Are we protecting students from the risks inherent in new providers?

For a brief moment last weekend, online betting aggregator Oddschecker had Jesse Norman - Financial Secretary to the Treasury and MP for Hereford and South Herefordshire - as the favourite for next Conservative leader.

Jim is an Associate Editor at Wonkhe

Those odds had fallen back quite a bit last time I looked, but it was nevertheless interesting to see Norman’s piece in the FT on the same day, which argued that our public debate “remains trapped in a sterile tussle about whether more university students is a good or bad idea” when we should instead “move on and ask more fundamental questions about the deeper function, effectiveness and purpose of much of UK HE.”

It’s an interesting piece – not least because, having just returned from a study tour to the Scandis, his argument that too much UK higher education reflects ideas that originated in the 12th century resonates:

The point is not that there are “too many students” or “too few jobs”. It is that too much UK higher education still reflects ideas about abstract thinking, elite education, vocation, class and wealth that originate in the 12th century, with its focus on classical definitions of learning, the trivium and quadrivium, and the works of Aristotle.

That tradition has great merits. But it is just one. Now we need to look more closely at the best international models, from Olin College outside Boston, making engineering more inclusive, to Tilburg university in the Netherlands and the “Learning Factories” in continental Europe, which emphasise problem solving.

Handily enough, Norman has a great example in his own backyard. The New Model Institute for Technology and Engineering (NMITE) in Hereford, which after a long incubation period finally opened its doors to students last September, offers (for the time being) a single course – an accelerated three-year Masters in Integrated Engineering:

Students perform hands-on work, ‘learning-by-doing’ in small teams on intensive three-week modules. A constant flow of real-world challenges is set by real employers. The result is that they learn both academic content and professional practice from the start.

And its admissions policy presents a challenge both to tradition and to his friends over at DfE’s proposals on minimum eligibility criteria. Noting that most universities use academic entry requirements to “prime high academic standards at graduation”, he points out that

NMITE works the other way round:

Of course, students must show they have the ability to pass the very demanding masters course. But instead of grades, the institute focuses on five personal qualities: grit, curiosity, passion, creativity and collaboration. The goal is to recruit highly motivated team players who can deal with adversity, who learn and think independently, who can work imaginatively through problems and have deep interests.

It is already striking how this approach leads to much greater inclusiveness and massive cognitive, socio-economic and geographic diversity. Sixty per cent of our students do not have a maths A level; a quarter do not have A levels at all. Yet the dropout rate so far has been 3 per cent, half the sector average.

It’s all well and good. But what Norman doesn’t say is that its three per cent drop-out actually appears to be one student in a cohort of just thirty in its “Pioneer cohort” that enrolled last September – which may not be the best basis on which to calculate a robust non-continuation rate. It’s not at all clear whether a mooted January intake actually materialised.

As we’ve noted before on the site, if you argue that this kind of innovation can’t really be done inside a traditional university, a strategy of encouraging new providers makes sense – but getting something like this off the ground isn’t easy. OfS might have smoothed out its processes and “sandboxed” some of its expectations, but there’s still financial viability to consider – so even if the regulatory machinery is relaxed about academic track record, students still need to weigh up the risks of enrolling at a provider without a financial track record, and we should do all we can to protect them from those risks.

Timing hasn’t been especially helpful – NMITE said to me that in common with most other institutions, its early plans were impacted by the pandemic – but that it is now advancing its plans to grow, adding:

We were excited to be named as an exemplar of an innovative new provider in the Levelling Up White Paper and have received support from politicians in parliament during recent weeks. We are tremendously grateful for this support.

Our finances are sound; since we welcomed our first cohort in September, a second followed in January 2022 and a new cohort will join in September 2022; we will also have new programmes starting in 2023; our Centre for Advanced Timber Technology (CATT) is already proving its value in terms of new programmes and standards in industry collaboration. We therefore move relatively swiftly from a small, one course provider to a multi-course institution which of course augurs well for the future.

Hopefully recruitment will pick up and the growth plan will work. But a poke around in its finances does raise some interesting questions.

In 2020-21 NMITE had operating expenses just short of £7 million, a staffing bill of just shy of £3m and a £220K bill for its senior staff member. But because it’s an Approved (fee cap) provider on the OfS register, its (home) fees for the Accelerated MEng Degree are £7,200 per year. To cover a £7m bill would need almost 1,000 of those fee cheques, the staff bill would need 400 fee cheques and the senior staff member alone uses up over 27 fee cheques from the 30-strong pioneers.

Maybe the Student Protection Plan is right that a “realistic and incremental approach to student number planning serve[s] to mitigate these risks” and maybe there is untapped demand for what amounts, so far, to a single programme provider.

It may well explain why the SPP rates the likelihood of students not being able to continue with their studies because NMITE is unable to operate as “medium”, which it explains is:

…due to the recognised risks associated with new institutions, particularly in their first few years of operation.

Later in the SPP we’re told that anything less than 50 students in year 1 would represent a “point of failure” (and now thanks to Covid and poor performance in Y1 there’s catch up to be done off the back of the sunk expenditure) and the targets are then 175 new students and 250 new students in subsequent years.

As usual, “teach-out” is listed as the magic bullet if the place failed – although on the assumption like at ALRA) that wouldn’t actually be possible, it then talks about facilitating transfer or direct entry to another provider – which would presumably be very tricky given how different and innovative its model is.

It’s certainly notable that the accounts say that detailed reviews of the institution’s financial position have been undertaken and remain ongoing and these have led to a number of post-year interventions that don’t appear as listed mitigations in the SPP. These include an organisational restructure to “reduce costs and re-shape the organisation to leave it better equipped for its fully operational phase”, a “reduction in planned expenditure across most cost categories which will remain in place for the following year”, the production of a revised “sustainability plan” which will chart a “new path to long term financial sustainability” and “the development of new programmes, a re-set student population growth trajectory and revised plans for investment in marketing and student recruitment activities.”

Applicants might also be concerned that:

In April 2020, NMITE received the final tranche of funding from the DfE (£4.5m). Budgets for 2020/21 demonstrate that this funding will provide sufficient cash resources for at least the next 12 months (Charity SORP).

Or was it final?

In the “going concern” section of the accounts, we are told that:

…Additional financial investment from government was secured in February 2022 to cover the full working capital requirements of the new sustainability plan.

…which is later detailed as…

NMITE has secured long term financial support in the form of new loans from the Department for Education to cover the full working capital requirements of the new sustainability plan.

A look at its page on Companies House website tells us that NMITE seems to have signed a “mortgage” style deal with DfE on all its buildings. You might have thought, given funding it has already had, that there’s already a Treasury interest on its assets – but it’s clear this backs up the loan.

It’s great that there’s some HE innovation here and let’s hope that growth plan succeeds. But nevertheless, we’re still left with a number of questions. There are clear risks here – but are they clear to prospective students? Why hasn’t the SPP been updated? Which scheme does the (new) DfE loan come from? Will more loans be available in the future if required? Does this represent special treatment for Hereford because DfE has already invested so much money there? And why wasn’t a loan like this available to ALRA?

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