The question on regulating franchised provision isn’t how, it’s why

How do you solve a problem like the regulation of franchising?

In recent months, we’ve seen a push from the Office for Students (OfS) aimed at governors; we’ve seen a framework from Universities UK, GuildHE and the Committee of University Chairs; there’s a proposal for self-regulation from a university that does a lot of franchising; the Quality Assurance Agency has a thing out; the Office of the Independent Adjudicator has published something; and there’s plenty of suggested action to come from the Department for Education (DfE) on agents, and from various bodies over access to loans.

There are all sorts of options in this space – a closer look at percentages and reliance, more transparency over outcomes, more invasive and urgent inspection, and better empowerment of students when they sniff that something is going wrong.

But there’s a question I keep coming back to – and it’s not how. It’s why. It’s whether we really need the sort of provision that’s in scope here at all.

2011’s Students at the Heart of the System wanted to see controls on franchising relaxed to encourage diversity and competition in the sector. The subsequent lifting of number controls was partly aimed at that goal too. And when former universities minister Jo Johnson was getting the Higher Education and Research Act through parliament, he was frustrated at the way that inherited arrangements stifled competition, innovation and student choice.

Each of those efforts imagined a fairer, simpler system for new HE entrants, with providers like NMITE, Dyson, Multiverse and the New College of the Humanities all variously trumpeted by ministers as offering the sort of radical departure from traditional delivery that students and industry craved.

Even if we set aside the success record of the innovators – which has been patchy at best – what nobody has ever done is set out why it’s important that London, Birmingham, Manchester and Leeds dramatically expands the number of students in the area with business or health qualifications, which is the bulk of this “new” provision.

If they had done so, no politician or sector big name has ever explained why that unmet demand might not be better met by existing universities or further education colleges, with their track records on quality, student support and facilities.

And nobody has ever said that it would be a jolly good idea to design a system where that unmet demand for piled high, delivered cheap qualifications also enables owners and their agents to pocket huge profits. Nor has anyone really demonstrated that the “demand” is driven by students rather than salespeople.

Those that argue that the sector should widen its participation are rarely found arguing that the “poor door” can be hundreds of miles away, robbing WP students and middle class students alike of the social and education benefits of bridging social capital.

Unlike with international fees cross-subsidy, nobody has ever suggested out loud that this is how some universities should be filling their funding gaps. And while specialist provision from theatres, seminaries, STEM entrepreneurs and the like might be encouraged to develop, nobody has ever explained why a university offering experience X should be allowed to offer a demonstrably different experience hundreds of miles away.

Deciding that the upsides outweigh the risks depends on two things: how realistic it is that the risks can be mitigated, and deciding how important the rewards are for a type of provision that was never intended.

I think the case on rewards is shaky – and the track record on risks enough to give decision makers pause for thought.

There’s a type

Regular readers will know that we’ve been keeping an eye on a particular type of provision, and a particular type of provider, for some time now.

This is not a hard and fast category, but we’re talking mainly business and management and health and social care courses, delivered by private providers without degree awarding powers, in London and more recently other major urban centres.

We’ve been doing so for a number of reasons. It’s partly about some of the scandals that were seen in the last decade – where a four-month investigation led by the Guardian found allegations of serious abuse of the student finance system, with money lent to students regardless of attendance or suitability for courses – which led to an NAO intervention, a DfE crackdown and a promise of a regulatory system that would prevent such abuses.

It’s partly because of the astonishing profits that many of the providers – that are often not on the Office for Students register – seem to be making from the state-backed student loans scheme at a time when the mainstream part of the sector has been demanding fee increases to cover costs. They’re profits that are sometimes on balance sheets, sometimes hidden away in charges from other companies, sometimes trousered in huge dividends, and sometimes just funnelled directly into huge salaries for owners.

It’s also about the way these courses seem to be being sold. We’ve seen door-to-door sales, introduce-a-friend schemes, banners in shopping centres, TikTok videos that hide or obscure that student finance is usually a loan, and suggestions of part-time delivery and flexibility that don’t communicate what anyone would think are the real demands of a full-time course.

Domestic agents, too, seem to be making significant profits, usually by targeting disadvantaged communities, and often by targeting those with pre-settled status – all the least likely sorts of student to be able to be savvy in the HE “market”.

It’s partly about what we hear from whistleblowing staff and SUs from within and around the edges of these providers – with hair-raising tales of problematic admissions practices, a lack of support for students on the programme, and poor facilities and services for those enrolled. Increasingly, it’s about what’s being found officially – with the NAO, DfE and latterly OfS investigations revealing poor quality at best, and outright fraud at worst.

It’s also about the inability for us – and therefore the public or students themselves – to see the outcomes of those providers that are being franchised-to if they’re not on the OfS register. Even an FOI request to that end has been rejected as “not in the public interest.” The public – and the students saddled with the attached debt – may disagree. And either OfS is using it in DiscoverUni when it’s not “ready”, or it’s not and students are being denied the slither of information they should be entitled to when choosing a course.

It’s about other things too – the breathtakingly rapid expansion in recent years; the way that this type of provision seems to prop up widening access performance for some providers; our suspicion that outcomes concerns about foundation years are really about this sort of provision; the ongoing mystery of the providers where maintenance loan value and maintenance loan holders outstrip fee loans; the colourful lists of names of (often paid) directors and advisors that seem to appear; and the seeming failure of the regulatory system to at first prevent, then to notice, and now to tackle what could be very serious issues in a timely fashion.

Some of the above we’ve published on the site – much of the above we’ve not. We’ve also noticed that this particular part of the sector has a tendency towards litigation. But that’s exactly why regulation or state funding restrictions should exist.

The story so far

Hence one of the key questions that we’ve tended to come back to in the team is what kind of restrictions or regulation would address the problems that have been emerging.

Problems with the practices of agents, for example, have been on various folks’ radar for some time. But the idea that such agents were also operating and targeting students domestically has been something of a surprise, despite their antics and tactics operating in plain sight.

DfE knee-jerk announced an investigation/review into agents off the back of a Sunday Times story on international foundation years earlier this year – only for it to suddenly have its terms of reference extended as soon as the Public Accounts Committee started asking about domestic activity. We have yet to hear public peep on its work or conclusions.

Until recently, if OfS had identified franchised provision as a key risk to quality, the student experience, or the sector’s reputation, it did not make this public. On inception it decided against establishing a registered (basic) category that was proposed to assure students that their course was indeed higher education and to ensure OfS’ oversight of the sector as a whole. And very quickly it became clear that a whole raft of providers that it expected to register into, or in some cases outright rejected from, its Approved or Approved (fee cap) were switching to franchising.

It’s now obvious that at the very least its plan for a (basic) category should make a comeback for anyone seeking to deliver higher education in England.

OfS’ big thing was always about regulating experience and outcomes through metrics – but these lag a lot longer than the expansion that’s been seen. Experience regulation via a focus on metrics rather than voice and complaints has demonstrated vividly that students on their first HE course don’t know what good should look like, and nor do they know their rights or how to exercise them.

And because the idea was to regulate through the franchiser, outcomes for those not on the register are either impossible to discern at franchised-to provider level, or buried in a university’s wider scores. Add in the interminably long process of identifying concerns, setting up investigations, reporting on them and then deciding whether to take regulatory action, and a gap is left for provision to grow, students and the taxpayer to be ripped off, and owners to furnish their coffers. Even TEF submissions allowed universities to delete the data from their franchise courses.

We really do need to see the data, now. And if OfS’ nudges and winks about fraud in its recent insight brief are to be believed, it should announce a much more extensive “boots on the ground” operation immediately.

There’s been some other activity. OfS has been attempting to get governing bodies and their audit committees to take a closer look – although notes like this from Advance HE seem to suggest that many governors have been rather too sanguine over the issue.

The National Audit Office and the Public Accounts Committee have both got stuck in, only to find DfE, SLC and OfS all pointing at each other, with hints at OfS being given more powers that it won’t have the time or capacity to use.

There’s been some suggestions that the sector should improve self-regulation in this area – although though calls for “light-touch, low-cost regulation” sit ill against the scale of bad practice uncovered in OfS investigations, most recently at Regent College London.

And Universities UK, working with GuildHE and the Committee of University Chairs, have developed a Franchise Governance Framework. Which could have the effect of tightening up oversight of franchised provision where there is good faith on both sides, but isn’t going to touch the sides when it comes to managing the problematic financial incentives involved or identifying the plausible bad actors.

Frustratingly, another bit of tertiary has seen all of this before, and got a grip on it. In the last decade the ESFA implemented tighter controls over subcontracting – a 25 per cent numbers cap, the requirement to publish a policy explaining the rationale (focused on enhancing learner opportunities or gaps in niche or expert provision), transparency over fees and charges, stringent quality and financial due diligence standards, external checks, the granting of access to premises and documents, and direct evidence of the performance for (regular) assessment against Ofsted’s common inspection framework.

Quite why nothing of this sort has been considered in HE is baffling – the idea that fees will be allowed to rise without it, astonishing.

For me, the other gaping hole here surrounds student representation and rights. In the Regent College London report, students are in rep meetings raising what should be obvious complaints. They may not know that they have rights in this area – and may not realise that they’re almost certainly due a partial refund under consumer protection law.

It’s notable that the OfS inspectors gave “student engagement” a tick – presumably on process rather than outcome grounds. Unless OfS starts to take student rights and complaints seriously, seeing students as a set of people it wants to afford more power to, it doesn’t matter how many frameworks or processes or inspections are around – the system will miss bad stuff. But again, no sign of that so far.

The why question remains

But while DfE, or the SLC, or OfS, or UUK, or Guild HE, or the NAO, or IHE, or Advance HE or whatever body could step up to offer whatever strength of tape they think will work on the holes in the regulatory leaky bucket, it’s also possible to take a step back and ask not how all of this might be better regulated – but why?

The point isn’t that it isn’t possible to better regulate in this space. The point is that there has never been a proper policy intent here – and when coupled with the incentives in play, it’s hard to believe that where we are now is where the Conservatives ever meant to be, let alone Labour.

Had ministers announced that they’d like to see a collection of businesspeople appear out of nowhere, be able to rent some office space, run governance rings around well meaning (and desperate) universities to offer them their brand, deliver boilerplate business courses (often) badly, and employ salespeople to extol the virtues of the student loans system to those desperate for cash and a career, then fair enough.

Had ministers have said “we’ll blind eye the problems in the system, and then enable ourselves and our political appointees to gorge at their share too”, then fair enough too. But they didn’t.

Maybe you could argue that these providers are doing the sector a favour – demonstrating that  there’s waste in the way that the traditional HE delivers degrees. That would be more palatable if its owners had shared the profits with students or the state rather than just themselves; more credible if inspections and deep dives didn’t keep finding quality car crashes.

Every pound spent tightening up regulation – every framework, every insight brief, every boot on the ground, every minute spent in governing body meetings mitigating against the huge incentives for all the players, is time and money that could be better spent on the sector’s other range of problems. It is, if we’re honest, solving a problem that is not just not necessary to have – at least not at system level.

Reversing course will need careful handling to protect vulnerable students that have signed up in good faith, and some will worry about the principle of demand-led funding being eroded. It will also require some assistance for those universities that are now relying on the funding, and some proper lessons should be learned from the collapses we’ve seen of late.

But Labour should do the only sensible thing, and should signal its intent now. It’s time this particular party – generalist, for-profit, franchised provision, and everyone that profits from it – was called over.