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

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 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 to account. The OfS’s role includes protecting students’ interests from the consequences of financial risk in higher education providers which could adversely affect students. The financial sustainability of the sector has been declining since before the pandemic, evidenced most obviously by the fact that the number of providers with an in-year deficit increased from seven (5%) in 2015/16 to 80 (32%) in 2019/20. Of these 80 providers, 17 had been in deficit for the past two years and a further 20 for three years or more. The OfS does not, however have a complete set of measures by which its performance can be judged. Of the 26 performance indicators the OfS sets out on its website, eight are still in development or have incomplete performance information and a further 11 indicators do not yet have associated targets. Complete information is available for just seven indicators, giving an inadequate picture of performance. The Department asserts that it is not 6 Financial sustainability of the higher education sector in England complacent and has committed to reviewing the set of performance metrics and ways to measure them, by the summer. Furthermore, the OfS does not ask providers for structured feedback on its own performance as a regulator. Recommendation: Working with the OfS, the Department should establish a complete set of robust, published performance measures and targets, including structured feedback from providers, and use these to hold the OfS to account for its effectiveness. Show less

View Details →

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 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 Show less

View Details →

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 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 were promised by their provider and their interests as consumers should be protected before, during and after their studies. Overall student satisfaction has been consistently over 80%, but fell to 75% in the pandemic- one of the main contributing factors being dissatisfaction with learning resources required by lockdown restrictions. The proportion of students who thought their course was value for money is much lower and dropped from 38% in 2020 to 33% in 2021, with more than half saying it was not value for money. The OfS acknowledges that students’ view that they are not getting value for money is a cause for concern. The OfS believes that quality of provision is central to how students regard value for money, and asserts that quality is one of its top three concerns. The OfS says that it is looking at quality issues closely and that working with the universities to ensure that, even on oversubscribed courses, quality remains good. Recommendation: The Department and the OfS should set out what action the OfS is taking to improve students’ satisfaction with value for money, including the OfS’s assessment of the impact of hybrid teaching on students’ experience and what progress has been made in addressing the causes of dissatisfaction. Show less

View Details →

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 has identified common weaknesses in them – including over-optimism about …

View Details →

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 …

View Details →

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

View Details →

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’ …

View Details →

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 during the COVID-19 pandemic, it was undertaking work to better …

View Details →

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 …

View Details →

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

View Details →

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, eight are still in development or have incomplete performance information …

View Details →

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 the views of regulated bodies on its own performance. It …

View Details →

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 – primarily fees from overseas students.24 The Department told us that …

View Details →

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 …

View Details →

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 …

View Details →

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 …

View Details →

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 …

View Details →

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 …

View Details →

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, …

View Details →

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 …

View Details →

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 …

View Details →

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 …

View Details →

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 …

View Details →

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. …

View Details →

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 …

View Details →

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 …

View Details →