The accelerated level playing field

Much of the government’s HE Green Paper, Fulfilling Our Potential, returns to the themes of 2011’s Students at the Heart of the System. That White Paper also promised an unprecedented degree of liberalisation in the undergraduate market. Many of the reforms outlined there and in its accompanying Technical Consultation reappear in today’s documents, which take on the legacy of the 2011 reforms and greatly accelerates their progress.

The background

Part B of the 100-page consultation is devoted to opening the sector to new providers “by removing barriers to entry and growth”. Some might be surprised by this focus since the last parliament saw such uncontrolled expansion from alternative providers that the National Audit Office was asked to investigate.

As the Green Paper states, “the number of students studying at alternative providers has grown almost tenfold, from 6,600 in 2010/11, to around 60,000 today”. This would suggest that students at private colleges comprise over 10 per cent of the funded undergraduate sector, receiving roughly £700m per year, and that the private sector hardly needs more stimulation.

The Green Paper assures us that “Widening the range of high quality higher education providers stimulates competition and innovation, increases choice for students, and can help to deliver better value for money.” But the NAO conclusions were that the loan-backed HE system was open to abuse. Margaret Hodge, then Chair of the Public Accounts Committee, concluded:

Today’s NAO investigation has exposed the potential misuse of millions of pounds of public money, with EU students at some private colleges accessing public funds to which they were not entitled. … This extraordinary rate of expansion, high drop-out rates, and warnings from within the sector ought to have set alarm bells ringing.

That’s the opposite of the claimed efficiency and increase in quality touted by Jo Johnson, Minister with responsibility for higher education. This recent phase of expansion saw the creation of a subprime undergraduate sector – subprime in that the provision expanded predominantly amongst communities unfamiliar with university study. Dropout rates were five times that of the traditional universities.

BIS published its response to NAO’s findings in July, introducing a new minimum English-language requirement for students at ‘designated’ alternative providers (5.5 IELTS); reaffirming Student Numbers Controls for alternative providers that do not have their own degree awarding powers; and requiring alternative providers to publish Key Information Sets including data on completion.

The last point proved a key issue for NAO: it found that BIS had no means of comparing the number of students in receipt of full-time fee and maintenance support with the number of successful qualifications awarded. This was particularly a problem for students taking out loans to pursue Pearson’s HNC or HND courses: Pearson did not record funding status and allowed all students five years to complete the award. In effect, students funded as full-time were treated as part-time by the examining body.

There are still no official statistics on how many of those extra funded students since 2010/11 achieved any award. Nor, despite promises to the contrary, has BIS published the Student Numbers Controls imposed on colleges.

In its summer response, BIS announced a new performance pool of additional funded places for high-performing alternative providers (think 2012’s core/margin model for low-cost HE providers). The Green Paper announces that these controls will be kept in place as they are needed “to maintain quality, protect students and ensure value for money for the public purse”, though it has lifted the default ‘small providers’ SNC allocation at each college to 100 funded students from 50.

So the ‘barriers’ to be overcome that are specified in the Green Paper turn out to be those introduced by the Coalition in troubleshooting mode: number controls and repeated annual re-designation procedures.

Breaking down barriers

Today’s government would claim that legislation is needed to tidy up many of these ad hoc arrangements that have been put in place after the fact of market liberalisation. But in truth, the Green Paper’s commitment to opening up the sector involves going beyond colleges offering Pearson’s higher nationals, and speeding up the process by which new starters can achieve their own degree awarding powers and the university title.

Here’s where the detail most resembles 2011’s proposals, but everything is accelerated up as if to make up for lost time. A single gateway will be overseen by the new Office for Students to create “a level playing field for all providers and a faster route to becoming a university”.

The new framework would be resolutely risk-based – removing barriers to entry, but upping monitoring and creating a series of new powers for OfS and the secretary of state to police the sector. That emphasis on speed and increased choice is countered by a set of regulatory arrangements that make the private sector look much less independent than was envisaged back in 2011. Some may baulk at that regulatory burden, but the money on offer has been increased, so that the 2011 vision of new provision undercutting overpriced established providers seems to have dimmed.

The performance pool of places will be coupled to the Teaching Excellence Framework as an incentive. In addition, colleges’s access to student support will also be tied to the TEF. Alternative providers designated for student support are currently able to set whatever annual tuition fee they like, but their students can only access £6000 per year in tuition fee loans (now labelled ‘Model 2a’ in the Green Paper). That ‘fee loan cap’ could see ‘uplifts’ for providers who do well in the TEF.

Alternatively, new providers would be able to elect for a new option, known as ‘Model 2b’:

A £9,000 tuition fee loan cap (or equivalent for part time), a cap on fees at £9,000 (or equivalent for part time etc), a requirement to sign up to an access agreement if fees charged are more than £6000, and eligibility for government grant.

Effectively matching the funding available to an established HEI offering undergraduate subjects, which don’t attract the residual grant (but without the right to access public research funds). No significant track record is needed to achieve this milestone.

As I said, speed is the essence of these reforms. BIS promises:

  • Quicker access to student funding, and no cap on student numbers
  • Ability to apply earlier for degree awarding powers (DAPs), with a more flexible approach to track record
  • Shorter time period for DAPs assessment
  • Ability to secure university title (UT) much earlier, provided conditions are met.

The following diagram from the Green Paper illustrates the changes: from zero to university in under six years. To stress, in the past the government has created universities to such timescales, but here we are talking about private individuals doing the same. For some perspective, it took the polytechnics over 20 years to cover that ground. (The reference in the left-hand column to ‘key individuals’ is nowhere explained, but must give Anthony Grayling some comfort).

Towards University Title

The last government reduced the minimum size criterion from 4,000 FTE degree-level students to 1,000 FTE undergraduate of whom 75% must registered on degrees or above. The consultation outlines dropping this size stipulation entirely:

We want to introduce access to university title for a wider range of providers and take the view that universities should not be so limited by the size or location of the student body. For this reason we propose reducing the number of students or potentially even removing the student numbers criterion for university title.

If there was no student numbers criterion for university title, there would no longer be a need to distinguish between a “university” and a “university college” (except in the specific case of constituent colleges of universities). We therefore expect that university college title would no longer continue to be awarded. Changes to this criterion could be made without primary legislation, and in advance of the new framework.

Again, good news for a certain humanities crammer in Bloomsbury. But is this at all desirable for English HE’s reputation if universities turn out to be smaller than schools? Scottish universities may be concerned that having university title there means having research degree awarding powers as a minimum, whereas in England, no one knows what it means anymore.

We could well see several hundred universities in England before too long.

Towards Degree Awarding Powers (DAPs)

There are three potential pathways on the table, though the suggestion is that the government would prefer to choose one. None of the options are currently well drawn.

Validation is to get a thorough overhaul, to remove the conflicts of interest that result from bodies that teach offering to validate competitor’s courses. The options:

First, what might seem the most radical:

With new legislation, the Office for Students could itself take on a validation role, perhaps delivered through another body under contract. An additional benefit of this would be that the Office for Students could use its validation responsibilities to underpin and de-risk the flexible approach to DAPs.

OfS would in effect act like the old Council for National Academic Awards, which awarded Polytechnic degrees. This is one example of the increased regulatory permeation proposed in the document.

Second, the government could give DAPs to non-teaching bodies, such as Pearson/Edexcel. This would need a rewriting of degree awarding regulations: these currently require the presence of an academic community which safeguards standards. This idea was floated in the 2011 White Paper, but as it requires primary legislation nothing happened.

Third, the government:

could approve, endorse or even contract existing bodies with their own DAPs to operate as central validating bodies, on condition that they sign up to a validation approach which explicitly promotes competition, diversity and innovation.

Competition vs. Risk

Earlier this year, Jo Johnson enjoyed making the comparison between ‘anti-competitive’ education and the cut and thrust of fast food provision. Validation, he said, “is akin to Byron Burger having to ask permission of McDonald’s to open up a new restaurant”.

What change if any do these three options provide? By analogy, the authorising body would be a pressed meat marketing authority, a publisher of burger guides or, still, McDonald’s.

Apparently we are going to get a risk-based model. But that seems to imply that we let 1000 Filet-o-Fish merchants bloom and then review the results. We will only “widen the range of high quality providers” after the fact, once we have seen these results and once particular students have undergone the education offered by the subsequently-excluded pedlars of reconstituted, low quality HE?

There appears to be no recognition that the dominant innovative practices we saw in 2013/14 were novel recruitment and enrolment – chugging for students, not innovations that led to significant achievement.

This points to a glaring problem in the current system as well as what is proposed. Students who have a bad experience use up their access to student support as they go along.

Normal consumers ‘exit’ by choosing a different product the next time they go to the supermarket. We have a system that prevents that option. The sector learns about poor providers on the back of one-time students, who don’t get a second chance. One very simple and concrete reason to condemn the government for having nothing to say about ELQ and part-time study in this Green Paper.

OfS will be given ‘compliance powers’ and a set of sanctions for providers who fail various requirements. These appear to extend to all HEIs:

… we would look to refine and expressly provide for sanctions such as the suspension and removal of DAPs and university title from any provider in appropriate circumstances. We would only use this power in the event of very serious concerns arising, and would underpin it with a transparent, evidence-based and rigorous process around its use.

In this vein, the secretary of state, “or a specified partner” will be given powers “to enter and inspect a higher education provider, if it is suspected that the provider has committed a breach of the conditions of receipt of (direct or indirect) public funding”.

These compliance measures are unlikely to be ‘light touch’ given that OfS will be set up as the first regulatory body to “consider issues from the point of view of students, not providers”.

Towards the exit

The final section to visit today concerns “market exit”, which ministers take to be a sign of a well-functioning market. The only problem being that you need a “protection requirement” so that students can continue to be taught elsewhere in the event of institutional failure, or can receive financial compensation. Previously, an ABTA-style bond was envisaged, but the existing private sector was so mistrustful of the new entrants that they refused to participate.

The government helpfully suggests “an insurance policy, a bond, reserve funds, or Escrow accounts” but “Any such requirement would need to be carefully designed so as not to create a barrier to new entrants.” Again, can that circle be squared? If you want genuine protection, then the new entrants need to provide it, otherwise, since ‘exit’ is unlikely to be ‘orderly’, the government cannot evade having to act as guarantor of last resort.

The most recent example saw the opposite: students mis-sold study were told to repay their maintenance grants.

Explicitly a consultation document, there’s no doubt scope for revising any of the Green Paper snippets I’ve collated here. But there’s a deeper incoherence: things are sped up but there’s much more regulation, and far less incentive towards competition on price.

This already looks like a misfiring state-regulated utility market that would only suit those aiming to arrive swiftly and depart equally rapidly after those first six years, before the compliance catches up. That is, incidentally, the normal timescale for private equity investment: after six years: cash in.

A better approach would be to bolster part-time education and develop a coherent overview of teaching quality and excellence. Once such measures are established then any future government would have a better idea of how to intervene productively in higher education.

In the end wouldn’t it be more efficient for the government to create some new universities?

Letting the market sort it out in this way will create an expensive and convoluted mess that could be very hard to undo.