The £800k stealth tax on English higher education

A “stealth tax” will see the English higher education sector pay an extra £800,000 to the treasury in the 2019-20 academic year, and potentially the same in future years. But it was a lucky escape - initial projections from DfE would have seen this tax as nearer £1.3m.

This might not seem much in the grand scheme of things, especially when you consider the large sums often discussed in sector finances. But we know that some small providers will see difficulties in swallowing their subscription costs - especially when one considered the cost per student of subscription. Any indication that they are paying too much will make subscription fees even more unpopular than they already are.

Office for Students (OfS) registration fees are levied in order to cover the running costs of the regulator. As per section 72 of the Higher Education and Research Act 2017:

The OfS must pay its fee income to the Secretary of State except to the extent that the Secretary of State, with the consent of the Treasury, directs otherwise.

Fees keep rising, projections keep falling

Repeated rises in OfS registration fees since the idea was first mooted in a consultation have accompanied drops in the projections for total registrations. The last projection drop (from 508 to 464), detailed in the March 2019 DfE impact assessment, was based on in year figures from the Office for Students' registration process.

But based on registration figures published in the Chief Executive’s report to the Board on 31st March 2019, of 464 registration applications received 20 have already been refused, and a further 20 were incomplete and thus unlikely to be accepted. Add this to four applications from providers that have since closed and we see a total likely registration of 421 providers.

Three hundred and fifty two providers have been registered with OfS as of the date of publication. Working with the DfE projections of registrations within the student FTE-based bands set out in the impact assessment, we know the approximate size and shape of 53 of these missing providers still making their way through the registration process. A further 16 remain unidentified - for my calculation I have approximated their average fees as being equivalent to the lowest subscription band, though of course some may be new or micro providers and pay less, whereas others will have more than 25 FTE students an pay more .

Using only those 352 institutions already registered, and including discounts for 11 identified new providers (those that have never been funded, even for a designated course), the OfS would raise £25,116,137.50 from fees levied as set out in the statutory instrument. Adding in the 53 further institutions from detailed DfE projections (tables 14, 15, and 16 of the impact assessments) yields a further £1,885,050 (again including appropriate discounts). The final 16 institutions within the registration process would be likely to raise a little under £20,000, depending on their size and eligibility for new- or micro- provider discounts.

This gives us an estimated OfS registration income of £27,021,187.50 - £821,187.50 more than the £26.2m calculated by DfE as OfS running costs.

A conflicting DfE registration number projection within the same document (Table 8) would see total income of around £27.7m from the sector.

Cashback

The projected running costs for the Office for Students are £27.2m, of which £26.3m was to be found from institutional subscriptions. But under section 8 of the The Higher Education (Registration Fees) (England) Regulations 2019

The OfS may waive or refund part or all of any fee payable under these Regulations if it considers it fair and reasonable to do so in an individual case.

It remains to be seen whether, and how, the regulator will choose to lessen the burden it places on providers during these difficult times.