Higher Education (Registration Fees) (England) Regulations 2019

Gordon Marsden Excerpts

Wednesday 1st May 2019 General Committees

[Gordon Marsden (Blackpool South) (Lab)]

I beg to move,

That the Committee has considered the Higher Education (Registration Fees) (England) Regulations 2019 (S.I. 2019, No. 543).

It is a great pleasure to serve under your chairmanship, Mr Davies, and to introduce this debate. Having prayed against the regulations, we are glad to finally have a chance to debate and express an opinion on them, because there are several outstanding issues that need to be addressed. Some of those issues go back to 2016, when I took the Higher Education and Research Bill through Committee with the Minister’s predecessor, the hon. Member for Orpington (Joseph Johnson); others have arisen from changes made by the Government via their consultation on the registration fees that higher education providers are now being asked to pay.

Considerable disappointment has been expressed to us by MillionPlus and other HE sector bodies about the relatively short notice the sector has been given of the regulations. I am grateful to the Minister for giving the Labour Front Bench notification of them some time ago, but there is a feeling among those in the sector that they have not had enough opportunity to look at them—I think the regulations were laid only about 10 days ago. To some extent, I am afraid, that suggests that the Department for Education is less willing to work collaboratively with the sector and is more interested in a combative approach. It is unclear, at least to me, whether that is in the long-term best interest of students. What is clear from drilling down into the small print is that the Government have further reduced their funding of the Office for Students and the regulatory functions that it provides in the higher education sector. That has put more of the burden on the institutions and, indirectly, on the students.

Members of the Committee need to be aware that OfS registration fee assessments have increased significantly since the original impact assessment for the Higher Education and Research Act 2017. When we debated these proposals in the Bill Committee in 2016, we expressed our concerns that the figures might change. OfS fees are banded by provider size, which is calculated according to the number of full-time equivalent higher education students. Under the regulations, the maximum annual fee payable by the largest providers—those with more than 20,000 students—is £186,600.

According to a briefing provided by Universities UK, the new fees represent not only an average increase of 62% on the figures in the 2017 impact assessment, equating to an increase of £66,900 for the largest institutions, but an average increase of 18% on the estimates in the DFE’s February 2018 fees consultation, equating to an increase of almost £29,000 for the largest institutions. The fact that the estimates have varied so dramatically within a year, and that the cost to institutions has shot up, strongly suggests that the Department does not have a handle on where it might go next—indeed, it suggests that its whole calculation mechanism and strategy has been flawed. Given the multitude of other unknown factors that universities have to deal with, some of which I shall refer to shortly, how are they supposed to plan for and cope with these new burdens if there is no clarity?

The Department would have us believe that the increased registration fees are a result of increased operating costs for the OfS. According to the figures before us today, the total operating costs were estimated at £26.2 million in 2017, but are now forecast to increase by at least £1 million. The Department says that that can be explained, first, by the registration of fewer new providers than expected. The OfS predicts that a total of 464 approved and approved (fee cap) providers will be registered in 2019-20—67 fewer than in the original impact assessment for the Higher Education and Research Bill. The over-optimistic, rather gung-ho assumptions about the new providers coming forward that the Department made when discussing the issue in the White Paper and the Bill Committee in 2016 have now been shown to be false, as we warned they would.

A reduction in expected efficiency savings for 2019-20 is the second reason given. Estimates have been revised down from 10% in the 2017 consultation impact assessment to 5% in the 2019 impact assessment, which again hints at how flawed and over-optimistic the 2017 assessment was. The Department tells us that it has absorbed the £500,000 cost of the student information programme; costs associated with Prevent, which are not specified; subsidies for new providers; and a fee waiver for providers with fewer than 300 students—a combined total of £800,000, subject to the spending review.

We are alarmed by how quickly the Government’s proposed contribution has fallen, from the 2017 impact assessment to the proposals before us today. The amount the Government are contributing has decreased significantly since the 2017 Act. The 2017 impact assessment shows that £26.2 million would be contributed from the sector and £6.6 million from the Government—a split of 75% to 25%. The statistics we have been given suggest that the 2019 statutory instrument shows a £27.2 million sector contribution by the providers and only a £800,000 contribution by the Government—a split of 97% to 3%. If those figures are accurate, that is a huge change and a huge new burden on those hard-pressed institutions. That is another factor explaining the increase in sector registration fees, alongside the reasons I mentioned earlier. Can the Minister tell me why the Government have chosen to push this burden further on to institutions and students since the Act was passed?

As I have indicated, this financial burden coincides with a range of other challenges: the potential costs of the subject-level teaching excellence framework that the Government have proposed; pension increases; the implications for HE institutions of Brexit and the Immigration Bill; and funding changes, all of which have a potential knock-on effect on institutions and the opportunities available to students. In that context, it is not surprising that the Minister’s predecessor, the hon. Member for East Surrey, who is serving on this Committee, said only on Monday, in the urgent question:

“the cumulative impact of some of our policy decisions…could be that we undermine the university sector”.—[Official Report, 29 April 2019; Vol. 659, c. 29.]

We would argue that this is one of those factors.

Universities UK has therefore asked for more accountability regarding the overall cost of the OfS and the reasons why the costs for providers have increased so substantially from previous estimates. We believe these costs are unexplained and potentially unwarranted. Can the Minister clarify any of that? On top of that, page 2 of the impact assessment states:

“There will be small familiarisation costs for HE providers when the new system is introduced.”

Can the Minister tell us what constitutes a small familiarisation cost and how much the Government expect that to be per institution?

I referred earlier to the fact that the DFE had absorbed the costs of the fee waiver for small providers. Regulation 4 proposes that micro-entities with 300 or fewer full-time equivalent students should be exempt from paying either initial or ongoing registration fees if they retain that status. We are concerned about that on two levels. First, those institutions often require a higher level of monitoring than larger, well-established ones. Is it fair, therefore, that others have to pay while those micro-institutions are allowed the same benefits of registration without having to bear any of the cost?

Secondly, and possibly more alarmingly, the way in which the micro-entities category has been established in the regulations provides the potential for creative abuse by large groups or companies seeking to enter the market but circumvent fees. Could a situation arise where an individual or company set up a number of micro-entities, which each specialised in a single university subject, but which collectively would be a far larger institution? That way, could they not maintain registration across a substantial area of activity without having to pay the fees? How does the Minister respond to that? There seem to be no safeguards in the regulations to prevent that.

Regulation 8 states:

“The OfS may waive or refund part or all of any fee payable under these Regulations if it considers it fair and reasonable to do so in an individual case.”

However, nowhere in the explanatory memorandum is there any clear indication of what those fair and reasonable circumstances may be. That may be another potential loophole. It is not clear anywhere in the materials how that would pan out. Will the Minister enlighten us?

MillionPlus told us in its briefing for today’s debate that the OfS was established under the principle of risk-based regulation, but basing the fees on student cohorts rather than on the amount of regulatory effort or risk is in direct contradiction to that—for example, a larger established provider may be a far lower risk than a new provider recruiting 100 full-time equivalents for the first time. DFE officials suggest that they have taken that approach because the latter approach is not possible at the moment, so bandings based on student numbers were used as a necessity.

MillionPlus also stated:

“there are some cliff-edge changes throughout the bandings, especially at the upper end. Although the difference is around a 25% increase each time, it is possible that fees based on student numbers will act as a disincentive to growth, which is unlikely to be in the interests of students.”

Universities UK has echoed that call, asking for a commitment to move to a model of charging fees that properly reflects the costs of regulating different providers.

Given the current proposal, and the fact that registration fees are just for the upcoming academic year and are not confirmed beyond that, can the Minister clarify whether we should expect the process to change in due course as the OfS understands where the effort and risk lie? If so, and changes do take place in the criteria by which regulation fees are assessed, will they need to come back to a future SI Committee?

The questions we have for the Minister are many, substantial and significant. We look forward to hearing his response, and I reserve my right of reply at the end of the debate.

--- Later in debate ---

[Chris Skidmore]

Taxpayer.

[Gordon Marsden]

Government.

[Dr Blackman-Woods]

Yes, from the Government. We can talk about the sources of Government money. Why are these costs going up? In a response to me in 2016, the then Minister made it clear that fees would only be charged on a cost-recovery basis—it is in Hansard and I am happy to pass it on to the Minister—yet that is not the system that we have in front of us today. This SI does not seem to marry with what we were being told in the Bill Committee.

We have to return to the points made by Universities UK. I am not sure that the Minister answered those questions, so I will ask him again. First, Universities UK makes the point about accountability in relation to the overall costs of the OfS and the reasons why the costs for providers have increased so substantially from previous estimates. We have not had a clear answer from the Government or from the OfS about why that is the case and we have absolutely no idea why the Government think the cost will increase by another £5 million in the next five years. We need an answer to that.

The Minister should be concerned about the way in which the OfS is growing like Topsy. It is a quango; what happened to the Government’s desire to see a bonfire of quangos? This one is being let grow more or less out of control.

The second point was about a commitment to move to a model of charging fees that properly reflects the costs of regulating different providers, rather than just size. The Minister reiterated the importance of looking at size today, but in our initial discussions, the Bill Committee felt that if fees were charged on a cost-recovery basis, particularly for universities that have clear systems and can easily provide information to the OfS, that would perhaps result in more limited costs than for new providers coming into the market and that would be reflected in the fees. That has not happened; quite the opposite. In fact, what the Government appear to be doing through exempting smaller providers is ensuring that their marketisation agenda continues apace, rather than reflecting the cost to universities.

The third point is that there should be appropriate funding from the DFE so students are not paying for Government policy priorities.

--- Later in debate ---

[Gordon Marsden]

It is nothing to do with the regulations.

[Chris Skidmore]

It is important, because this is about the scope of the OfS. Our debate today has focused simply on the financial role of the OfS in regulating universities. It also has a role in promoting access and diversity, to ensure that all students have the opportunity and the freedom to study. That work is not some spread of a quango, as the hon. Member for City of Durham said; it is really important work. We should be able to look at how we ensure that hate crime is addressed effectively and that we adopt a collaborative approach. The OfS as a body provides a national focus to ensure that these measures are taken forward constructively.

When it comes to the development of the OfS, I urge all Committee members to support it and look at its work in universities in their region, because it is an important organisation that will benefit students, and not just by providing best value for their courses. We can talk about the cost of the registration fees; I think the OfS will pay back the cost of the registration fees to the universities more, and not just in kind, but by being able to look at what is an incredible value-for-money argument.

It is important that we work to ensure that the OfS can continue to develop its plans for the future. I have already helped to sign off the access and participation plans framework guidance for the OfS this year. I am keen to ensure that we work on developing that for next year and the years after and on ensuring a positive relationship with the sector.

--- Later in debate ---

[Gordon Marsden]

As I have observed, and as my hon. Friend the Member for City of Durham, who has just spoken, has observed, today’s debate concerns registration fees and their implementation. While I have considerable respect for the Minister, as he knows, I have seldom heard such an inadequate response to a debate about a statutory instrument in which specific questions were asked about specific financial issues and why they have changed.

Members will be relieved to know that I will not detain the Committee by going through all the questions I asked that the Minister failed to answer. I appreciate that he cannot answer some of them here and now, but I thought that he would be capable of answering one or two. I certainly think that all members of the Committee deserve answers to those questions, because they are absolutely at the centre of whether the provisions before us have been properly thought out and whether we can rely on their financial probity, given what we have seen over the last two years.

The Minister totally ignored the issues that we raised about the potential for abuse with micro-entities. I give him notice that we will be watching progress in this area very carefully, and if any scandals or problems occur as a result, unless he wishes to expand on the matter in writing to me, his complacency today will be noted and taken into account in future discussions on these matters.

The truth of the matter is that the Minister has attempted to glide through a number of bromides about what he thinks the OfS might be doing in future, and about this, that and the other. Of course, the things he talked about are laudable, and of course I support what the OfS is doing, particularly the work of Chris Millward, on access and participation, but that was not the issue. The OfS is a sort of passive bystander in the process. The Government are making an extraordinary demand on universities at a time when their future is uncertain, which is why the Minister’s response is inadequate.

We are not going to let this matter go. I shall write to the Minister and ask him to spell out specifically responses to the questions that he failed to answer today, in respect of what my hon. Friend and I have said. It is regrettable that the Minister talks about co-operation and collaboration with universities, yet does not see the HE sector as a partner to be worked with, but as a partner to be listened to, then ignored. That is essentially the outcome of the regulations. On that basis, we cannot conclude that there has been sufficient or adequate discussion, or even a response to the issues that we have raised, so we propose to divide the Committee.

Question put.