The OfS is currently consulting on its approach to charging fees for investigations.
Regulations were passed in December 2022 permitting it to charge such fees (the Higher Education (Investigation Fees) (England) Regulations 2022). The consultation itself sets out the circumstances under which the regulator would charge fees for investigations, and the way in which these fees would be determined.
What does the consultation cover?
These regulations conferred on the OfS the power to recover costs it reasonably incurs in conducting the investigation, where it:
- Finds that a provider is breaching, or has breached, any ongoing condition of registration.
- Imposes a specific ongoing condition of registration on the provider.
- Requires the provider’s governing body to provide information under registration condition F3.
- Recommends that, in order to mitigate an increased risk of a breach of a registration condition, the provider should take or refrain from taking any action specified by the OfS.
This power is separate to the power to recover costs where the OfS imposes a sanction on a provider for breach, such as a fine, suspension from the register or deregistration. Recovery of costs in those circumstances is covered by the Higher Education and Research Act (HERA) itself. So, by definition, the investigation fees covered by the current consultation relate to cases where the OfS decides a serious sanction is not appropriate.
What is the OfS proposing?
The OfS is proposing to recover the full costs of conducting an investigation (which it defines as “a careful search or examination in order to discover facts or other information” and which includes engaging with the provider and seeking information voluntarily), from the point at which it decides to begin an investigation up to the point it makes any of the decisions set out above.
If it decides not to impose any of these requirements, no fees at all will be recoverable.
Full costs include staff time costs, any fees paid to third parties and expenses, but not the running costs of the OfS unless those have been directly increased by the investigation.
What are the key issues?
There are a number of issues arising with the proposals.
Reasonable fees, efficient investigation
The Regulations limit the fees recoverable to those that are reasonably incurred, but give the OfS the power to determine the amount of the fees. There is nothing in its proposed approach that explains how it will ensure that those fees are reasonable. Indeed the proposal to recover full costs suggests it will carry out no assessment of whether the full costs are reasonable in the circumstances.
The OfS is under a general duty under HERA to have regard to the need to ensure it carries out its functions efficiently and effectively, but it has previously stated that this does not mean it has to achieve efficiency and effectiveness in practice. Therefore, providers may be being asked to pay for the inefficient and ineffective conduct of investigations, which is not in the public or student interest. The OfS should commit to ensuring it will conduct investigations effectively and efficiently, and publish the internal controls it will apply to make sure that this is the case.
Also, there is no commitment in the consultation or elsewhere for the OfS to ensure that the scope of any investigation goes no further than is reasonably necessary to address the concerns that lead to the investigation. Indeed, in the consultation the OfS states its belief that “there is no statutory or legal requirement for the OfS to meet any particular evidential test or threshold before [it] can open an investigation and/or compel the production of information”. As a result, the OfS may decide to undertake a fishing expedition that goes way beyond what is reasonably justified by its regulatory intelligence and seek to recover all those costs under its published approach.
Again, this is not in the public or student interest as it diverts provider resources unnecessarily. Assuming that is not in fact what the OfS intends to do, the OfS should publish a clear commitment to proportionate and targeted investigations, based on sharing transparently with affected providers what specific concerns it is investigating.
A perverse incentive?
The steps that will trigger an obligation to pay fees are extremely broad, including requests for information and the making of recommendations. In the consultation, the OfS makes the point that if it sought to recover fees only where it made a finding of breach or imposed a specific condition of registration, providers might be concerned that it would make these regulatory decisions solely to recover its fees. However, surely this as great a risk, if not a greater risk, in relation to the lower-level steps of requesting information and making recommendations.
If the decision facing the OfS is to recover no costs at all, because it has been unable to find evidence of breach, or to recover all of them by asking for some information or making a recommendation, what possible incentive is there for it not to find something to ask for or to recommend?
A right to represent
The costs could be significant and unlikely to be substantially less than in those cases that proceed to a sanction, as an underlying investigation into the facts will be needed in both. Current investigations in the sector (not caught by these proposals as the power to recover fees is not retrospective) have gone on for many months and there are, as stated above, no procedural safeguards requiring the OfS to act proportionately or transparently. The consultation includes a right to make representations on the costs, but providers may feel sceptical about the extent to which the OfS is likely to agree to reduce its own costs, when there are absolutely no negative consequences for it in refusing to do so and a financial shortfall if it agrees to do so.
This contrasts with the OfS’s statutory power to recover costs where a sanction is imposed where there is an express right of appeal to the First Tier Tribunal on the grounds that the costs are unreasonable. This disparity of rights leads to the curious outcome that providers who are sanctioned (because their breaches are severe) have greater rights and safeguards than those who are, for example, merely considered by the OfS to be at risk of breaching a condition.
Of course, the OfS makes the point that its registration fees do not cover the costs of investigations, except where those investigations do not lead to any of the four determinations covered by the regulations. But monitoring compliance with registration conditions is presumably what the registration fee was intended to be for. It is difficult to know what else a registered provider, as opposed to an applicant, is paying for. Yet the OfS wants to recover an additional fee simply for engaging with a provider or seeking information from them voluntarily. If that is the case, then the question arises whether the base registration fee should be reduced.