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Higher Education Regulatory Reforms

Volume 566: debated on Thursday 11 July 2013

Today I am announcing reforms to how higher education in England is regulated.

The White Paper “Students at the Heart of the System”, published in 2011, set out a plan to transform higher education, to ensure it was placed on a sustainable footing, to deliver a better student experience, to promote social mobility and widen participation, and to create a more responsive higher education sector in which funding follows the decisions of learners and where successful institutions will thrive. The funding reforms, which rebalanced funding from grants to tuition fees, came into effect in the 2012-13 academic year. The regulation of higher education needs to be adjusted to reflect these reforms.

The reformed regulatory system for higher education I am announcing today has been developed by the Higher Education Funding Council for England and the Student Loans Company through the Regulatory Partnership Group, working with the Government. The reformed regulatory system ensures accountability for public funding, protects the collective student interest, gives priority to quality improvement, safeguards institutional autonomy, and sustains the reputation of English higher education.

The higher education sector has a long tradition of successful independent regulation and also regulation shared between Government and the sector. The funding council’s statutory independence is a key feature of this system. The funding council’s independence has helped to sustain academic freedom and institutional autonomy, features that are critical to the continued success and international standing of English higher education. In adjusting the regulatory framework this successful independent regulation has been protected as a vital national asset.

The funding council and the loan company do not work alone and have developed effective relationships with other bodies including the Quality Assurance Agency, the Office for Fair Access, the Office of the Independent Adjudicator, the Higher Education Statistics Agency, and the Universities and Colleges Admissions Service.

As part of the reforms, the working of the regulatory system will be set out in an operating framework which the funding council will be publishing shortly. The framework will be instantly recognisable to many in the sector as much remains largely unchanged. It affirms the value of institutional autonomy and sets out transparently the accountability and regulatory requirements that protect the student interest and public investment.

HEFCE will consult the sector on a new financial memorandum that will support the operating framework incorporating necessary changes that the reforms and new priorities demand. The framework incorporates changes which have been a result of separate consultations by Government, the funding council, and the Quality Assurance Agency.

Flowing from the White Paper “Students at the Heart of the System” and the funding reforms, there are a number of new or reformed elements. These reforms are:

Placing the funding council in an oversight and co-ordination role;

Establishing a register of higher education provision;

Introducing a statement of higher education institutions (HEI) designation conditions;

Updating the financial memorandum;

Reforming student number controls;

A new designation system for alternative providers;

A student number control system for alternative providers; and,

A designation resolution process.

The first reform is placing the funding council in an oversight and co-ordination role. This is a complex, but highly necessary function that will ensure proportionate regulation across all higher education providers and co-ordinate the regulatory activity of a number of bodies that are variously constituted as Government agencies and independent bodies. It will involve the funding council:

Acting as registrar;

Working with higher education providers, agencies, representative bodies and the NUS, to monitor systematically observance of the conditions associated with operating in the system, with a focus on protecting the collective student interest;

Taking a lead in working with partners to identify and address issues within higher education providers and take appropriate remedial action; and,

Monitoring the ongoing appropriateness of the regulatory system, changes in the broader context, and new risks as they emerge.

Next, I have asked the funding council to establish a register of higher education provision. Good, high-quality, timely, and reliable information is key to enabling students to make the right decisions on their education. It is also important that those institutions that fulfil requirements that provide confidence to students and the public are appropriately recognised.

The register of higher education provision will therefore act as a consumer safeguard. The register will give information on:

The constitutional/organisational status of each higher education provider;

How the higher education provider is funded; and,

What the provider is committed to do—this might include, but not be limited to, provision of information, quality requirements, financial management, governance, complaints handling, and fair access.

The third reform is introducing a statement of HEI designation conditions. Regulatory requirements on higher education institutions are currently primarily applied through the funding council’s financial memorandum which applies conditions to grant funding and establishes clear accountability for such funding. This arrangement will continue. From academic year 2014-15 onwards it is my intention that similar conditions will also apply to HEI automatic course designation for student support. This ensures that the rebalancing of funding from grants to tuition fees does not diminish the effectiveness of the current regulatory regime and the confidence this provides to students and the public. It also means the regulatory burden is minimised as no further requirements are placed on institutions than currently exist.

To make this change I will be updating the education (student support) regulations. BIS will discuss the details of the amendment and its implementation in practice with representatives of the higher education sector. Importantly, once the regulations have been made, BIS intends to delegate to the funding council the function of designation of courses at higher education institutions for student support purposes. This continues the existing protections that institutions enjoy through the funding council being at arm’s length from Government.

Over the next academic year the funding council will be consulting on an updated version of the financial memorandum, informed by extensive discussions the council has already held with higher education representatives and other interested bodies. I understand that the proposed changes are limited, with the most significant issue for consultation being new arrangements to manage the risks around financial commitments. These arrangements are important for sustaining confidence in universities in the capital markets.

The funding council is already consulting on reforming the student number control system for HEI. While continuing to exercise prudent control of the overall higher education budget, student choice is being increased through our tariff policy and the consultation on a flexibility margin for 2014-15. The tariff threshold has been reduced to ABB or equivalent from 2013-14 which frees around one third of places from number controls. These policies will allow more students to study at their first choice institution.

Alternative providers are an important part of increasing choice for students. The sixth reform is to the designation system for alternative providers. Specific course designation at alternative providers allows eligible English-domiciled students on designated courses to access loans and grants from the Student Loans Company—with the maximum fee loan being £6,000 per annum. This widens student choice and strengthens the forces that drive innovation.

At the same time the Government are committed to ensuring that there are robust processes in place to protect the interest of students, the reputation of UK higher education, and the public investment. Following a Government consultation, existing and new alternative providers will now have to meet stronger requirements on quality assurance, financial sustainability, and good governance. We will also expect that the collective student interest is served through this process.

To accompany the strengthening of specific course designation for alternative providers we are also planning to introduce a system of student number controls for alternative providers. This will be introduced from academic year 2014-15.

Finally in the highly unlikely event that a higher education institution or alternative provider does not meet the conditions of course designation in respect of student support funding there is a risk that the course will no longer remain designated. To protect the students at an institution where this occurs I have asked the funding council working with Government and the wider sector to look at options for developing a designation resolution process. This should place the interests of students at the centre of the process.

Taken as a whole these eight higher education regulatory reforms constitute a package of measures, alongside the previous rebalancing of funding, to ensure higher education is placed on a sustainable footing, that students have a better experience, to promote social mobility and widen participation, and to create a more responsive higher education sector in which funding follows the decisions of learners and where successful institutions will thrive.

I am today placing copies of my letter to the funding council in the Libraries of both Houses. I am also placing copies of the operating framework in the Libraries of both Houses.