Jim is an Associate Editor at Wonkhe

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?

6 responses to “Out of money? Out of time? OfS has a (new kind of) plan

  1. Yes, there are all these problems. But we are in unusual times. The risk of a run on the bank is real. It is rational for the students but guarantees the outcome for the institution. The only way forward is that done for actual bank runs: the regulator comes in and runs the bank until some resolution for the customers is completed. As to the diminution of the nature/quality of the actual offering, perhaps your editor should look around at our economy and society, where the quality of every offering has been materially reduced by the coronavirus pandemic. There is nothing unique about the higher education sector. Get real. The OfS should operate like the FCA and the Bank of England, for sure. But students are going to suffer like everyone else in this coronavirus period.

  2. “I have so many questions”.  It’s a pity, then, that you didn’t have time to take up our offer of a background briefing yesterday.  So, to help your readers to a clearer understanding of our proposals, here are some of the things we might have talked about:
    1. The current situation is very challenging for some providers.  But it’s unnecessarily alarmist to suggest that some of them ‘could go under any minute’.  Providers are working hard to take action to mitigate the impact of the pandemic and our proposals would put in place a backstop to make sure students are protected if those efforts don’t come good.
    2. Providers’ financial positions change all the time, even in a pre-pandemic world.  They sometimes recruit less well than they’d expected, or aren’t able to put in place the borrowing they want.  So it’s normal for a provider to be in a different position compared to when it was first registered.  We act reasonably to allow a provider time to resolve these sorts of issues while taking steps as necessary to make sure students are protected while that happens.
    3. One of the most important things we’re asking about in the consultation is how we decide whether and when to publish information about a provider in financial difficulty.  We’re saying that the different interests here can’t always be resolved.  Applicants might want to know as soon as there’s the slightest concern about a provider; current students may not want any information published that could precipitate a disorderly closure while they’re in the middle of their course.  And our experience is that providers don’t want to say anything at all in public because they’re trying to save their business.  We hope students and their representatives will respond to the consultation and give us their views on how we should balance these competing interests.  This isn’t about ‘keeping secrets’ – but about being able to respond to challenging situations in a way which affords proper protections to students and applicants alike.

    4.  For some providers, the route through the challenges of the pandemic won’t involve closure, but will involve changes to courses, or more substantial restructuring.  Our current approach to requiring updated student protection plans works effectively for these circumstances – and we’ve approved new plans for some providers who are in this position. Now, more than ever, our regulation needs to be targeted where it’s needed and we’re focusing on cases that are likely to present the most risk to students.
    Our consultation is open for eight weeks.  If your readers want to ask us about these issues, or any others, they should get in touch.

  3. Just compare the guarantees available for those booking an expensive holiday with what is being offered up for students. Draw your own conclusions.

  4. This is what happens when you have a capitalist system in charge of the provision of higher education, only the largest organisations with economy of scale rather than quality will survive, ultimately giving the consumer less choice in the long run. All part of the Tory plan to make higher education elitist again.

  5. @ Susan Lapworth “We hope students and their representatives will respond to the consultation and give us their views on how we should balance these competing interests. This isn’t about ‘keeping secrets’ – but about being able to respond to challenging situations in a way which affords proper protections to students and applicants alike.” at the same time the legitimacy is being questioned is not particularly helpful . Also very brave (read not grown up) to pick fights with the press instead of asking for a reply article, or an amendment – I think it is very clear that the criticism has stung the OfS. With such attitudes, that are the hall marks of a sector senior management “new management” culture of style over substance I doubt you will A. get unfiltered student feedback, or B listen to what little you receive.

  6. It will be interesting to see the outcomes of the consultation and any new conditions of registration. However I am sceptical that any extra measures will actually provide additional protection for students. I’m sure the case of GSM’s failure is burned into the collective mind of the OfS and this action is partly in response to the limited way OfS could intervene, with looming possible failures due to the pandemic making this an even more painful memory.

    Why I’m sceptical is having dealt with a partner financial failure at my previous institution with market exit only being avoided when the assets were bought by another provider, is all well intentioned plans go out of the window when the money runs out and the administrators move in.

    This was in pre-OfS days but they had a detailed student protection plan, with many of the proposed features of the ‘market exit plan’, as a condition of course designation. Transfer of students to other suitable provision is a lot harder in practice (particularly mid-academic year) and administrators view students like any other unsecured debtors. Students who are potentially most at risk will still be the least protected, as they will be studying at Approved (no fee cap) providers who won’t be able to access the DfE scheme to support a smooth teach out.

    The only way I can see adequate protection for all students is the extension of the DfE scheme and the ability to appoint special education administrators akin to the FE insolvency regime. However this would add to the ever increasing amounts of regulations in the sector. Who would have foreseen that opening up the Pandora’s box of the free market for HE would have the opposite effect and led to such regulatory creep…

Leave a Reply