Infernal Audit: the value, and values, in the HE market

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The National Audit Office (NAO)’s aim is to “help the nation spend wisely.” It’s a pithy slogan, and when it comes to spending on higher education – given the sums involved (as well as the many opportunity costs for students) – it seems right and proper that it report on the success, or otherwise, of the system.

Today’s report considers “whether the Department for Education is maximising the extent to which market dynamics in the higher education sector support government’s objectives.” Specifically, the concern is about the English undergraduate market, with a focus on universities.

The headline conclusions are that too few students think they’re getting value for money, that there’s too little uptake of the information available to help them make the right choice, and that the DfE isn’t doing enough to make sure that the market operates to promote quality and choice.

While there’s been a drop in the number of student complaints to the Office of the Independent Adjudicator, the NAO is concerned that students aren’t using the threat of switching provider to improve quality. And it finds that there isn’t yet evidence that new providers entering the market will improve overall quality. Expect DfE’s response to be that the Office for Students will take on these challenges.

Here are some things you already know

Anyone who has been following, or working in, higher education will know that funding for undergraduates has moved from grants to student loans. In 2015-16, 85% of funding followed the student. You probably also know that league tables don’t tell you much: “university rankings and league tables encourage providers to offer high-quality education to attract students, but in practice these incentives appear weak.” And you probably also know that widening access to university has not been even: “Between 2011 and 2016, the lowest ranked universities saw an 18% increase in the share of students from low participation areas, compared to 9% in the highest ranked.”

Things get more interesting when we look at the way the report draws parallels between the HE market and financial services. Do prospective students have sufficient high-quality information to enable them to make the best choice for them? The NAO isn’t convinced that enough of them have it, or are using it, and suggests that at £50k average debt, there should be more protections.

“The government is failing to give inexperienced young people the advice and protection they need when making one of the biggest financial decisions of their lives. It has created a generation of students hit by massive debts, many of whom doubt their degree is worth the money paid for it.”

Amyas Morse, head of the National Audit Office, puts it more bluntly, saying: “If this was a regulated financial market we would be raising the question of mis-selling.” This is pretty unfriendly language, but why so strong?

Follow the money

The NAO report says that taking course where the average salary is less than a non-graduate represents “bad decisions potentially leading to poor financial outcomes.” But back to things we already know, and which the NAO also points out: “Graduate outcomes vary widely by subject, provider and family background, as well as other factors such as prior attainment and local labour markets.” The implication is that, with the best possible financial advice, students would not choose subjects or institutions which didn’t provide the high average financial return.

But this misses so many important factors in student choice, including location, subject passion, social and cultural expectation, and a deficit of positive alternatives. To parallel higher education programmes with financial products will be unpleasant for many, but especially so when seen in such narrow, short-term, ways (i.e. focusing on the financial return over the decade post-graduation and missing the lifelong benefits which go far beyond the money).

In another curious passage on investment, the report states: “increased capital spend represents a zero-sum game, with little overall benefit to educational quality. Many providers are striving to provide facilities equal to, or better than, their competitors, while future student numbers are highly uncertain.” Is this to argue that there should not be capital investment to ensure that students have the best learning and wider experience? While it’s true that there is a limited pool of qualified applicants, it seems odd to argue that that would be a reason not to invest to attract them, or to provide the best possible facilities for the students enrolled.

Lest we forget

It’s pleasing to see a renewed focus on the decline in part-time students, an area in which there’s been plenty of misreporting. The report acknowledges the 55% drop between 2011/12 and 2015/16, and that DfE has some plans in place to try and ameliorate the situation. However, it is rightly damning when it says “the Department has not yet set out an overarching strategy for lifelong learning, or what impact it expects these measures to have.”

Winners and losers?

The primary winner that I see from the NAO report is the HEPI-HEA student experience survey. This publication has been hugely influential in policy-making in recent years (take a look at how many references in the 2016 White Paper, and how few for the National Student Survey). The fact that the refrain “32% of undergraduates from England consider their course offers value for money, down from 50% in 2012,” is so dominant in the report, is a testament to the success of the HEPI-HEA survey.

But is a statistic on undergraduates’ immediate perceptions of value for money the best measure we should use? Unfortunately, we don’t see to have any others to hand, and certainly none with such traction in the corridors of power.

From the Public Accounts Committee’s perspective, there is concern both about the polarisation of the sector, and the DfE’s overall management of the ‘market’. Meg Hillier MP, the committee’s chair said that there were:

“worrying signs of a two-tier system of higher education emerging, with the students from less well-off backgrounds siphoned off into lower-ranked universities and then lower earnings in their careers. Instead of looking out for students, the Department has taken a hands-off approach to the sector.”

The focus on the “lower-ranked” throws up one of the key losers from the NAO report: useful reference points. For reasons beyond my understanding, NAO has chosen to use a league table to analyse institutional performance rather than considering more carefully whether this is appropriate for the exercise. There’s no consideration of benchmarking performance or looking for added value, regional considerations, the selectivity of universities or the influence of research (included in the league table they chose) on teaching or students’ outcomes. This should alarm anyone that would like to see more subtle approaches to HE policy rather than those which tend to confirm longstanding – but sometimes arbitrary – hierarchies.

Unfortunately, this kind of ill-informed policy-making is in favour at the moment, and the NAO report will almost certainly provide a strong basis for the Office for Students to take an interventionist approach as it becomes the new market regulator.

Why does any of this matter?

One key reason this report matters is that we’re still expecting the “major review” of fees and funding, one which may stray beyond HE to look at funding across the whole breadth of tertiary education. And, more importantly, reports which highlight “poor value” and the differential outcomes between institutions and subject areas signal further that any funding review could spell any (or all) of: less money overall; less money for some institutions; less money for some subject areas.

The other reason that this report is important is the timing alongside the regulatory framework for how the OfS will operate. It would be entirely possible for OfS, in its deliberation of the consultation responses, to see this report as an endorsement of its establishment as a tough and challenging regulator rather than a gentler guiding hand. Neither the prospect of hard regulation nor differentiated fees (and less funding) should come as a surprise, but with each report that reinforces these ideas, we edge ever closer to assuming that this is an inevitable future.

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