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Public Accounts Committee calls for more regulation

Today the Public Accounts Committee has released their report ‘Regulating Financial Sustainability in Higher Education’. It calls for greater regulation of HE after the new funding regime begins and raps BIS on the knuckles for getting their sums wrong over fees. It could make for uncomfortable, but probably not devastating reading in some parts of Government. And it adds weight to those who’ve been arguing for a long time that the Coalition’s fees policy doesn’t add up. This post has a look at some of the headlines from the report.
This article is more than 13 years old

Mark is founder and Editor in Chief of Wonkhe

Today the Public Accounts Committee has published their report ‘Regulating Financial Sustainability in Higher Education’. It calls for greater regulation of HE after the new funding regime begins and raps BIS on the knuckles for getting their sums wrong over fees. One solution it floats is a cut in student numbers – a policy likely to be unpopular with many, and indeed even as a suggestion is sensational enough to make the front page of this morning’s Guardian. The Public Accounts Committee is more influential than most Select Committees, so it could make for uncomfortable, although probably not devastating reading in some parts of Government. But it adds some serious weight to the argument that the Coalition’s fees policy doesn’t add up, which many of us have been making for quite some time.

Let’s have a look at some of the headlines in the report:

From 2012-13 onwards, the change in higher education funding arrangements will require a new system of regulation and accountability. It is unclear however whether this ‘light touch’ approach [of the funding council] will be fit for a more uncertain financial environment for institutions.

It’s clear that the forthcoming white paper will address regulatory bodies, but it seems that there is little appetite for a Browne-style all-powerful Higher Education Council. How can there be proper oversight over HE in a way that doesn’t grate with free-market ideals that David Willetts is so keen on bringing to HE? With HEFCE only funding a limited amount of the sector, and not putting any money at all in to other parts, could new legislation give them greater regulatory powers? Think ‘Ofuni’. But to truly meet this need, funding and regulation would need to be entirely separated which means new quangos – hardly a Coalition first choice.

The transition to new funding arrangements will create new risks to the financial health of institutions.


The Funding Council’s capacity to respond to difficulties at institutions will be stretched in the new environment.

The report outlines the risk of leaving HEFCE in charge of responding to institutional ‘difficulty’ when they themselves are under substantial financial and administrative pressure. A good point that should be taken on board.

A market-based environment is designed to provide opportunities for existing institutions to expand and for new providers to enter the market. At the same time, some institutions may shrink and possibly close or even fail.

The Committee suggest that for the 2011-12 academic year, BIS and HEFCE should develop contingency plans for protecting students, and the taxpayer, should an unexpected institutional failure occur. Sage advice.

Students will need information to assess and compare the value of studying at different institutions, and to make an informed choice.

The Committee make the point that HEFCE’s value for money activities do not look at the value for money of institutions. It recommends that BIS should ensure that appropriate measures are put into place to ensure applicats make informed choices for the 2012/13 academic year. No one is going to be happy if HEFCE starts assessing universities value for money in a consumer-facing way – unless they are given a beefed up regulatory/public-facing role. It’s hard to see how this could happen without the legislation to do just that. Maybe the Committee knows something we don’t?

We do not accept the Funding Council’s practice of not disclosing which institutions are at higher risk for a three year period. The Funding Council needs to strike a different and better balance between the interests of institutions and those of prospective students.

It seems only right and fair in a ‘market’ that students and prospective students have an accurate and up to date picture of an institution. However, a public ‘at risk’ register could have dramatic and unforeseen consequences for affected institutions. This needs to be handled very carefully and the Committee accepts that a ‘graduated scale’ that distinguishes those facing insolvency from those that have other high risks might be more appropriate. Public disclosure in this environment must be led by what is in the students’ interests. It also raises questions over the role of HEFCE – without further regulatory powers, it would seem incongruous if they were to manage the public risk disclosure process over institutions they did not fund and had little or no regulatory power over.

The Department faces a potentially funding gap of several hundred million pounds if the fees set by institutions significantly exceed its expectations. So far, evidence from those institutions which have declared their fees for the 2012-13 academic year suggests that its forecasts were too low, increasing the cost to the taxpayer of providing student loans.

We’ve been saying this for a while and its good to have the weight of the Public Accounts Committee behind this argument, albeit at this very late stage. The report suggests that BIS assess available options to plug the spending hole, like maybe finding some more money for the sector. Or most controversially – by reducing student numbers. But there’s really not a lot of appetite for either.

Today shows us just how overdue this white paper is. The longer the delay, the harder it will be for David Willetts to regain the initiative. And he can be sure the Public Accounts Committee won’t be the last people to rain on his parade while we wait, and wait, and wait.

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