Higher Education and Research Act 2017 (Further Implementation etc.) Regulations 2019

Wednesday 5th June 2019 Lords Chamber

Motion to Approve

17:26

Moved by

[Viscount Younger of Leckie]

That the draft Regulations laid before the House on 29 April be approved.

Relevant document: 49th Report from the Secondary Legislation Scrutiny Committee

[Viscount Younger of Leckie (Con)]

My Lords, it is a pleasure to speak to these regulations. I welcome the opportunity to debate them; they are the final major set related to the implementation of the higher education elements of the Higher Education and Research Act 2017, otherwise known as HERA.

The main purpose of the regulations is to make consequential amendments to existing legislation, a standard procedure after any primary legislation has passed. The majority of these amendments replace references to now defunct bodies or repealed legislation. They also reflect the diversification of higher education providers and the wide range of providers registered with and regulated by the OfS.

Further, they reflect the movement from a funding-based system with quasi-regulatory elements to a formal regulatory system based on registration. Some of the cross-references in other enactments relate to the quasi-regulation of higher education institutions by HEFCE, and others to the receipt of or eligibility for funding; the amendments reflect this nuance to preserve the original intention of such provisions.

Let me take a step back. As I mentioned during the debate on 20 May on the Higher Education (Monetary Penalties and Refusal to Renew an Access and Participation Plan) (England) Regulations 2019, we have made great progress since HERA came into law. Noble Lords may recall that HERA abolished the Higher Education Funding Council for England, otherwise known as HEFCE, and the director of the Office for Fair Access, more commonly known as OFFA. As mentioned earlier, a new regulator—the Office for Students, or the OfS—was created to oversee and monitor activities, including in relation to fair access and the participation of English HE providers registered with it.

The OfS currently regulates registered higher education providers under transitional arrangements; the new regulatory regime will be fully operational from August this year. In addition to retaining existing HEFCE and OFFA functions for the transitional period, the OfS has gradually begun to exercise its functions under HERA, and so has greater responsibility for a wide scope of higher education providers—not just universities, but some further education colleges, sixth-form colleges and alternative providers.

HERA gave the Office for Students the power to create a new single register of higher education providers. Registration with the OfS is the only route for providers to be eligible for teaching and research grant funding or to access student support funding, through charging fees for courses that attract student loans. Registration is now a requirement for an institution to obtain degree -awarding powers or the right to call itself a university. Since its formation on January 1 2018, and as of 23 May this year, the OfS has registered 357 higher education providers to exacting standards, including all English universities.

The HERA reforms to the system of regulating higher education were wide-ranging. This means that a number of changes to the statute book are needed to reflect the reforms introduced and to ensure the smooth running of existing legislation. That brings us to why we are here today.

17:30

I turn now to some of the more detailed provisions under these regulations, the first of which is university title. The OfS assumed responsibility for determining applications for university title on 1 April this year. Before that date, applications were determined by the Privy Council. Transitional regulations were made in November last year to allow applications made before 31 March to be dealt with under the old system. Further provision has been made in relation to university title in the regulations debated today to ensure that the consequential amendments they contain do not disturb applications already in process under the old regime.

These regulations also enable registered HE providers that are charities to become exempt from registration with and direct regulation by the Charity Commission. If a provider chooses to take advantage of this opportunity, the OfS will act as principal regulator for that provider, enabling it to avoid duplicative regulatory returns to both the Charity Commission and the OfS. Formerly, HEFCE was principal regulator for the higher education institutions it funded. A registered charity that does not wish to become exempt will not become exempt against its will; a provider must take action to obtain the exemption. This amendment is intended to create greater flexibility and choice for charitable bodies that are registered higher education providers.

I am sure your Lordships will be pleased to hear that these regulations make the Regulators’ Code applicable to all the OfS’s regulatory functions under Section 24 of the Legislative and Regulatory Reform Act 2006, fulfilling the commitment made during the passage of HERA.

I want briefly to address a matter on which we have offered reassurances to the Secondary Legislation Scrutiny Committee, and that I know is of interest to your Lordships: data or information sharing. These regulations assist the OfS in its access and participation activities by enabling schools, bodies that offer alternative provision and the Secretary of State to share relevant key information with the OfS and registered higher education providers. However, let me reassure your Lordships that these regulations do not open up additional access to data. The information being shared—which is necessary to support OfS functions—has not changed, only the bodies between which that data might be shared. That is to say that HEFCE, a body which no longer exists, is replaced by the OfS, and HEFCE-funded providers are replaced by OfS-registered providers.

Let me now turn to why these regulations are so important. In summary, they create the opportunity for more charitable bodies to become exempt from direct regulation by the Charity Commission; ensure that key enactments continue to work in the real world, thereby minimising the risk of disruption; and put OfS compliance with the Regulators’ Code on a statutory footing.

I have already highlighted the wide-ranging nature of the legislation affected by these amendments. If they are not approved, it could have serious negative consequences on both students and the sector. Among other things, it could result in the loss of automatic pension eligibility for the teachers’ pension scheme for new teachers at certain higher education institutions; confusion over whether certain providers have to charge VAT on student fees, and consequential budgetary implications; the Office for Students not being subject to the public sector equality duty, as laid out in the Equalities Act 2010; certain charities being unexpectedly faced with a change to their accounting rules, resulting in confusion and more paperwork, which again will potentially affect students and their overall experience; and, finally, students being denied their full entitlement to state benefits because of outdated references to defunct legislation.

This Government firmly believe that the higher education regulatory system must be one that can protect effectively the interests of students in the short, medium and long term. That is why I hope your Lordships agree that these regulations are important to students and the sector, and I hope noble Lords will support them. I beg to move.

[Baroness Garden of Frognal (LD)]

My Lords, this is a relatively uncontroversial SI that goes through the entire statute book, as the Minister set out, working out what consequential amendments need to be made as a result of the Higher Education Act 2017.

We have no issue with the changes that cross out references to HEFCE, individual research councils and definitions of a university in previous legislation, replacing them with references to the OfS, UKRI and the definitions set out in the 2017 Act, nor indeed with those that make the OfS an official government regulator, subject to the Regulators’ Code or those that allow a university’s charitable status to be regulated by the OfS rather than by the Charity Commission.

The Minister talked about data sharing and I have a question about that which has caused some concern. There has been confirmation from the HESA, that it distributes information on sexual orientation and religion, on a named basis, to the OfS and the Department for Education. This information has been provided by students as part of equality monitoring, but surely such a named database of religion or sexual orientation should not sit anywhere at state level. What plans are there to change this and for how many individuals does the department hold that information?

Parts on the pension scheme have also raised concerns. They ensure that university staff, mainly from post-1992 universities, remain eligible for the teachers’ pension scheme and the local government pension scheme. In September 2018, the Treasury recommended that employer contributions to the teachers’ pension scheme needed to increase from 16.48% to 23.6% of an individual’s salary to meet the expected future costs of paying pensions. The Government have recommended that the Treasury should pay an extra £830 million to schools to cover their additional pension contributions, and £80 million for colleges and other publicly funded training organisations.

Universities, however, will have to find the money themselves. That will affect universities created after 1992 that are not part of the main pension scheme for universities, which will have to find millions more from their squeezed budgets to pay staff. These are universities that rely more on tuition fees and have less of an ability to generate additional income.

The Liberal Democrat former Pensions Minister, Steve Webb, has said of this:

“For universities this is simply a spending cut, as the money for these contributions will have to be found from elsewhere. This does seem an arbitrary way of squeezing the independent schools sector and the university sector for what is essentially just an accounting change”.


Why are the Government footing the bill for schools and colleges, but not for universities? How will the Government ensure that these extra costs for universities will not have an adverse effect on students?

During the passage of the 2017 Act through Parliament, Peers across the House were united about the need for the Government better to recognise the importance of international students to our universities and wider economy, so do the Government acknowledge that anything that undermines the financial sustainability of our universities will inevitably lead to fewer overseas students coming to this country? Surely this pension decision will be a factor in challenging university finances.

The Augar review recommends that the Government adjust the teaching grant attached to each subject more accurately to reflect its perceived “value” to students and taxpayers. Given that a key aim of the Higher Education and Research Act is to improve student choice, do the Government consider that such a policy would undermine this principle? Following the Augar Statement yesterday, perhaps we may ask again: if fees are reduced to £7,500 how will this funding be replaced? How will the Government ensure that disadvantaged students at all universities can benefit from any replacement, instead of it being targeted at those in higher-tariff institutions?

I also want to ask the Minister about a couple of curiosities, which may prove that I have read these instruments. In Part 4, Regulation 43 amends paragraph 2 of Schedule 3 to the Charities Act 2011 to read:

“Any of the following if it is a relevant higher education provider”,


and names the universities of Oxford, Cambridge, London, Durham, Newcastle and Manchester. It then amends paragraph 3 and names King’s College, London and Queen Mary University of London. Is there any doubt that these are relevant higher education providers? What is the reason for separating King’s and Queen Mary? What about other universities? Are they not relevant higher education providers? This may be my ignorance about the way the legislation is written, but it seems curious.

Paragraph 11A of Schedule 3 to the Charities Act 2011 is amended to read:

“A relevant higher education provider … does not include (a) any college in the university of Oxford; (b) any college or hall in the university of Cambridge or Durham”.


Why is Oxford separated from Cambridge and Durham? There are, or used to be, halls in Oxford as well as at Cambridge and Durham. Will the Minister explain why Oxford has been separated in that paragraph? I look forward to the Minister’s reply.

[Baroness Wolf of Dulwich (CB)]

My Lords, many noble Lords will remember that, as the Minister reminded us, the Higher Education and Research Act 2017 established a regulator with unparalleled and unprecedented powers. One of those powers is effectively to set its own budget by deciding what to charge universities for its services and activities. During the debates in this House, noble Lords pressed very hard for the Government to ensure that the Office for Students was subject to the Regulators’ Code, so I am delighted to see that it is being placed on a statutory basis. How, though, is the Office for Students expected to demonstrate that it is behaving in accordance with the Regulators’ Code? What sort of information does it provide to the Government on that basis and what sort of information does it provide to the public on that basis?

[Lord Bassam of Brighton (Lab)]

My Lords, I guess the Minister is really asking the House to accept that these regulations are tidying-up amendments. I am grateful to him for his explanation of this statutory instrument, which, as he said, is a consequence of HERA 2017. The majority of the amendments are consequential and replace references to now-defunct bodies or repealed legislation. They include HEFCE and the Office for Fair Access, or OFFA.

Looking at registration under these regulations, under the Act a new regulator was created, the Office for Students, to oversee and monitor the activities, including in relation to fair access and participation, of English higher education providers that register with it. The OfS currently regulates registered HE providers under transitional arrangements which were due to end on 31 July. Will the Minister advise the House whether the new regulatory regime is on schedule to be to be fully operational by then? In addition to retaining existing HEFCE and OFFA functions for the transitional period, the OfS has gradually begun to exercise its functions under the Act, including the power to create a new single register of higher education providers. OfS registration affects the HE provision that institutions can provide, specifically access to public grant funding, the fee levels they can charge and the levels of support students can receive. Indeed, institutions that are not registered cannot access OfS or UK Research and Innovation public grant funding or charge above the basic fee amount.

I understand that since January 2018, the OfS has registered more than 300 higher education providers. However, last month, it was reported that 19 colleges offering higher education courses were still waiting to be registered with the OfS, only months from a new term when student recruitment should be well under way. Against this backdrop, Student Finance England was advising that to ensure funding is received in time for courses commencing in autumn 2019, new students should complete and submit their applications by 24 May. That seems a rather strange process and period of delay for making the system work. Does the Minister agree that the fact that it has taken almost a year to complete this process suggests that there might be room for some improvement?

17:45

The Minister described the changes to the way in which university title would be settled and explained that the OfS assumed responsibility for this from 1 April. I thought I heard him confirm, essentially, that the consequential amendments in this instrument do not affect applications already in process under the old regime—that is, until 31 March. When he comes to reply, perhaps he could clarify that.

The regulations also make the Regulators’ Code applicable to all the regulatory functions of the OfS. That is most welcome and something that Opposition Front-Benchers and stakeholders across the House asked for during the passage of the Higher Education and Research Bill in 2017.

Turning to the Charities Act implications, we think that the regulations, quite properly, enable registered HE providers that are charities to become exempt from registration with, and direct regulation by, the Charity Commission. This should enable relevant HE providers to avoid duplicative regulatory returns to both the Charity Commission and the OfS. However, can the Minister advise how this policy will be communicated to HE providers that are charities to ensure that they are aware that they have a choice? That seems to be the implication of the regulations and we would like clarification on that important point.

We accept that it is imperative that, with a marketised higher education system, we have a robust higher education regulatory system to protect the interests of students, universities and the sector alike. However, following on from yesterday’s Statement on the publication of the long-awaited Augar review, the Minister will undoubtedly be deep in thought about how effective our funding and regulatory structures are in supporting high-quality provision. Therefore, here are a few additional questions for him to ponder as part of that deep thought.

The Augar review recommends that the Government should adjust the teaching grant attached to each subject to more accurately reflect its perceived “value” to students and taxpayers. Given that a key aim of the Higher Education and Research Act is to improve student choice, do the Government consider that such a policy would undermine that principle?

The Higher Education and Research Act has specific protections for universities to determine the courses they offer, allowing them to respond dynamically to student demand and the skills needs of their local areas. Are the Government at all concerned about proposals in the Augar report that undermine this autonomy, important as it is, through a grant system which favours certain courses over others?

During the passage of the 2017 legislation, Peers across the House were united about the need for the Government to better recognise the importance of international students to our universities and wider economy, and other noble Lords have drawn attention to that. Do the Government acknowledge that anything which undermines the financial sustainability of our universities will inevitably lead to fewer overseas students coming to our country?

Large parts of the 2017 Act relate to access and participation plans, which are funded by universities through tuition fee income. If fees are reduced to £7,500, as the Augar report recommends, how will this funding be replaced? That question was also asked by the noble Baroness, Lady Garden. How will the Government ensure that disadvantaged students at all universities will be able to benefit from any replacement, instead of it being targeted at those in higher-tariff institutions?

The Augar panel recommends changing the measure of disadvantage used in student premiums, as by the Office for Students, to capture individual-level socioeconomic disadvantage. Do the Government plan for the OfS to implement this change and, if so, when will it be implemented?

The quality of courses is of course imperative, not just for individual students but for the UK as a whole, which benefits from economic growth, a skilled workforce, productivity and social mobility. If the funding is not made up, in our view, universities will doubtless cut their widening participation budgets and drop subjects that are too expensive to teach. Given that a key aim of the Higher Education and Research Act is to improve student choice and access, do the Government consider that such a policy would undermine this principle? These questions are additional to those asked yesterday. The House deserves some reassurance on these points, and it will not do for the Government simply to say that all will become clear in the future and it is all subject to a spending review. We need some of those answers now, and so do the universities.

[Viscount Younger of Leckie]

I thank the noble Lord, Lord Bassam, and the noble Baroness, Lady Garden, for acknowledging that these regulations are mainly technical. I am pleased that these are the final regulations that have come out of the Higher Education and Research Act. It was a major Bill to go through this House and I thank all noble Lords who were involved.

A good number of questions arose. Before I get into answering them, I would like to pick up on what the noble Lord, Lord Bassam, said. He is quite right: the whole House acknowledges—and we would like to confirm—that what is important is to uphold and improve the quality of our first-class universities and, in so doing, to ensure we give the best choice to students, including international students, and that they get best value for money. That is behind everything we are doing in relation to the regulations and the Act itself, and—I will touch on this in a moment—is the basis for the Augar review, the independent review that has just reported. As I said yesterday and will say again in a moment, we will look very carefully at all 53 recommendations and will report back at the spending review, but not before. I say this not, perhaps, to reassure but to reiterate the point I made yesterday.

I will get straight into answering some of the questions raised: first, from the noble Baroness, Lady Garden, on pension schemes. The department ran a consultation, as she may know, on the impact of increased employer contributions on all TPS employers—including state schools, further and higher education providers and independent schools—for 2019-20. The department has decided to fund schools to the tune of £830 million and further education providers to the tune of £80 million—and not universities—in 2019-20, with costs beyond that year to be agreed at the spending review. This decision was based on the strongly positive response to our consultation proposal and the fact that schools and further education providers are most directly funded by government grants. I will read Hansard tomorrow to look again at the detailed remarks that the noble Baroness made. I will check her questions against my answer and, if I am not satisfied, I will write; I am sure that she will press me if she is not satisfied.

The point the noble Baroness raised on data is important and, again, she had some detailed questions. Although I would like to write to give her some information in answer to her question about our plans for changes, I emphasise that these regulations do not extend access to data; they simply update the bodies between which data may be shared, replacing HEFCE with the OfS and HEFCE-funded higher education providers with OfS-registered higher education providers.

I welcome the noble Baroness, Lady Wolf, to her place. I was sorry that she was not present yesterday. I thank her, particularly, for her role in the production of the Augar review. I am sure she has read Hansard in detail for yesterday’s exchanges. She asked how the OfS will demonstrate that it complies with the Regulators’ Code. The OfS, as she may know, is required to report annually on the performance of its functions. This report is sent to the Secretary of State and laid before Parliament.

The noble Baroness, Lady Garden, asked why the Charities Act amendments in Part 4 were drafted in this way; she had a number of detailed, interesting questions. I am sure that I will not be able to answer them all, particularly the points raised about the differences between Oxford, Cambridge or Durham. Again, I will need to read Hansard. What I can tell her is that the Charities Act amendments reflect the existing drafting in the Charities Act, which lists certain specific institutions. The term “relevant higher education provider” is used to ensure that a provider is registered with the OfS. If the provider is removed from the OfS register, it will no longer be a relevant higher education provider. But I want to go further and say that deregistration by the OfS can happen only under very narrow circumstances, including: serious breach of registration conditions by a provider; where the provider requests that it is deregistered; or where a provider stops providing higher education in England.

I shall say a bit more about the Augar review, which was mentioned by the noble Lord, Lord Bassam, and touched on by the noble Baroness, Lady Garden. As I said yesterday, I am not able to give an opinion on what, if any, recommendations we will take forward. I said yesterday, and repeat again, that we need to look at the 53 recommendations “in the round”—that was the expression that I used yesterday—since many of them are interactive. For example, the proposal to reduce tuition fees from £9,250 to £7,500 needs to be taken into account along with the proposal to extend the payback period from 30 years to 40 years and the further proposals for changes to the in-study interest rates and beyond. These are matters that I am simply not prepared to comment on or make a judgment on.

[Lord Bassam of Brighton]

Does the Minister accept—I think this is overwhelmingly the view of those who have looked at the Augar review—that the proposed financial changes are regressive rather than progressive? That is an important point, particularly in respect of the 40-year payback period it recommends.

[Viscount Younger of Leckie]

Again, I am not prepared to say whether they are progressive or regressive; we are looking at the 53 recommendations, and we will decide by the spending review what we want to do.

I shall go a little further. The noble Lord mentioned the teaching grant. As I said yesterday, the question of—to use his words—making up the teaching grant is again something that we need to look at in the round. It is all interrelated. If the proposed reduction to £7,500 leaves a make-up to be made, we will need to look at that with a great deal of care. As I said at the beginning, it is important to ensure the financial sustainability of our very best universities, making sure that the quality is there, the choice for students is there and that it is affordable—I think that that is incredibly important.

I think that I have covered all the questions. As I said earlier, I shall read Hansard in particular depth on this occasion because of the detail of the questions, and I shall certainly write a letter if I have not covered everything.

Motion agreed.