Higher Education: Financial Pressures

Baroness Wilcox of Newport Excerpts

Thursday 30th March 2023 Lords Chamber

[Baroness Wilcox of Newport (Lab)]

My Lords, as a former teacher, I am glad to have the opportunity to speak on this issue. As noted in the register, I am the chair of trustees of the Council for Dance, Drama and Musical Theatre.

I do not need to tell noble Lords taking part in this debate about the strengths of the UK’s higher education sector. Whether it is our fantastic HE colleges or our world-famous universities, the teaching and research they give us should be a source of immense pride. That is why it is so important that the Government are alive to the risks the sector faces, and that they take a proactive approach to supporting providers and their students to weather them. I am grateful to my noble friend Lord Knight for bringing these matters to the attention of the House through this debate. Indeed, universities and higher education institutions face a perfect storm of rising costs, with EU structural funds ending and an increasingly combative Government raising fears about capping international students.

In June last year, the House of Commons Public Accounts Committee published a concerning report into the financial sustainability of England’s HE sector. The number of institutions with an in-year deficit has risen more than sixfold, from 5% in 2015-16 to 32% in 2019-20. It would not be fair to draw attention to any particular provider, but we know that when organisations look to balance their books, they often have to cut staff and subjects. This can be devastating for students and regional economies alike.

I am sure that noble Lords across the House will speak in more detail than I intend to on the second and third aspects of the debate, and I am certain they will do a sterling job. I wish to focus on the threats to local communities, and particularly the key role the Office for Students must play in supporting providers, considering the central contribution they often make within their surrounding economies. There is value in probing the regulatory role of the OfS, particularly how well it monitors the financial sustainability of the sector, and its role in protecting students from fallout when things go wrong. As my noble friend highlighted in the blog he published last week prior to this debate, the university sector brings much-needed skills to local communities: 73% of UK university students study locally, or go back to the region they grew up in to work. However, when the sector struggles, the impact on the local community is widely felt.

I will mention an institution that I relied heavily upon when teaching at Hawthorn High School, in Pontypridd. The University of Glamorgan, now the University of South Wales, generously gave of its time and facilities to my A-level students in preparation for their radio coursework submissions. It allowed us access to a fully equipped radio studio, when all I had in school was a double cassette recorder. This engagement not only allowed students to produce the best technical examples of their work but took youngsters from backgrounds where university was not part of their experience into the campus itself, where they saw that they too could look to engage with a university education in their future lives. It was an important aspect of the university within the community, and I could share many more examples, if time allowed.

The National Audit Office report noted that it collects a great deal of data on institutions to check the validity of the economic model, but smaller institutions question why they have to give the same amount of information as large ones. Perhaps the Minister could address this concern in her remarks and say whether the Government agree with the remarks of smaller institutions regarding information overload. When they speak to the Office for Students, perhaps they could ask how this could be reviewed and refined. I believe that the OfS is trying valiantly to refresh its comms approach. I hope it will improve the situation, and I trust it will set robust metrics to measure its success on this. What is the Government’s view on whether the OfS is communicating effectively.

As well as having clearer comms, the National Audit Office review recommended that the OfS should

“improve where necessary and then reauthorise student protection plans for all providers to ensure they remain adequate and can respond to new risks.”

The Office for Students must get this right. The “responding to new risks” part of the recommendation is absolutely crucial. Threats to the sector are evolving all the time, so the OfS must see its role as proactive: to foresee these risks and see them off before a university fails. Although the OfS sees the risk of multiple provider failures remaining low, the consequences for an area of its local college going under are simply too catastrophic for the regulator not to do everything in its power to set the conditions for success.

On this basis, I have several questions for the Minister. Are the Government satisfied that the OfS has the appropriate clout—I mean the regulatory tools and powers—to monitor the financial health of institutions effectively? Does the Minister believe the OfS is sufficiently alive to the financial instability of many institutions, and does it see its role as preventive or simply reactive? Should a provider fail, is the regulator confident it could mitigate the damage to the undergraduates and staff, and to the surrounding local economy? What is the Government’s overall assessment of the financial stability of the sector, and what are they doing to support it?

Over the next five years, it is predicted that universities alone will help set up more than 20,000 new businesses and provide more than £11.5 billion of support and services to industries and not-for-profit companies. Instead of the worrying trend of treating the sector as a convenient political arena for a culture war, it is imperative that the UK Government do everything they can to protect the jewel in the UK’s crown.