Government would protect interests of “students, taxpayers, and research” in provider insolvency

The final session of the Commons Education Committee “mini-inquiry” into higher education funding, the threat of provider insolvency, and international students started with a juicy story from a recent private hearing.

Apparently, at a Chatham House rule meeting with providers last week held in Warwick, it emerged that one larger provider looks set to collapse this calendar year, with the information apparently deriving from due diligence ahead of a possible merger (which clearly was not going well).

Neither Susan Lapworth (chief executive of the Office for Students) nor Jacqui Smith (minister for skills) were aware of any provider in this kind of imminent risk, with both noting that a registered provider in such financial peril would already be in discussion with OfS and DfE.

This prompted the question as to what the government would do (even in a hypothetical situation) were this the case. And it yielded some new language from Smith, who committed the government to protecting “students, the taxpayer, and research” in such situations – likely mechanisms including supporting preparations for student transfer, potential partnerships, and operational issues affecting cash flow (there were that due SLC tuition fee payments could be reprofiled, for example).

Lapworth concurred that the financial picture for the sector remains challenging – though it also does not have information suggesting a university would fail in the next month or so. We did learn that OfS’s risk category approach to monitoring suggested that there were perhaps 24 providers (including 7 with more than 3,000 students) at risk in the next 12 months, and 50 (including 20 with more than 3,000 students) at risk in the next two years: however, it was emphasised that this represented a very conservative analysis of risk and that OfS did not expect the disorderly exit of any of these providers.

The minister added that “you don’t wake up one day in insolvency”, and highlighted that such failures of strategic planning would not be as common now that the government has offered a measure of certaining around tuition fee income.

On that: we are promised (a slight step up from “if parliamentary time allows”) primary legislation that locks in the inflationary fee increases beyond the initial two years, and that this will also cement the promised link to quality (though Smith added that the current TEF is not fit for this purpose – implying that for the two years ahead all providers will get this uplift.

But there was no movement on other funded interventions – there will clearly be no transformation fund to support mergers and process sharing (in the minister’s words there is no need for a “government bung” to ensure that institutional governors take their responsibilities seriously). She said: “universities that make decisions about closing down courses without thinking about regional needs are wrong” – and given the number of times it came up, one half-suspects she was thinking about nursing at Nottingham as she said this.

This appeal to leadership responsibility also appears to have put paid to the idea of an independent “higher education commissioner” to broker partnerships, though we were reminded of the language in the white paper around the development within DfE of a systemic overview of the higher education market – and Smith praised the recent AdvanceHE “insights” report on the Anglia Ruskin/Writtle merger as a good example of sector agencies sharing expertise and practice in this area.

DfE is aware of the Teachers Pension Scheme issue, with Smith deftly balancing the desire of employers to remove themselves from an expensive scheme with the value that staff place on their pensions. There’s no chance of a grant to that part of the sector to support these costs, so – for what it is worth – the only option she appeared to leave on the table was a scheme revaluation (the current troublesome one took place in the perfectly normal year that was 2020).

There were indications that OfS’ strategic priority grants (SPG) would keep their current focus: high-cost subjects, student support, specialist providers. So there will be no return of a consideration for “vulnerable subjects” – apparently certainty over tuition fee income will do that job.

And a stray line on franchising – the minister would be happy to see “much less” subcontracting of provision, and for that which does continue to be of a much higher quality.

This inquiry also focuses on international recruitment, but given that this particular hearing happened the day before we get details of the scheme and a regulatory impact assessment questions about the levy were played with a very straight bat. Smith’s “if I had a penny…” line about sector lobbying against the levy but for the return of maintenance grants got another airing, and there was some discussion about price elasticity that never reached a firm position.