Office for Students

Lord Ponsonby of Shulbrede Excerpts

Thursday 30th January 2025 Grand Committee

[Baroness in Waiting/Government Whip (Baroness Anderson of Stoke-on-Trent) (Lab)]

My Lords, what a genuinely engaging debate—I am also going for “joyful” today. I thank noble Lords for their congratulations. I am having a very good day, even if my husband-to-be’s credit card is probably not.

Moving on to the debate, I begin by thanking the noble Lord, Lord Willetts, for opening the debate and, moreover, for the significant role he has played in shaping our world-class higher education. I never for a moment thought that I would ever be responding to “Two-brains” in an education debate, but I am delighted to do so. I agree with him on the joys of being a Whip at this end of the building. We are allowed to speak; the Chief Whip will decide whether that is for good or ill. The noble Lord’s ongoing contribution to the broader debate about the future of our universities is deeply valued.

I also thank the noble Lord, Lord Johnson, for requesting this debate. I know that he, having been instrumental in setting up the Office for Students, continues to have a keen interest in the future of our universities and in securing the future of our higher education system for the benefit of our students, the taxpayer and the economy. Higher education is vital to the future of our country. Our universities are revered globally for excellence and act as one of the country’s greatest enablers of two of this Government’s missions.

First, higher education is the engine for growth. It ensures that we have a highly skilled workforce and delivers world-class research that underpins long-term innovation and economic growth. In many communities, it acts as an anchor for local economic development and civic impact. It adds billions of pounds of value to our economy each year, supports hundreds of thousands of jobs and generates over three-quarters of all our education exports.

Higher education also provides opportunity. It enriches the lives of learners, regardless of their background, and how they access education—including at the Salvation Army, which, for the record, is where my mother was born. For many, it is a truly transformational experience. Graduates have better choice, better paid employment and are better able to contribute to the economy and society as whole, challenging understanding and developing new ideas. This contributes to a healthier, more cohesive society for us all. I have first-hand experience of this. I am the first person in my family to have gone to university. My grandmother, from the East End of London, would have been somewhat confused by where I ended up, but I know only too well how higher education can transform lives to ones of aspiration and achievement.

Secondly, higher education is an engine not only for the economy but for social mobility. This lies at the heart of the Government’s commitment to build skills for opportunity and growth, so that every young person can follow the pathway towards a better future that is right for them, whether at university or elsewhere. Technical education and further education are also key to ensuring that people have the right role for them and are able to find joy and happiness at work, which is what we are doing today.

The Office for Students is fundamental to all this through its effective and independent regulation of the sector. The noble Lord, Lord Willetts, touched on the fact that there was no regulator in place when some genuinely challenging elements came into being. It is vital that we now have one, making it work in a way that delivers for the sector and the country.

The primary purpose of regulators is to protect the public. At the point when most students enter higher education, through tuition fees, they make the single biggest investment that they are ever likely to make. These fees are, of course, largely underwritten by the taxpayer through the student loans system. Therefore, it is vital that our universities and colleges offer high-quality provision that ensures a good return on that investment for students and the country, and it is right that independent regulation should seek to ensure this, while protecting and promoting the student interest.

What is the need for stronger regulation and the new strategy? We need to take a step back. Noble Lords will recall the report from the Industry and Regulators Committee on the Office for Students, published in September 2023, which provided a stark assessment of the regulator’s past performance. Indeed, it was entitled Must Do Better.

Last July, the Government published the report of Sir David Behan’s review of the OfS. The review sought to be forward-looking and create a platform for change, but Sir David was very clear that the environment within which the OfS operates has changed considerably since the noble Lord, Lord Browne of Madingley, first made the case for the regulator in 2010 and, indeed, since the noble Lord, Lord Johnson, articulated his vision for higher education in the 2017 White Paper Success as a Knowledge Economy.

The current situation is volatile, uncertain, complex and ambiguous. Navigating this uncertain terrain will be a challenge for many providers, their students and, as it has proved, the OfS itself. Sir David found that the case for regulation was clear. He recognised the improvements the OfS had made since the publication of the Industry and Regulators Committee report but recommended that the OfS should focus on the key priorities of quality, financial sustainability, acting in the student interest and protecting public money. In short: do less but do it better.

Following the resignation of the noble Lord, Lord Wharton, as chair of the OfS, and while a permanent replacement is recruited, the Secretary of State has appointed Sir David as interim chair to oversee the implementation of his review. The OfS has begun this work, setting out a proposed road map for the next five years in the consultation currently running on its strategy, which are discussing today. However, while this important long-term work progresses, immediate priorities and risks must be assessed and addressed.

Central to Sir David’s analysis was a focus on the financial sustainability of the sector. Concerns about the sector’s finances have continued to grow, even appearing in the news this week. In November, the OfS published analysis of the higher education sector’s financial health for the 2022-23 financial year and forecasts for the next four years. It made for troubling reading, finding that both domestic and international recruitment are below the sector’s expectations; that by 2025-26, income could be £3.4 billion lower than provider forecasts; and that up to 72% of providers are expected to be in deficit if they do not take significant mitigating actions.

As a result, the OfS made the decision to temporarily pause the processing of applications regarding the OfS register, degree-awarding powers and university titles, to refocus their resources on managing the critical risk of financial sustainability in the sector. I reassure noble Lords that Education Ministers and officials meet with the OfS on a regular basis, and this specific issue was discussed with the OfS in November and again in December.

Of course, this is not the ideal decision for the OfS to make, and I do not underestimate the impact on those providers whose business models rely on achieving registration or progressing with degree-awarding powers, but it is a decision for the OfS as an independent regulator, not for Ministers. Furthermore, it is in line with the recommendations of the independent review and with expectations set out in the regulator’s code to prioritise resource to manage the greatest risk.

The pause is limited to new and early-stage applications. The OfS expects to restart the process in August, or earlier if possible, and will review every three months until then. Affected providers have been contacted individually and will be informed of progress and changes. I recognise the concerns that this stifles growth, but it is about keeping the show on the road while we deliver our long-term strategic ambitions for higher education. On that note, I will answer some of the specific questions put to me by noble Lords.

In response to the noble Lord, Lord Willetts, there are unlikely to be more than 100 applications from franchised providers. We require only those with over 300 students to register for the new franchising model, and the largest 10 unregistered providers account for 58% of all franchised students at unregistered providers. This will work quite quickly and effectively with the largest suppliers.

With regard to the “Strengthening oversight of partnership delivery in higher education” consultation, we think that it is important to make progress towards strengthening the regulation of franchised higher education. The OfS has currently paused the registration of new higher education providers in order to support the sector with financial sustainability concerns, as I said, but this is being reviewed every three months.

With regard to institutions that are already in process, which the noble Lord, Lord Willetts, touched on, the OFS has said that it will process applications that are already well advanced. If the noble Lord has knowledge of where that is not happening, I would be grateful for the information. It will also review that every three months. Given what we are talking about between now and August, that seems proportionate, but, if there are specific concerns, I would like to hear from the noble Lord.

On global chains and the pause, I think it is fair to say that education is global. The best of education, as we discuss regularly in the House, allows people’s brains to flourish. Universities are cathedrals for learning, whether they are here or elsewhere; the more exposure we have to more people, the better position we are in to move society forward.

On global change, it is for providers and universities to make decisions about business models, including international investment. However, I can reassure noble Lords that this is temporary to address a critical risk. If there are people with whom we need to engage in the interim, we will endeavour to have those relationships to reassure those institutions. The OfS will consider such applications as soon as the process restarts but will, I hope, seek to work with partners as the pause is ongoing.

I believe that I have answered on the next bit. We are getting through the questions.

All three noble Lords asked: why so much regulatory burden now? Individuals and the taxpayer have invested hugely in higher education. It is right that this should be regulated. However, regulation has to be proportionate and not stifle growth. I agree that the Chancellor’s speech yesterday was excellent. We must also make sure that we are all contributing to the delivery of growth in order to continue to invest in the public services that I, for one, care so much about.

The Office for Students must, and does, abide by the Regulators’ Code and should not impose unnecessary burdens, but students’ experience and outcomes are critical. We need to ensure that students are getting what they pay for.

With regard to further education colleges, as raised by the noble Baroness—am I okay for time, Mr Whip?

[Lord in Waiting/Government Whip (Lord Ponsonby of Shulbrede) (Lab)]

Yes.

[Baroness Anderson of Stoke-on-Trent (Lab)]

Thank you. It is quite nice to be on the other side.

FE colleges form an essential part of the HE landscape. We are very aware of the burden on colleges that are regulated by a number of different bodies. That is why, for example, we are proposing to exempt FE colleges from the new proposed requirements for franchising. I emphasise again that the pause is temporary. If FE colleges wish to register, they will be able to do so from this summer.

On the wider education strategy, in answer to the noble Baroness, Lady Stedman-Scott, the Secretary of State has been clear and has announced five priorities for the reform of higher education. Given the time, I will not outline them but will write to the noble Baroness with the details.

I am very grateful for the thoughtful contributions that noble Lords have made during this debate. There is a great deal of higher education expertise in your Lordships’ House—some of which is a little terrifying—and I welcome this opportunity to benefit from it. I conclude by commending the efforts of the OfS. The Government continue to maintain their strong support for the regulator and its important work in protecting the interests of students. I also recognise the risks that universities and, by extension, students are facing. I assure noble Lords that both the Government and the OfS maintain a keen focus on overcoming these challenges to ensure that we maintain the secure, stable and world-class higher education that we are all so rightly proud of.