OfS subscription fees – you’ve got trouble

We’ve been keeping a careful eye on how much the new Office for Students plans to charge institutions for the privilege of regulatory oversight in the form of subscription fees. Unlike HEFCE – which had been directly funded by DfE – the new regulator will be funded by subscription. Like membership at the Athenaeum, an OfS subscription will be the mark of a most distinguished vice chancellor.

Sneaking out alongside the regulatory framework document dump, the OfS Registration Fees (Stage 2) consultation (published by DfE) contains an updated set of fee bands, including indicative fee levels. It turns out that both the fee levels and overall income estimates have changed substantially since the consultation, as we predicted would happen. For seventeen unlucky providers, this means they may have to budget for 50% more than the initial banding implied.

I used the same institutional numbers as our articles in December – the future shape and size of the (approved) sector is arguable and the topic of much delight in the regulatory impact assessment – but, by using institutions we currently know about in both cases, we can make a direct comparison between the two models. Note that though I’ve flagged them as “final” in this visualisation, there is scope for them to be further altered by the OfS and DfE.

Till there was you

The first immediate change is the overall level of income. Our calculations back in December suggested subscriptions would raise around £16.5 million – plugging the new indicative fee levels into the same model gives just over £21 million. This is above the £19.9 million 2019-20 projected OfS income in the impact assessment.

HEFCE’s total running costs are currently estimated by DfE at around £25m. Adding our income estimate to the additional £6.6m of support promised by the government, makes the new regulator more expensive to run than the old body, even though – in passing functions to UKRI – it does less.

Will they ever tell you?

DfE claims that: “…we have also decided to amend the percentage distribution of costs across the different bands so that a lower proportion falls on smaller providers.”

As you can see from the visualisation, this is indeed what it has done. For the very smallest institutions, fees have shrunk by more than 40% – and there’s a cut for all institutions with fewer than 75 students.

However, what DfE doesn’t tell us is that it has applied what is (nearly) a perfect normal distribution curve to fee increases for institutions with over 100 students. The seventeen institutions currently with between 1,501-2,501 students would pay more than 50% more than the initial indication, but the seven very largest institutions (over 20,001 students) would pay only 32% more than was initially expected.

As larger institutions will have substantially more income, this is a regressive feature – and we are not given any explanation as to why it should be so.

You’ve got to know the territory

The fee levels have to go through parliament as a negative statutory instrument – under section 70 of HERA – along with any conditions, like the proposed discounts for “micro-provider” new entrants. Future year-on-year inflationary increases will also pass via a negative statutory instrument. This is a very small part of the overall HERA/OfS regulatory package but may prove particularly controversial. Both institutions and political opponents are liable to criticise what could appear to be a profligate use of institutional funding, otherwise known as students’ fees.

The sadder-but-wiser regulator

Regulation isn’t cheap, and the price keeps going up. As ministers keep piling non-regulatory functions in what was supposed to be a simple market regulator, income has to come from somewhere. And while it is good that the DfE is committing to continue to make a contribution to these costs, once again we see a larger share than expected coming from the sector.

We know that the designated bodies, and other agencies like Advance HE, are kicking around their own subscription models, having lost HEFCE income entirely. And we know that institutions will need to make considerable infrastructure investments in meeting OfS’s “live” data requirements as they emerge. All-in-all a “lighter touch” feels like it may cost a whole lot more than the old-fashioned cyclical approach.

Already mired in controversy around political intervention in its board appointments, the perception of rising cost is another element to what is looking like, through little fault of its own, a tough week for OfS.

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