HM Treasury
20
Conclusion
Eighth Report - Financial sustainabilit…
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 …
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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 up to £10 million capital funding to help them expand capacity. However, neither the Department nor the OfS modelled in advance whether the changes to A-level grades would, by themselves, lead to some providers becoming undersubscribed and what the financial consequences for those providers could be. The National Audit Office reported that many medium- and low-tariff and specialist providers recruited fewer students in 2021 than they had in 2019, despite a 10.8% overall rise in undergraduate entrant student numbers over the two years, and that this created short-and medium-term financial risk.37 The Department told us that it had been challenging for the, typically middle- and lower-tariff, institutions that had ended up being undersubscribed. It explained that there had been some financial impact on those providers, although that impact had not been uniform because it also depended on the local actions taken and the subject profile of each provider. However, the Department asserted that its priority had being making sure it was doing what it believed to be the right thing for students.38 The OfS told us that it was now seeing universities’ financial forecasts starting to return to normal, but that it remained concerned about the quality of provision where courses had been very heavily oversubscribed. The OfS told us it was now looking at this issue closely and working with the universities to ensure that, notwithstanding increased numbers, quality remained good.39 36 Q 4; FSE0003 The Russell Group, 21 March 2022, paras 15, 19; C&AG’s Report para 4.27 37 Qq 1, 4; C&AG’s Report, paras 4.24–4.26 and Figure 12 38 Qq 2–3; Correspondence from Susa
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Government response AI 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.
Read full response →
HM Treasury
21
Conclusion
Eighth Report - Financial sustainabilit…
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 …
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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 reported in October 2019 that, when assessing applications for initial registration of providers, it had found student protection plans very variable in quality. Because it believed it was not in students’ interests to delay registration, it nonetheless approved a number of plans that were significantly below the standard it would expect. It identified weaknesses including providers being over- optimistic about the risks they faced, lack of detail about what specific actions providers would take, and weak refund and compensation policies. In the small number of cases where the OfS had required providers to undertake more detailed planning, it had found that existing student protection plans had been the starting point for discussion, rather than a set of actions that could be taken. We asked whether the OfS was now confident that student protection plans are fit for purpose and would adequately protect students. The OfS acknowledged that protections for students did still need further review and told us that it was committed to doing this over the course of the next 12 months as part of its next business plan.41
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Government response AI 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 …
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HM Treasury