Out of money? Out of time? OfS has a (new kind of) plan

As I type there are 396 providers of higher education on the Office for Students register, many of which are tiny, and some of whom presumably could go under any minute given the impacts of Covid-19.

Meanwhile the Institute for Fiscal Studies says that 13 UK universities “could go bust without a bailout”. So what do you do?

The answer to that question kind of depends on what sort of higher education provider we’re talking about. For large, mainstream providers (or “universities” to you, me and the Telegraph) the headline grabbing intervention is the “maybe there will be bailouts after all”, “but there will be strings attached” Department for Education restructuring regime covered elsewhere on the site – which is explicitly only open to providers in the Approved (fee cap) category. FE and sixth form colleges are subject to the special administration regime in place for further education.

For everyone else, there’s a real chance that they could collapse. And so alongside that restructuring regime, OfS has published its own consultation on an exciting new Condition of Registration. And in many ways, it’s really quite extraordinary.

It was the best of times, it was the worst of times

Enrolling on a course of study at a higher education provider is quite a risky business at the best of times, and involves a major investment from individuals. The general position of the government is that its system of autonomous, competing providers normally works well – but on the occasion that it doesn’t, its regulator insists that an appropriate safety net has been developed so you can be confident you’ll be able to continue and complete your course.

This downside to marketisation is nominally mitigated for by Student Protection Plans – a regulatory requirement introduced with the Higher Education and Research Act that are supposed to set out the risks to continuation of study faced by students, and make clear the plan if any of those risks came to be “crystallised”.

You’ll recall that in OfS’ own review of its initial registration process, it revealed that a large number of these plans were poor. But as it “would not have been in the interests of students to delay registration in so many cases”, it approved a number of plans that were “significantly” below the standard it would expect anyway – on the promise that those providers were told to resubmit improved plans following the publication of revised guidance by OfS.

That revised guidance never came, and those plans were never revised. A consultation was repeatedly delayed last year, paused for the General Election, and has now been indefinitely suspended – ironically because of a pandemic that has made these risks look much more likely.

After all, “some [providers] may close or cease providing higher education even in normal times”, opines the press release. “But the challenging circumstances created by the coronavirus (Covid-19) pandemic mean that some providers will experience particular financial difficulties and so the risk to students is currently increased”.

So as a kind of emergency measure, we learned back in June that OfS was going to swap out the previously planned consultation on new requirements for student protection plans for one on a single aspect of its planned proposals – so-called “market exit”.

OfExit stage left

First let’s look at what OfS is getting at when it talks about “providers that the OfS judges to be at material risk of market exit”.

Matters that might cause the OfS to reasonably consider that there is a material risk of a provider exiting the higher education sector include, but are not limited to:

a. where a provider asks to be removed from the OfS’s Register;

b. where a provider cannot demonstrate that it is likely to have access to sufficient funds to meet its day-to-day costs within the next twelve months, including where a provider’s ability to meet its day-to-day costs is likely to be reliant on specific factors and the OfS judges that there is material uncertainty about whether these will be delivered in practice. These specific factors might include, but are not limited to:

i. securing additional borrowing or investment;

ii. delivering significant business restructuring or other cost saving measures;

iii. the decision or actions of a third party.

Close watchers of the OfS registration process might be looking at this and thinking – hold on. To be on the OfS register in the first place – and to stay on it – in theory a provider has to be “viable” (not at material risk of insolvency within three years) and “sustainable” (sufficient financial resources to keep your promises for five years).

In other words, if a provider can’t prove it can pay its bills for the next year, students were told when OfS was set up that it wouldn’t let them operate. Now it’s saying – yeah, we’ll let them operate, but we’ll intervene. How odd. There’s not really been time for any material change in situation at a provider to take effect pre-pandemic – we sit comfortably within the five year window for “sustainability”, and just about in the three years for “viable” since the register was established. Any provider now facing trouble, we are forced to conclude, was judged as being in rude health less than five years ago – it wouldn’t be on the register otherwise. So much for “risk-led regulation”.

And anyway, if and when a provider does collapse – even if a student ends up moving somewhere else – aren’t they going to say “but this big regulator told me they were fine?” Won’t parents ask “if you knew, why didn’t you tell us?”

Enhanced protection

Next let’s look at the sort of intervention we might be talking about. Basically what OfS is saying is that in this Covid-19 era, its existing ongoing condition of registration C3 (student protection plans) is just not agile enough to allow for the sort of “rapid intervention” needed in these circumstances. Financial failure was assumed to come about through the slow, stately, progress of dwindling applicant interest – not the short, sharp, shock of Covid-19.

OfS says this is because condition C3 is underpinned by a provider’s own assessment of the risk of various student protection events occurring, and the measures necessary to mitigate the impact of those risks on students’ continuation of study. Tellingly, OfS says that a provider’s assessment of the risk of market exit does not always reflect OfS’s assessment, and such situations “can escalate quickly requiring immediate action that a provider may be unable or unwilling to take”, so condition C3 as it stands is inadequate.

Basically, what OfS appears to be saying is that where it thinks that a provider is in trouble – but that provider either doesn’t agree or at least won’t agree in public – it just takes too long to fiddle about with the back and forth of student protection plan approval.

So instead, the proposal is that OfS just says “look, we reckon you’re in trouble”, and then requires the rapid development of a new kind of plan, called a “Market Exit Plan”, that describes the actions if the provider collapses – teach out, student transfer, exit awards and unit certification, information, advice and guidance (IAG) for students, refunds and compensation and archiving arrangements that enable students to access evidence of their qualifications in the future.

The sting in the tale

Now clearly you may be thinking “if they’re in that much trouble, and the Student Protection Plan wasn’t up to snuff in the first place, some will presumably just ignore this (or not have capacity to do this) and collapse anyway” – and students would then be stuffed. I can’t find anything in the proposals that addresses this pretty obvious scenario.

You might also be thinking “why on earth create a new kind of plan” instead of just beefing up its power to direct Student Protection Plans. And there’s a little sting that explains. As we’ve argued countless times on the site before, one of the problems with this SPP regime is that being open and transparent to students about the level of risk to their continuation of study might create a “run on the bank” scenario. OfS describes this tension as follows:

The approval of a student protection plan under condition C3 triggers an automatic requirement for that plan to be published. Providers at material risk of market exit have expressed concerns about the consequences of this publication requirement. They have sought to avoid publication of information they consider could further damage their financial position by seeking approval for plans that are not sufficiently clear on all relevant points.

This creates a tension between the need to initiate early planning to ensure students can be protected if an exit were to occur, and the need to avoid precipitating an exit that would otherwise not happen. It is likely to be the case that the view of the OfS differs from that of a provider about when information about a potential market exit should be made available to students and others.

But the current requirement to automatically publish an approved student protection plan under condition C3 is hindering our ability to ensure that detailed planning takes place in a timely way because a provider may prefer to delay publicly setting out student protection measures that suggest an exit is likely.

And its solution?

We recognise that a provider may consider that the publication of its market exit plan would be likely to further damage its financial position if current or future students were to decide to study elsewhere because of the information contained in the plan.

The OfS will need to balance the needs of students for accurate and timely information with the interests of a provider that may be seeking to remain in business.

We are seeking views in this consultation about the factors the OfS should consider in deciding whether and when to require a provider to publish its market exit plan, or information about other student protection measures.

Yes, you read that right. To get around the fact that getting an honest assessment of risk that leads to a proper plan is hard to admit in public, OfS will create a new kind of plan that it will probably allow a provider to keep private – robbing applicants of the ability to see if their provider of choice is in trouble.

I have so many questions. If there’s a “Market Exit Plan” does the provider keep its legacy “Student Protection Plan” with a pack of lies at the start about risks? Or does it delete it? Can a student see the plan if the provider collapses? And if it does, is that plan worth the paper it won’t be written on?

Remember when OfS was set up, in that blaze of messaging around “student interest” rather than “provider interest”? Now it’s saying that if a provider is in trouble, it will take various steps to keep that a secret. Charming.

Trust us, we’re the regulator

There is a pattern of behaviour here. The document – like so many other OfS documents – is littered with a sense that OfS knows things the rest of us don’t, and that students just have to trust it. As every month ticks on, the notion that students or the public have the right to know things about risks inside providers gets chipped away at even further.

But there’s a much bigger problem with the proposal that we should think carefully about.

The truth about both the DfE restructuring regime and this secret OfS “market exit” plan proposal is that most providers will do everything they can to avoid both. In a small number of cases that might involve cutting waste, or renegotiating loans, or selling assets. None of it may be required if enough students actually turn up and stay in September.

But for most, surviving without these interventions (with a load of additional Covid costs) will mean cuts. We’re talking 24 hour libraries being quietly converted to 12 hour affairs. We’re talking academics being laid off, with consequent huge reductions to module choice and learning pathways. We’re talking cuts to study support, and welfare services, and careers provision. We’re talking ramping up the cost of coffee, and copying, and rent. We’re talking taking out the postgraduates that teach, killing off the capital projects, and turning on the heating ever later in the winter.

Eventually, the course and the provider are changed so much from what was promised – under the cover of a global pandemic – that they’re not really the course or provider that the student signed up for in the first place. The provision has “ceased”, but Trigger maintains it’s the same broom. Amazingly – this most obvious, glaring, massive set of risks to “continuation of study” being faced by almost every higher education student in the country this September, are not on the radar.

What is the point of the Office for Students again?