Passing the regulatory baton from HEFCE to OfS

So short are memories in higher education policy making, that it’s easy to forget it was only five years ago that the government decided English higher education needed a “framework”.

This was realised at the time when tuition fees were tripled to £9,000 and the bulk of the block grant covering teaching was removed.

An operating or a regulatory framework?

The Office for Students (OfS) published its Regulatory Framework on 28 February 2018, so it’s now possible to make comparisons with HEFCE’s Operating Framework, designed collaboratively with the sector bodies, published in July 2013, and further developed since. OfS’s framework will become the defining document from 1 April 2018.

The language of HEFCE’s framework sets a very different tone from that of the OfS document. It speaks of a “partnership” between the student and the provider, rather than pointing to a “consumer contract”; of defining “gateways” for providers to enter the sector, but without threats of removing failing providers from the register; of the “building blocks” of a regulatory system in which more than a dozen sector bodies are “involved”. This last element in the creation of the original HEFCE Operating Framework is of immense importance. The Regulatory Partnership Group (RPG), which did the necessary groundwork, was made up of a range of sector bodies; some independent, some sector-owned, some statutory.

OfS has not been created to work cooperatively with sector bodies in the way David Willetts directed the then sector bodies to do. Instead, it becomes the sole regulator of English higher education. The balancing influence of HEFCE’s cooperating bodies has been broken up and reshaped. The independent QAA, formerly an RPG “partner”, becomes a designated body recommended to government by OfS, as does HESA.

Replacing the yearly Financial Memorandum

HEFCE continued to update what had been its annual Financial Memorandum, to take account of what former chief executive Alan Langlands recognised to be its “diminishing effectiveness”, as most teaching funding moved from the block grant to tuition fees. It was to diminish further when the research funding element of the block grant moved to Research England, within UKRI, as part of the shake-up of the sector’s regulatory architecture. However, there was an effort still to protect fundamental principles.

By July 2017, the letter to the sector was entitled Memorandum of assurance and accountability between HEFCE and institutions. The document begins with the statement that HEFCE’s role is to “act as a broker” between higher education institutions and the government, “ensuring the appropriate institutional freedom for teaching, research and knowledge exchange”. HEFCE’s responsibility has been to ensure that government funds are “used for the purposes for which they were given”, that there was appropriate “risk management”, and “value for money” was “being achieved”. In addition, HEFCE has to take account of the collective interest of students in how it operates.

So in the end-days of block grant funding, headline concerns of 2017-8 about value for money, and the demands of individual students that their personal fees should be spent on themselves, did not arise with reference to the remaining public funding. Each year, institutions presented their financial statements so that HEFCE could be satisfied that the “conditions of grant” were met.

The HEFCE Register

The Operating Framework of 2013 explained that the compilation of the HEFCE Register would mean not only listing existing higher education providers but designing a “gateway” for new providers to enter the English higher education system. The requirements that higher education providers have to satisfy depend on whether they want to do any of the following:

  • award degrees
  • use the terms ‘University’ or ‘University College’ as part of their name
  • receive student support (so students at that higher education provider, or on a designated course, can access student finance from the Student Loan Company)
  • receive public grant funding from HEFCE (a new process was introduced from 2014-15 for those Further Education colleges that are not currently directly funded, to enter the HEFCE-funded sector)
  • have courses validated by a recognised awarding body

There would also be a duty to have an access agreement with OFFA (not applicable to alternative providers), and the Tier 4 licence necessary to recruit international students.

The new register was to be the key point of reference. It was to provide information to students, but also give the public confidence that providers which deserved it were “appropriately recognised”. It was to include more than just those established universities, but also list those further education colleges who offered higher education, and were previously funded by HEFCE through the block grant. At the time, Willetts was anxious to “ensure that the rebalancing of funding from grants to tuition fees does not diminish the effectiveness of the current regulatory regime”.

From operation to regulation: a new kind of framework

The Operating Framework of 2013 set out the ways in which providers could be held to account, in the light of the diminishing effectiveness of conditions of grant and the Financial Memorandum. This meant adding supervisory, even “regulatory”, duties to HEFCE, and the word “regulator” began to appear more frequently on its website. Accountability would now make providers answerable to students, Parliament and the taxpayer, OFFA, the Home Office, and various research funders.

Introducing OfS’s Regulatory Framework last month, its chair Michael Barber claimed in his foreword that “the OfS and our regulatory framework are themselves innovative”. There would be a “powerful set of regulatory levers”, but at the same time a reduction of “unnecessary regulatory burden”.

This (apparently paradoxical) simultaneous tightening and loosening of the controls, was consistently noticeable. There will be a “single gateway” to a place on a new register. Initial conditions of registration must be met but thereafter the provider must, to remain on the register, deliver “particular outcomes”. The language throughout is of “compliance” with conditions of registration which will become “the primary tool that the OfS will use to regulate individual providers”, with the OfS determining which “general and specific ongoing conditions should apply to the provider”.

However, for newcomers: “The initial conditions of registration are designed so that providers do not need to have a track record of delivering higher education to be able to meet them.” Nor would they need to have a track record to gain degree-awarding powers. This went far beyond the provisions in the HEFCE register, which listed those alternative providers not in receipt of public funding, but which had ‘course designation’ to allow their students to access student loans.

HEFCE had a consistent policy of seeking to support providers in trouble, in order to encourage them to improve and to protect the interests of their current students. However, the description of the “monitoring” of registered providers by OfS, suggests that a climate of suspicion is to replace this supportive approach: “All providers will be monitored using lead indicators, reportable events and other intelligence such as complaints. These will be used to identify early, and close to real-time warnings that a provider risks not meeting each of its ongoing conditions of registration.” There will also be “random sampling” to check up on providers, and OfS will respond swiftly with interventions (which may include sanctions) if deemed necessary.

OfS will not be offering support to suspected providers, who “should look to other sources, for example to sector bodies for such advice and support.” These “bodies” are not specified, but elsewhere there is mention of the QAA, HESA, UKRI, the UK’s devolved administrations and their funding bodies, with which there is to be cooperation, but apparently not in the spirit of collaborative partnership which informed the RPG.

The apparent contradiction between the promise of easier entry and lighter regulation for new would-be providers, and the far more draconian powers set out in the OfS framework, remains to be resolved. On the face of it, it is the existing universities which will face harder scrutiny, while newcomers may be given generous room to establish themselves. Consistent treatment of providers was far more straightforward under the Financial Memorandum and its successors, with “conditions of grant” seen as leading to a strictly financial penalty, to be used very rarely, in a world-class higher education sector consisting mainly of established providers.

So what’s next?

A good many of HEFCE’s experienced staff will be moving to OfS, which will, like HEFCE, have its offices in Bristol, in a building not far from the campus of the University of the West of England. I wonder what will they have to consider, in moving from one approach and one set of rules to the other, from supporting and facilitating, to monitoring and punishing?

The foreword to the new regulatory framework spoke of “stewardship”. But replacing direct public funding of teaching through the century-old block grant with tuition fees, without – as Willetts admitted – thinking it through, has required the creation of heavy new machinery, capable of crushing what was formerly held in more protective and respectful hands.


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