Source · Select Committees · Public Accounts Committee
Recommendation 13
13
Accepted
Increasing financial pressures and varied performance affect higher education sector sustainability.
Conclusion
In June 2022, we reported that higher education providers face long-term, systemic, pressures on their financial sustainability and viability.30 We asked about the sector’s current financial sustainability. DfE referred to the most recent OfS report, published in May 2023, which concluded that the overall financial position of the sector is sound although there continues to be significant variation between providers. OfS added that the extent of variation has increased and that some providers are being squeezed in terms of student recruitment. Financial performance in 2022–23 was weaker than the year before, and weaker than had been seen over historic trends for the sector, but consistent with the sector’s forecast last year. For the current year a greater number of providers are forecasting deficits and weaker cash flows, suggesting a further squeeze, before a slower recovery than previously anticipated. OfS emphasised that these forecasts, including the slow recovery, are underpinned by assumptions around student numbers growing. For a small group of providers, income from franchise arrangements is material to their sustainability. DfE added that, while forecasting for the sector as a whole looked to be reasonable, there is quite a lot of variation in what it described as optimism bias in some providers.31
Government Response Summary
The OfS intends to publish an Insight brief that sets out the risks and benefits of franchise arrangements, with a focus on the expectations placed on lead providers for effective management and governance of partners, and will consider financial arrangements for franchise partnerships in the scope of any investigations it carries out into the quality of franchised courses.
Government Response
Accepted
HM Government
Accepted
2.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2024 2.2 The OfS intends to publish an Insight brief that sets out the risks and benefits of franchise arrangements, with a focus on the expectations placed on lead providers for effective management and governance of partners. 2.3 The government agrees with the Committee’s recommendation. Target implementation date: March 2025 2.4 The OfS will consider financial arrangements for franchise partnerships in the scope of any investigations it carries out into the quality of franchised courses. 2.5 Due to the diversity of roles, responsibilities and arrangements in sub contractual partnerships, and differing costs of delivery dependent on courses and students, the OfS does not consider it possible to set out a standard proportion of tuition fees that it would be appropriate for lead providers to retain. The OfS will continue to use its engagement and investigatory work to understand these arrangements better and review its position on this.