Higher Education (Industry and Regulators Committee Report)

Baroness Taylor of Bolton Excerpts

Tuesday 21st May 2024 Grand Committee

Moved by

[Baroness Taylor of Bolton]

That this House takes note of the Report from the Industry and Regulators Committee Must do better: the Office for Students and the looming crisis facing higher education (2nd Report, Session 2022-23, HL Paper 246).

[Baroness Taylor of Bolton (Lab)]

My Lords, I thank the members of the committee, who put so much work into compiling this report, and our staff, who were extremely helpful. The noble Lord, Lord Hollick, was the chair of the committee when we started this report in March last year, but we also had a lot of help from our special adviser, Mike Ratcliffe, and from the committee staff of Dom Walsh, Dominic Cooper and Itumeleng Osupeng. I should also mention Alec Brand.

As I say, we started our inquiry into the OfS and higher education in March 2023, a time when we felt that the higher education sector was facing a whole raft of challenges. They have intensified since then, and I think we were right to decide that this should be our priority at that time. The challenges that higher education is facing pre-date but were exacerbated by issues such as Covid. It is important to remember that some of these are very long-standing challenges that higher education has been trying to deal with for quite some time. We had the raft of difficulties, and we have had issues such as the loss of EU research funding that have challenged universities even further. There have, of course, been industrial disputes, which have not helped, but I think that all the issues such as inflation, the cost of living and the lack of funding have made industrial action more likely.

The committee’s overarching finding was that the Office for Students was performing poorly; it is important to make that basic point. We did not choose our title casually—in fact, we had many alternatives that could have been a bit more colourful, shall we say. We said it “Must do better” because this is an important institution that regulates a very important sector of the British economy, and for it to be performing poorly is extremely important and a very real problem for us all. I think that this report is one of the strongest of recent House of Lords committee reports, and therefore should be taken seriously.

The name of this organisation, the Office for Students, was chosen deliberately by the Government to imply that it would put the interests of students before the interests of providers, yet our investigations found that neither students nor providers of higher education have confidence in the OfS. There were poor relations with both providers and students, and a very clear perception of a lack of independence of the OfS from government.

I will talk about several of our conclusions; I know that colleagues will venture more widely. My overriding concern as we went through this inquiry was the complacency on the part of the OfS about what we described as “the looming crisis” in higher education. There is more discussion of it now—just recently we saw some alarming figures—but even when we were taking evidence more than a year ago, we could identify severe difficulties in the whole sector, not just the odd institution.

The freezing of tuition fees for so long meant that many universities were in real difficulty. The Russell group has suggested that its universities are losing £4,000 for every domestic student. Perhaps not surprisingly, that has pushed universities to become increasingly dependent on cross-subsidisation from international and postgraduate students, whose fees are not capped. That has been a feature for many universities, not just one or two. On the other hand, recent statements and comments from Government Ministers that there should be a reduction in the number of international students are causing real concern and may already be impacting international applications.

We raised alarms about the information we had on the financial challenges but, at the time, the OfS gave very general assurances about the health of the sector and did not share our concern about the direction in which things were going. However, in its most recent financial sustainability report, published just last week, the Office for Students says that 40% of HE institutions are expected to be in deficit this year. That is after many institutions have made severe efficiency savings— or cuts, as they are probably better called. In many institutions there is little leeway for further cuts without significant consequences, and this could affect the quality of the education they offer.

I have a couple of specific questions for the Minister. What action are the Government taking in relation to the looming—indeed, current—crisis facing the HE sector? What is the Government’s attitude to international student recruitment? Clarity on that point would be very helpful all round. I wonder whether the Government really understand the danger of institutions collapsing and/or a decline in the quality of the education provided.

One of my main memories of the evidence we received was that of a vice-chancellor who said that, were his institution to see financial problems looming, he would not talk to the OfS about possible solutions and long-term viability because he thought that its attitude would not be supportive but combative, and that it would look for problems and criticisms of the institution. It is really worrying that the reputation of the OfS is so bad within the sector.

I have heard anecdotally from some in higher education that our report has prompted some change in tone and that the OfS is sometimes using different language in its visits and contacts. If that is the case, it proves that the House of Lords can have a positive impact.

I said earlier that the name OfS was deliberately chosen to imply that it was on the side of students. The committee found that, despite its name, it was unclear how the OfS defines student interests. Indeed, it was said that there was a suspicion that the term was used as a smokescreen for the political priorities of the Minister. We were given the example of free speech, which we heard was not a priority concern of students. We took direct evidence from students on the concerns about OfS engagement. We particularly heard allegations that the OfS issued veiled threats over the future of its student panel when individual students on it were making their concerns known. The OfS responded to our criticism and said that it would expand its plans for a review of its approach to student engagement. That is to be welcomed, as is the fact that it will take up our recommendation to report annually on student engagement. Does the Minister have any information about when we might see a report on that?

There is another area of real concern and puzzlement. Why has there been such a breakdown in the relationship between the Office for Students and the Quality Assurance Agency for Higher Education? The QAA, which assessed quality and standards until 2023, was widely accepted as a significant and independent body doing a very good job. Things are now being changed, and this is possibly going to result in a move away from European standards. This in turn could damage the international reputation of some of our universities, which have such a high reputation historically. The Minister needs to clarify this because I am not sure that the OfS has the capacity to assess the quality of all HE institutions. The OfS has completed only eight such studies and reports so far. Can it do it for the entire sector and in a timely way? Will it be as professional, comprehensive and reassuring as the system we had with the QAA? What happens there really matters.

Other concerns that we had were about the burden of regulatory compliance. We needed some clarity on the OfS’s priorities. UUK says that in each university 17.6 staff, on average, are involved in compliance. Those people are having to deal with the bureaucracy that the Government often say they wish to reduce. It would be good if the Minister could comment.

I must also say a word about political interference. There is clearly a concept throughout higher education that the OfS is there to do the wishes of the Government, rather than act as a totally independent body. I am sure that the Minister is well aware of the criticisms that have been made—the idea that if there is a headline in the Daily Mail, the Minister will tell the OfS to go hard on that particular issue. That is the perception, and it rings true in many respects. I must also mention other issues because the perception of interference is not helped by the fact that the chairman of the OfS takes the Conservative Whip in this House. The all-party committee as a whole thought that anybody in such a significant role should not be taking any party Whip when it came to activities within Parliament.

Our report has shed light on the very widespread concerns that exist. The challenges in HE are intensifying and are very real indeed. The OfS is now beginning to recognise that some of the issues we raise are pertinent and need attention, but the challenges facing the sector are very significant. I have long believed, and have said for many years, that pre-legislative scrutiny is helpful to Parliament and to government in getting things right. What we have never done is sufficient post-legislative scrutiny; I have now suggested to our committee that we should do post-report scrutiny to see whether our committee’s report has had a real impact and made a difference. I think it is beginning to, but the committee will return to this issue to try to make sure that the OfS improves its performance.

--- Later in debate ---

[Baroness Taylor of Bolton (Lab)]

My Lords, I think Members here will be pleased that I intend to be brief and not detain them too much longer. It has been a very wide-ranging debate and, as the Minister has acknowledged, we have a high level of expertise in the Room, which has been very useful and constructive. I hope the noble Lord, Lord Johnson, will acknowledge that the comments of the noble Lord, Lord Agnew, prove that the committee was not captured by providers. I reassure him that we took evidence from Michael Barber and Nicola Dandridge, and have followed through on all the written evidence. The weight of evidence that we had backs up what our report actually said. It was not a subject that we entered into lightly, nor did we with the criticisms.

I wish that we had more time, because I would very much like to have discussed further with the noble Lord, Lord Johnson, some of the phrases that he used, such as “mass HE sector” and “poor-quality student experience”. Terms like that are bandied around far too freely, when in fact the vast majority of students get a very good experience and a worthwhile qualification at the end of it.

In fact, if we are talking about how we judge those qualifications, I chaired the council of the University of Bradford for several years and I was always frustrated because very often the quality is measured by how much graduates earn once they leave the courses. In Bradford, we wanted our graduates to stay in Bradford and the region and help to raise that region, yet, if you look at the earning potential in Yorkshire compared with London, we were always going to be at a disadvantage, which did not actually reflect the value added. I am sure that the noble Lord, Lord Norton, would say the same for Hull.

No one who gave us evidence, no one we spoke to and no one on the committee is against regulation. Everybody knows that if public money is involved, there have to be elements of accountability. The question is: what is the balance between accountability and interference? That is the main area where we did not see a situation that we would want. We produced another report recently about who regulates the regulators. That is also something we are going to come back to because it is a very significant point: there is a need for more parliamentary accountability of regulators. Actually, I think that if we had had an ongoing drumbeat of accountability of the OfS to Parliament, we might have avoided some of the problems that have emerged more recently.

As for the “looming crisis”, the Minister wants us to be cautious. I think we are seeing a trend here, and it is worrying. There are many universities that are concerned about their financial position this year and many that are looking to the future and seeing a very precarious situation in years to come, so I do not think that we can be complacent about this at all. The funding of higher education is a very difficult political issue for everyone: this is not just difficult for one party but for everyone, because it is very hard to resolve.

I still have some concerns about the marginalisation of the QAA and it being pushed out of this situation. The international reputation of our universities is desperately important and one of the reasons they are such big earners for this country. We have had some reassurance today about better relationships in the future and about a better role for students in terms of consultation, and those are to be welcomed, but there is a very long way to go before we have a satisfactory situation here. As I said in my earlier remarks, I am very keen that the committee should return to this subject and monitor what is happening in the future. That would help in having better regulation and a better balance and partnership between universities and those who are regulating. In the meantime, I beg to move.

Motion agreed.