Everything in the Industry and Regulators Committee OfS report

At 95 pages (or 438 paragraphs) long, today’s report of the House of Lords’ Industry and Regulators Committee (IRC) – Must do better: the Office for Students and the looming crisis facing higher education – is far from the bellyaching about regulation it will most likely be painted as.

There is a lot of detail present about the way in which the Office for Students (OfS) works and could work better, specifically around quality, the student interest, sector relations, and political independence.

But we also find a focus on the financial sustainability of the sector, and an examination on the way the ideas and approaches of the Higher Education and Research Act 2017 (HERA) have interfaced with reality.

The sector, it turns out, is facing existential problems in nearly every sphere of activity. And, as Lord Hollick puts it:

it was evident throughout our inquiry that the OfS is failing to deliver and does not command the trust or respect of either providers, or students, the very people whose interests it is supposed to defend.

What is this?

Though the initial sector calls were for a Commons Education Committee inquiry as post-legislative scrutiny of HERA, the work of the IRC in teasing out the effectiveness of OfS as a regulator (and the impact of some of its regulatory choices) has been immensely welcome. On Wonkhe we’ve covered the oral and written evidence in some depth – watching proceedings unfold has been genuinely fascinating.

A report from a parliamentary inquiry is a serious and influential publication – government responses (usually expected around a month or so after publication) need to be considered and reflective, even if (as here) much of the thrust of criticism is against the grain of political instincts. For that reason, couching these criticisms in terms of effective regulation and sustainability is hugely important, and this is something IRC have done notably well here.

The recommendations from the committee can be characterised as addressing:

• The practice of regulation: wherein the general thrust is a need for OfS to be more transparent about what it is doing, more open to dialogue, and more conscious of regulatory burden
• The financial stability of the sector: focusing on the impact on students and on England more generally where a larger provider to fail, and recommending urgent work with aims radically opposed to what is seen as current government policy
• The nature of the key influences on the design of regulation: the committee is scathing about the lack of attention paid to actual students and their expressed needs, and quietly lethal about the over-close relationship between an independent regulator and the government.

The rest of this article broadly follows the structure of the report itself, and picks up key issues in roughly the places they occur.

The job of regulation

The place to start if you are attempting to measure how well a regulator is working is understanding its remit – the duties it is required to perform, and how it is expected to perform them. The statutory duties of the Office for Students are set out in HERA, but the IRC report suggests that these have been applied “inconsistently and unequally”.

In part, this is a problem with the way HERA is drafted. OfS is asked to “have regard to” various things with no sense of priority. There’s also no clear way in which the regulator sets out what it has had regard to, or how this has affected decision making. This means that the regulator has at least the opportunity to pick and choose – and it is the perception of the committee that it has chosen not to think as much about institutional autonomy or good regulatory practices as it might.

The recommendation is that OfS needs to be more explicit about the choices it has made (or failed to make) when updating the regulatory framework, and that it should get better at aligning with the Regulators’ Code. The latter is a non-binding set of regulations covering how to be a regulator, setting out how policies and processes should be developed, implemented and evaluated. There is also a suggestion that the government should be able to require OfS to demonstrate the ways in which particular objectives have influenced regulation, rather than simply allowing it to say it has had regard without providing evidence of this.

To give this a bit of context – the regulator has plans to take on new responsibilities about free speech, and sexual misconduct, in the sector. In choosing to use regulations to do this, it perhaps should have considered achieving the same goals without as much damage to institutional autonomy by reviewing the way providers manage their own activities and offering guidance and best practice to support them in doing so.

It may be, of course, that sharp regulation is the best way to achieve results. In evidence, OfS’ chief executive Susan Lapworth said progress regarding a voluntary statement has “not been sufficient or fast enough”. A forthcoming government Public Body Review of OfS could reasonably conclude that regulatory time and resources could be better spent focusing on the strategic issues facing the sector.

Closing this section, the report notes that OfS often acts as if it is the only regulator involved in higher education in England – but as anyone involved in degree apprenticeships will tell you this is far from the case. The committee heard that the minister of state for higher education (Robert Halfon) was aware of the issues caused by multiple competing regulators and regulatory systems – indeed, he called for “Operation Machete” (a slightly over-the-top Jim Hacker-esque metaphor for a plan to cut red tape). The ask here is for further detail on this operation, including a timeline – and the steps that will be taken to clarify matters and streamline responsibilities.

Higher finance

In the judgement of every sensible observer – from the National Audit Office (NAO) to the Public Accounts Committee to, er, Wonkhe – the sector is in significant financial peril. Despite this, the official OfS position is that the aggregate financial position “remains sound” (though with an “increasing financial sustainability risk for some providers in the longer term”). In these days of rising costs (including rising pay costs), declining real-term value of income, difficulties in accessing affordable borrowing, increased capital expenditure, and brutal competition, it is fair to say that the committee was unconvinced.

Indeed, this concern is put in the starkest of terms:

Given the scale of these challenges, we were surprised by the OfS Chair’s assertion that the sector’s finances are “in good shape”. This is not an assessment that we or most of our witnesses share. In our view, this remark is indicative of the insufficient attention the OfS

has paid to the financial risks facing the sector.

The recommendation here is a review of the way higher education is funded, setting sustainable funding and delivery allowing institutions to make long-term plans – something that feels tailor-made to slip into an election manifesto.

In the interim, what can OfS do to help? Well, the committee thinks that two things are standing in the way of a more realistic examination of sector finances – the logic of the “risk-based” monitoring approach, and the punitive nature of regulation.

To unpack that, it is the stated goal of OfS to spend more regulatory time where it is best needed – meaning that ostensibly (based on comparatively minimal monitoring data) well run providers could go years without regulatory input. The committee feels that such an approach could lead to an artificial limit to regulatory knowledge about some providers, and that earlier and more frequent conversations could help spot problems sooner. This could, of course, happen now by invitation – but rules around “Reportable Events” mean that providers are reluctant to independently engage with OfS on matters of concern for fear of regulatory sanction.

This unwillingness to engage could endanger both providers and the students that are studying with them. Greater and earlier engagement with the regulator could allow for earlier intervention, including support for mergers and consolidation – it is noted that the recent intervention when ALRA suddenly lost financial viability seemed effective (OfS was able to help place students in suitable alternative provision when that provider folded, apparently at very short notice), but that such fortunate circumstances may not arise where a much larger traditional university has to close.

Damningly, the government is charged with identifying whether there is any real strategic oversight of the higher education sector’s long-term financial stability, and in commissioning such a function should this not be the case.

Value for money

Students are rightly concerned about getting “value for money” in their higher education experience, and promoting such “value for money” (alongside quality, choice, and opportunity) is a duty placed on the OfS by HERA. The problem is, nobody has yet managed to clearly define what “value for money” actually means in these contexts.

For OfS, this concept is currently couched in the measurement of “student outcomes” – broadly (via the B3 conditions of registration) whether students continue in and complete their chosen courses, and whether they progress from these to “positive destinations” such as a graduate job. But when you talk to students, like former board member Martha Longdon:

value for money is incredibly hard to measure because it will differ from student to student.

She cites the example of an 18 year old looking for the traditional university experience, as against an MBA student with clear, career-related, aspirations, and notes (in a theme that returns throughout the report) that little effort has been made to investigate alternative formulations of value for money:

because it does not align with the government’s steer, which emphasises the importance of jobs and pay.

Higher education is an expensive investment at any point in a person’s career – but the committee felt that the outcomes-based proxies used by OfS are “simplistic, and narrow”. In particular, they take limited account of the impact on outcomes that comes from a students’ personal background. The recommendation is simply that OfS does the work – in collaboration with stakeholders, including students – to come up with a better definition that takes these aspects into account.

Likewise, the report is clear that the advice offer to prospective students needs to be more transparent – the requests of OfS here include:

clear, digestible general information on the approximate contact hours they can expect to receive; the balance between online and in-person learning; the likely cost of living as a student on the course as it is running, including accommodation and hidden course costs; and the potential costs of student loan repayments over time for those on average graduate earnings.

with providers held to account for providing this information, and regulatory consequences for those who do not.

Quality banter

OfS has, to most observers, been spoiling for a fight on quality assurance for a while now – and not exactly looking like a serious regulator in the process. The way in which the relationship with the former Designated Quality Body (DQB) the Quality Assurance Agency for Higher Education (QAA) has imploded looks more like a spectacular own goal every day.

To go back to the legislative intentions, the preparatory work to HERA was clear in intending QAA (or a similar body) to continue in an existing role in quality assurance broadly as it has in the past – supporting internal reviews of quality within providers, and carrying out a system of transparent and independent cyclical reviews. This is a state of affairs broadly comparable with international best practice in quality assurance.

Impartiality – separation from sector interests and the government – was seen to be absolutely key in this relationship – and though OfS was given the right in HERA to take the work in-house in exceptional circumstances it was widely expected that an external body (again, most likely QAA) would take on the DQB role. And this it did, through to 2022 – when it withdrew consent to be named as such, citing breaches of international quality norms (namely the European Standards and Guidelines (ESG)) as putting other work in jeopardy.

Two of the stumbling blocks were plain odd – OfS had not permitted QAA to routinely publish commissioned reports, and refused to allow it to use students on review teams. The third was more fundamental, OfS had moved away from the expected cyclical review approach (reviewing all providers in turn) to using a more risk-led approach meaning that some providers would never be inspected.

That’s the QAA angle, anyway – OfS’ claimed that QAA just wasn’t good enough at doing the job, albeit without really providing clinching evidence of that. There’s five years of QAA reports underpinning historic regulatory decision making for one thing. The committee witnessed a whole series of slightly unedifying back and forth on this – musing that

the circumstances of the QAA’s de-designation remain unclear and contested, and the difficulties we faced in getting a clear account of these issues is a problem in and of itself.

The recommendation here is that OfS needs to align the quality and standards work it does to international norms, making the adjustments needed to eventually allow the QAA or another independent ESG-compliant body to take on the role. And the committee also wants to see an annual estimate of the costs and effectiveness of OfS doing the DQB work itself.

Quality does not exist in isolation – OfS is further tasked with improving the quality of support and guidance offered for providers entering the sector, and with reviewing whether an outcomes-led approach is suitable for lifelong loan entitlement-style short course provision.

Students in the office

During evidence the revelation that the OfS student panel had been put under political pressure to follow a house line was genuinely startling – something that has fatally undermined the OfS claim to be acting in the interest of students, and a circumstance that really needs thorough investigation. The bravery of former panel members in speaking out – Martha Longdon, Francesco Masala, Ruth Carlson on Wonkhe, and an anonymous student in written evidence who named one senior appointee as the source of problems, is to be commended.

The committee was as alarmed as you would expect, noting:

It was deeply concerning to hear allegations that the OfS issued veiled threats regarding the future of the Student Panel because members raised issues deemed to be of importance to students. This is precisely the sort of activity that the Student Panel would be expected to do, and it suggests that the OfS is not open or responsive to the feedback it receives from the panel.

OfS has since undertaken to review the work of the student panel to ensure it is working effectively – and the committee feeds into this review the need to ensure that the panel can continue to reflect student (rather than OfS or government) interests and priorities. We also get calls for OfS to open up more work to student co-creation, to annually report on the impact of student input, to re-engage with the National Union of Students, and to appoint an additional student board member.

Authentic and meaningful interactions between regulators and students are essential in determining what is in “the student interest” – many witnesses were concerned that OfS was more clearly aligned with the interests of ministers. Freedom of speech, for instance, was characterised as not being a student priority, with parallels drawn between the intensity of that work and the less visible action on the cost of living and on wellbeing. On those grounds the panel’s recommendation for a scoping exercise on defining the student interest is to be welcomed as a positive step towards making this work.

A prescription for regulatory burden

For all the initial noise about a “responsive regulator”, what the sector has seen emerge from Nicholson House has been quite prescriptive – de facto specifying the way in which providers need to prioritise and perform certain activities in a way that is almost diametrically opposed to the spirit of HERA. The committee has picked up on the regulatory burden that this has brought, citing the frequent and unexpected demands for data as a key facet.

The DfE Data Reduction Task Force was initially tasked with reviewing the full gamut of data demands from various regulators to address duplication – though the momentum of work was lost during Andrea Jenkyns’ brief ministerial tenure. In calling for the resumption of this work the committee joints many others in and around the sector. OfS, for its part, is charged with providing clarity on why data is required and how it is to be used – and with publishing detail on the way it approaches regulatory investigations on a general and specific level.

A part of the perceived burden may well be the perception that OfS will not only clamp down on but actively seek to punish any infractions. As the committee puts it

Relations between the OfS and the higher education sector have been poor, to the point of adversarial.

And this poor relationship has caused the effectiveness of regulation to suffer. Though the claim that this is a necessary corrective to the sector’s cosier relationship with HEFCE is examined in the report, and recent attempts at a reset have been welcomed, the two-way communication between sector and OfS is still seen as lacking. The committee calls directly for an annual feedback mechanism – a survey and an annual meeting – driven by sector priorities as well as regulatory needs.

More notable is a call for OfS to re-engage with providers – to actively seek the context that underpins what is being seen in the data, to identify and share good practice and to ensure each regulated provider has a named contact with whom they meet at least annually. One of the principal issues providers have faced with OfS is the loss of the much-appreciated HEFCE regional team approach – perhaps those days are returning.

Certainly, the 12 per cent increase in registration fees may provide that kind of headroom. The committee was as unimpressed by this increase as the rest of the sector – especially as much of the additional costs look set to directly translate into additional regulatory burden (free speech, however OfS does the DQB role). The simplest recommendations are often the most painful – here the committee asks that the government examines how OfS uses resources and how it is held to account.

Fellow traveller?

Underpinning a lot of what IRC has set out is a sense that regulatory capture has occurred, but with the government (rather than the sector) doing the capturing. To be scrupulously fair, the line OfS walks is difficult – it has a statutory duty to “have regard to” (that phrase again) guidance from the secretary of state, while maintaining independence from government.

It’s been noted that government guidance to OfS has been far more prescriptive, and that the volume has greatly increased, in comparison to relationships with other regulators. The recommendation here is that such guidance should be limited to “higher level strategic input” – setting broad parameters rather than micro-managing regulation.

But there is also a sense that OfS has been particularly keen to align with government priorities. Whether this comes from ideological similarity, pragmatic self-preservation, or undue influence, the fact that this perception is widely held is rightly a concern. The independence of the regulator should be beyond reproach.

As we have seen “political headlines very quickly translated into OfS policy” (the examples cited include freedom of speech, grade inflation, “low quality” courses”, and that bizarre spelling and grammar thing) the regulator needs to take steps to demonstrate it is indeed independent. OfS, in response, notes the way it pushed back successfully on some (but not all) changes to the National Student Survey and unsuccessfully on London weighting in the funding model.

Here the committee recommends that the government and OfS “set out the steps they each intend to take” to support improvements in the perception and actuality of regulatory independence.

None of this is helped by having an OfS chair that takes the government whip in the House of Lords. Though it would have helped ease concerns if James Wharton had chosen to resign the whip on appointment, he chose (and was within his rights to have chosen) not to do so – despite a generally accepted convention that chairs of independent bodies put themselves beyond reproach in this way. The committee recommends that the government should consider making this convention (or “matter of principle”) a formal requirement.

What next?

Though reports from parliamentary committees can be and sometimes are ignored, the convention is that the government (in the form of the relevant department) will make a response, most likely within the next six weeks. The same could reasonably be expected from the Office for Students – a holding response welcoming the report has already been issued.

The committee has done an impressive job in making thoughtful and practical recommendations. A strength in these things is the ability to reach conclusions that are difficult to sensibly argue against – it is notable (though this point will be litigated in some corner) that the committee or those who have provided evidence to it have not argued for less regulation but for more effective regulation.

In particular, the lines on independence and the student interest should give immediate pause – but the recommendation that work needs to begin on the making way the sector is funded more sustainable should, just ahead of election year, have a lasting impact.