The questions that will and should be asked about franchising

Take a look at some of the recent investigations the House of Commons Public Accounts Committee has conducted: HS2, flooding preparedness, the procurement of PPE during the pandemic.

Big, contested national projects with such volume of public investment that wrapping your head around what’s actually going on is quite an undertaking. And if that’s not true of England’s student finance system, then what is?

Today sees the committee get its claws into the matter of “potential fraud and abuse” in the student loan books at franchised higher education providers, following the National Audit Office’s explosive report in January. It will be grilling Department for Education (DfE) permanent secretary Susan Acland-Hood, Office for Students (OfS) chief executive Susan Lapworth, and Student Loans Company (SLC) chief executive Chris Larmer.

The committee is one of the most important parliamentary mechanisms for holding the government to account – its previous stock take on matters relating to higher education saw both DfE and OfS come in for serious criticism.

So what should we expect the Public Accounts Committee (PAC) to ask – and what answers are needed?

Questions, questions

We saw with the House of Lords Industry and Regulators Committee inquiry that – revelations about the treatment of the OfS student panel aside – committee hearings themselves do not always bring fireworks. The PAC inquiry will lead to a report, likely later this spring, drawing on both its hearings and the written evidence submitted by interested parties earlier this year which has not yet been made public – this is probably the moment when the sparks will really fly.

We know that the committee will be particularly focused on whether there is effective oversight of the sector and the student finance systems, and on the mechanisms for fraud detection and prevention that are currently in place. It also seems clear from the call for evidence that it will be trying to work out why lessons don’t seem to have been learned from previous, similar investigations, such as the committee’s scrutiny of alternative providers in 2018 when both Gillian Keegan and Bridget Phillipson were PAC members.

The PAC’s mandate really is to follow the money. Its report on HS2 was scathing of how costs had been allowed to balloon through poor oversight. In a pocket of the higher education sector where financial returns look to show exorbitant profits, highly paid directors and large dividend payouts, the committee will have serious questions about whether this is an appropriate final destination for public spending by way of student loans. The National Audit Office (NAO) also observed that the franchising university was typically taking between 12.5 per cent and 30 per cent of the tuition fee. Again, this feels like an area where the PAC will be getting ready to do some serious digging with its “public value for money” hat on.

One headline revelation in the NAO report was that detected fraud cases at franchised providers have increased enormously, both in real terms and proportionate to student number growth.

Given that student tuition and maintenance payments for the 2023–24 academic year are by this point well under way, the committee could and should ask where DfE and SLC think this line is going – and if the data is not yet good enough, then why not.

But beyond identified fraud alone, the NAO also made a point of highlighting the rapid expansion of student numbers at franchised providers, especially at those providers not registered with the Office for Students.

Here the data as presented only goes to 2021–22. But we have already seen in the HESES data that this looks to have continued in 2022–23. And how about this academic year, and the next, since it feels unlikely that any concrete steps will be taken before then on the “additional controls” that DfE said it was considering as part of its belated HE reform consultation response. How carefully are the government and its arm-length bodies monitoring this veritable explosion in provision?

We’d expect the committee to ask what action is currently underway. OfS got ahead of the question last week by announcing that it has launched an investigation into Leeds Trinity University’s partnership provision – and it’s a little out of character for the regulator to publicly state who is being investigated while it’s still ongoing. We may well at least get some indication of how many other providers are in the regulator’s spotlight.

Jim’s article from January sets out some other questions that PAC might want to enquire about, such as why there are some providers where maintenance loans outstrip fee loans, and why this has become a problem for England rather than Scotland or Wales, especially given that similar issues have arisen before in England, both in HE and FE.

Something else that you’d want the committee to be thinking about is how this all relates to the Lifelong Learning Entitlement (LLE). There seems to have been little said or thought, at least publicly, about how the LLE is going to integrate with franchising – on one reading, franchise arrangements will be key in bringing short, vocational, chunks of higher education to the underserved former industrial areas that are the ostensible point of the plans.

We know a third category of registration is being set up to cover providers whose provision is currently financed by Advanced Learner Loans. Last week’s HEPI/Buckinghamshire New University report on franchising recommended a category of registration for franchisees – some hard thinking would be needed about how the two categories would overlap, and the ongoing delays for the LLE third category should show just how complex an undertaking this would be, involving kicking the can several years down the road.

There have also been indications of “sub-optimal core systems” at the Student Loans Company hindering the development of the LLE’s back-end – any thought that student finance systems are ready to have additional layers of controls added needs to be considered both in light of both the current technical limitations and the massive additional burden that all this forthcoming “flexibility” is going to produce.

While the sunny uplands of a successful LLE rollout are generally imagined in terms of students picking and choosing a basket of top-quality courses, the current splurge of franchising news can lead you to picture a different future, one in which students are accessing fee and maintenance loans all over the place with real difficulties in establishing robust control systems and handling all that data.

Does franchising drive access and success?

It’s probably wishful thinking to expect the PAC to delve too deeply into the raison d’etre of franchising and the specifics of future HE policy movement – it’s not really what the committee is there for. There are some more fundamental questions that both DfE and the sector need to grapple with around franchising though.

The first is around access. The official line is that “DfE considers that franchising helps widen access to higher education,” and the evidence you get for this is that the students on these courses are more likely to be from WP backgrounds.

But elsewhere in England we have an access and participation regime which, in the nicest possible way, is dragging university WP teams over hot coals to get them to rigorously prove the effectiveness of their interventions. And yet the claim that franchising and partnership provision is an important way to widen access and allow for provision in “cold spots” is repeated as a truism when there is little if any evidence base for it. Is franchising – as operating now, not as we’d like to imagine it to work – an effective way to bring skills and qualifications to underserved areas?

Simply looking at the demographic characteristics of students enrolling into franchised provision is no way to make the case that it is widening access, except for a very narrow definition of widening access that has gradually lost favour in all other parts of the sector’s work. No-one in any other arena would say that higher education is promoting social mobility simply by getting students in, with no scrutiny of the quality of provision, the student experience, and the outcomes associated with courses. So why do supporters of franchised provision seem to have a lower bar to clear?

The evidence may be there. But until it’s presented publicly it’s hard to get on board.

A plan for growth

The other issue is around growth, in student numbers, places, and variety of provision. DfE has rolled back on its early 2010s aspirations to have a growing number of alternate providers and the innovation that private higher education was said to have in store for the sector, but it’s still loosely supportive of partnership provision as the way to get higher level study into places. In that case, is it thinking properly about where and in what subjects the sector is growing? Or have we simply stumbled into a rapid expansion of largely business and management-focused provision, often – it would appear – in big cities already well served by institutions whose quality is appropriately evidenced?

Most of us in the wider community want the opportunities of higher education extended to more people, for all sorts of sensible reasons that I don’t need to go into here. It would be great if the committee would ask the government if this is the way they want it to grow – and how comfortable it is with the student loan book being marketed through TikTok and feeding chunky profit margins.

It’s not the government’s job to plan the shape of the sector, some might say – this is a slippery slope to a loss of institutional freedom and dreaded limits on intakes.

But the ongoing franchising investigation is an excellent reminder of the fact that what the student finance system enables, and how it is regulated and overseen, is a form of managing the size and shape of the sector. Just because there are certain quasi-market mechanisms in certain places does not absolve the government of responsibility for how its systems and processes create and direct demand in some directions, and limit it in others.