Higher Education (Industry and Regulators Committee Report)

Lord Johnson of Marylebone Excerpts

Tuesday 21st May 2024 Grand Committee

[Lord Johnson of Marylebone (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Freyberg. I echo the points he just made about the creative industries and the need to measure properly value for money in that respect. I declare my interests as a visiting professor at King’s College London, chairman of FutureLearn, and someone who, in my previous ministerial role in the other place, was very much involved in the creation of the OfS and the high-level regulatory framework it is now implementing. I come at this with a certain baggage, and I lay that on the table; your Lordships do not need me to be clearer about it.

I very much want to defend the OfS rather than join the chorus of people seeking to bury it and condemn it for problems which, by and large, are not its responsibility but the responsibility of government policy. It is important that we are very clear in assigning responsibility correctly in this debate as we consider this report.

As the noble Lord, Lord Norton, said in his excellent speech, we have in the UK a world-class higher education system. It is one of our greatest national assets. However, it has some faults: some resistance to accountability, a quickness to take affront at suggestions that there are areas for improvement, and occasionally some short-sightedness in the way it opposes legitimate demands for reform. I fear that the report resulting from this inquiry is to some extent evidence of that phenomenon, because the inquiry and the report that came out of it were in part—probably quite a considerable part—the result of some very self-interested lobbying by university mission groups whose universities have over the years been very well represented in this place.

I am not saying that there is not room for improvement in the way the OfS operates—of course there is. However, it is also important that we do not lose sight of what this report is in part—not in totality—all about. We have to be honest that the report and the inquiry that led up to it are in part a continuation of battles that many in the sector and in this place waged against the very creation of the OfS in the first place.

Just to take us back a little, the fight about the OfS was actually about the change from a funding council acting on behalf of providers to an independent market regulator looking out for the student interest. This shift, as the OfS’s brilliant first chair Michael Barber noted in his evidence to the committee, was very much overdue given the massification of the sector and the change in the tuition and maintenance funding regime from one of government grants to income-contingent loans. My view is that for as long as we have a mass higher education system, as we will have, and this system of funding—to my mind, these two things are very closely and inseparably linked—we will need an independent market regulator rather than a funding council model.

Many in the sector and perhaps in this place might romanticise the Higher Education Funding Council for England. Indeed, there was a lot that was great about it, including its formidable last chief executive, Madeleine Atkins. But of course, by the middle of the last decade it had long passed its sell-by date as a mode of regulation for the sector. Indeed, in some senses it did not even recognise itself as a regulator. It came out of the University Grants Committee model, which was suited to a very different world of very small, limited tertiary participation and a much smaller, narrower system of university providers.

HEFCE was good for a world that had passed, but it was no longer fit for purpose for an era of mass higher education. Its function was very limited: to spread available grant funding around the providers in the system to ensure that everybody got a fair crack at the funding that the Treasury was making available. What HEFCE was not effective at was acting as a regulator to promote quality, choice and competition in the student and taxpayer interest. It is not going too far to say that there is a general consensus that, by the end, HEFCE had become essentially captured by the sector and urgently needed reform.

That is the backdrop to why the OfS was set up. Of course, this was not a popular change in the sector. The battles leading up to the passage of the Higher Education and Research Act 2017 were ferocious. It was one of the most heavily amended bits of legislation in recent memory. We should not ignore all that history, including the way the sector and its outriders lobbied hard against the new accountability regime that the Office for Students represented. To some extent, there are undertones of all that lingering around today at the five-year to six-year mark.

The creation of the OfS represented a move away from co-regulation to something that is much sharper and has greater consequences for institutions that deliver poor quality and poor student outcomes. All the stuff about co-regulation and how it is a better approach is, to my mind, a thinly disguised plea for self-regulation—a stance that I do not think any party in government will return to. As I said at the start, as long as we have a mass higher education system funded by a system of income-contingent loans—we will have this for the foreseeable future because it is the least bad system and is the only game in town from a fiscal perspective—we will need an organisation such the OfS acting in the student and taxpayer interest.

As Michael Barber told the committee, many universities thought that, notwithstanding the clarity of its legal duties, the OfS would be HEFCE under another name. They were very wrong and were surprised to discover that it was different. Some in the sector might think that, if they undermine the OfS enough and throw enough mud at it, they will suddenly get nice old HEFCE back, with its big pot of grant money administering the teaching grant and a system of student number controls that constrains competition and choice and allocates students to providers on the basis of government quotas. That is highly undesirable as an objective and highly unlikely to arise as government policy.

Even in the unlikely event that a future Government did want to replace our current funding system of income-contingent loans and return to a world of grants, they would still want an independent regulator to ensure value for money for taxpayers and hold universities to account for quality and outcomes in a mass higher education system in pretty much the same way the Office for Students does. Although the student focus of the regulator might change in such a scenario, I do not believe that any Government will return to the funding council model of the past.

Respectfully, I disagree with the report’s main contention that the Office for Students is performing poorly. To be honest, I think that Michael Barber and Nicola Dandridge did a brilliant job in leading the establishment of the new regulator in very difficult conditions, which their capable successors are continuing. I remind Members that its initial priority was to set up the new organisation. It managed the considerable task of registering a large numbers of providers at pace and putting in place the new regulatory framework in its first strategy. It then coped admirably with the challenges of the pandemic, suspending some of its regulatory requirements while providers adapted to the changed environment.

In its second strategy, the OfS has moved on to focus on quality. This has seen it reset the TEF, toughen up the B3 outcomes metrics, and reset the indicators for non-continuation, completion and progression. Again, that has generated a fair amount of angst in the sector, but this is absolutely necessary in terms of both the student interest and upholding quality and standards in the sector.

I do not want people to think that I am just a lackey praising the OfS without any self-awareness or criticism. I recognise that it has problems and is not in all respects operating as well as it might. I will be brief: there are three areas that I would focus on. The first is the question of distance from government. The problem here is not the OfS but the DfE—I say that with all respect to the Minister. The problem is clearly Ministers. It is also about where universities sit in government. The mistake is to have universities in the Department for Education, which does not understand institutional autonomy and treats universities like failing schools. My noble friend Lord Willetts made the point before.

In his great report on higher education sometime in the early 1960s, Lionel Robbins warned against moving universities to the education department because he feared that such an interventionist department would not understand or value the autonomy of universities. His warning has proved sadly accurate. The DfE treats universities like poorly performing secondary schools and now intervenes in them so much that the Office for National Statistics may well propose bringing universities back into the public sector.

When I was working on the HERA legislation, I was lucky enough to be Minister for both universities and science, like my noble friend Lord Willetts was when he was in the other place, with responsibility for both aspects of government policy towards the sector. That coherence has to some extent been lost by the move to the DfE and the splitting of ministerial responsibility in that way. It would be preferable to have universities back in a growth department of government, such as the business department or the new DSIT, where universities would be reunited with the rest of the research base.

The layering on of ever more conditions of registration has become slightly crazy. Ministers should adopt a self-denying ordinance of one in, one out—or better still, one in, two out.

My second area for improvement is that the Office for Students has to do much more to support innovation and promote new forms of provision. Now that it has established its bona fides as a tough and independent market regulator it has space to address parts of the role that Parliament has given it that have been neglected in the first five years. New providers—I have been intimately involved with a number—have been stunned by the bureaucracy they encounter in trying to get on to the register and establish new modes of provision. The consultants they have to recruit to advise them tell them that to succeed with the OfS they must, above all, look as much like an established university as possible. This is hardly the recipe for innovation that we want in our system.

My final point is that the Office for Students must make a real go of the lifelong learning entitlement. This policy is flailing at the moment. I think the name of the Office for Students should change to the office for lifelong learning, and it should grip this policy urgently so that it has a fighting chance of delivering the skills revolution that Ministers say they want for it. The detail of how that might work is for another day but that is an urgent priority.

I urge anyone in this Room who believes that the solution to the sector’s troubles is to attack and dismantle the Office for Students to think again. A strong regulator that enjoys the confidence and trust of the sector and of government is vital to the future of our HE system. Everyone should focus on working hard to that end.