Higher Education and Research Bill (Eleventh sitting)

Roberta Blackman-Woods Excerpts

Committee Debate: 11th sitting: House of Commons
Thursday 13th October 2016 Public Bill Committees

[Joseph Johnson]

I thank the hon. Gentleman for his welcome for the amendments. We share the same objectives, but I point out that it is not only newer entrants into the sector who require us to have these powers; there have also been instances in what we may regard as the classic university sector that have made it necessary for the powers to be introduced. I draw to his attention some cases we have seen in that part of the sector, which is by no means immune from the kinds of problems we want to ensure we stamp out.

One high-profile case that the hon. Gentleman may well remember in the sector funded by the Higher Education Funding Council for England was that of London Metropolitan University, which provided inaccurate data returns to HEFCE, resulting in it receiving significantly more funding than was due. The investigation into concerns about the university was hampered by access issues. HEFCE subsequently decided to recover access funding of £36.5 million over the three years up to and including 2007-08. So I would steer the hon. Gentleman away from the black and white picture of “alternative providers bad, classic sector good”, because it is not as simple as that, as he well knows.

The amendments will ensure that the powers of entry and search are effective and proportionate. I commend them to the Committee.

Amendment 89 agreed to.

Amendment made: 90, in clause 56, page 33, line 39, at end insert—

“(3) A “linked institution” in relation to a supported higher education provider means an institution which acts on behalf of the provider in the provision of a higher education course by the provider.”.—(Joseph Johnson.)

This amendment extends the power of entry so that it applies to premises occupied by institutions that are linked to supported higher education providers as defined in the amendment. Amendments 89, 91, 92, 94 and 95 are consequential on this change.

Clause 56, as amended, ordered to stand part of the Bill.

Schedule 5

Powers of entry and search etc

Amendments made: 91, page 77, line 11, after “provider” insert

“or a linked institution in relation to such a provider”.

See the explanatory statement for amendment 90.

Amendment 92, page 77, line 17, after “provider” insert

“or a linked institution in relation to such a provider”.—(Joseph Johnson.)

See the explanatory statement for amendment 90.

[Dr Roberta Blackman-Woods (City of Durham) (Lab)]

I beg to move amendment 290, page 77, line 25, at end insert—

“(e) the justice of the peace is satisfied that the use of entry and search powers is the only practicable way for the matter to be investigated.”.

This amendment would allow search and entry powers to be used only in cases where a justice of the peace is satisfied that there was no other practicable way forward.

It is a great pleasure to have you back in the Chair, Sir Edward.

I say to the Minister at the outset that amendment 290 is a probing amendment to test whether he thinks sufficient safeguards are in place for universities on powers to search and enter premises of higher education providers. I am sure we all agree that where incidents of fraud, financial mismanagement or other illegal behaviour have or are suspected to have occurred, it is exceptionally important that there is a power to investigate allegations in a timely and efficient way, and in some circumstances the use of search and entry powers will be necessary to carry out those investigations. However, there is some anxiety in the university sector that there might not be sufficient safeguards in the Bill on the court process to approve powers of search and entry. The amendment is simply to ask the Minister whether sufficient safeguards are in place, or whether it would be possible to add an additional safeguard of more court oversight.

[Joseph Johnson]

I thank the hon. Lady for tabling the amendment and for clarifying its probing nature. I reassure her that her intention is already achieved by schedule 5, which states that in order to issue a warrant a justice of the peace must be

“satisfied that…entry to the premises is necessary to determine whether the suspected breach is taking place or has taken place”.

A warrant may be issued only in relation to a suspected breach that is

“sufficiently serious to justify entering the premises”

and where entry to the premises would be refused or requesting entry would

“frustrate or seriously prejudice the purpose of entry.”

That means, in effect, that a warrant will be granted only when necessary and when it is not practical to enter or request the information on a consensual basis.

The hon. Lady asked what further safeguards there are. Further safeguards are built into the powers of entry and search, including that entry must be

“at a reasonable hour”,

that the warrant must

“identify, as far as possible, the suspected breach of a registration condition or funding condition”,

and the premises may be searched only

“to the extent that is reasonably required for the purposes of determining whether there is, or has been, a breach”.

Warrants granted under the powers will not allow for individuals to be searched. We are confident that those are strong safeguards that effectively ensure that the powers of entry and search can be used only if necessary and if that is the only practicable way for a matter to be investigated.

I agree that it is vital that proper safeguards are in place to ensure that those powers are always used appropriately. I believe that the strong safeguards set out in schedule 5 as drafted achieve that, and I therefore ask the hon. Lady to withdraw the amendment.

[Dr Blackman-Woods]

I have heard the Minister’s extremely helpful clarification, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: 291, in schedule 5, page 77, line 32, leave out paragraph (a).

This amendment has the effect that the power of entry cannot be exercised in relation to a breach of an initial registration condition.

Amendment 94, in schedule 5, page 78, line 7, after “provider” insert “or linked institution”.

See the explanatory statement for amendment 90.

Amendment 95, in schedule 5, page 78, line 20, after “provider” insert “or linked institution”.

See the explanatory statement for amendment 90.

Amendment 96, in schedule 5, page 79, line 1, after “the” insert “relevant”.

See the explanatory statement for amendment 101.

Amendment 97, in schedule 5, page 79, line 2, leave out “occupying the premises”.

See the explanatory statement for amendment 101.

Amendment 98, in schedule 5, page 79, line 7, after “the” insert “relevant”.

See the explanatory statement for amendment 101.

Amendment 99, in schedule 5, page 79, line 8, leave out “occupying the premises”.

See the explanatory statement for amendment 101.

Amendment 100, in schedule 5, page 81, line 36, at end insert—

““linked institution”, in relation to a supported higher education provider, has the meaning given in section56(3);”.

This amendment defines “linked institution” for the purposes of Schedule 5.

Amendment 101, in schedule 5, page 81, line 36, at end insert—

““relevant supported higher education provider” means—

(a) in the case of premises occupied by a supported higher education provider, that provider, and

(b) in the case of premises occupied by a linked institution in relation to a supported higher education provider, that provider.”—(Joseph Johnson.)

This amendment defines “relevant supported higher education provider” in order to identify such providers where a linked institution is occupying the premises. Amendments 96, 97, 98 and 99 are consequential on this change.

Schedule 5, as amended, agreed to.

Clause 57

Power to require information from unregistered providers

Question proposed, That the clause stand part of the Bill.

[Carol Monaghan (Glasgow North West) (SNP)]

On a point of order, Sir Edward. I believe that clauses 56 to 59 have been certified under the English votes for English laws procedure. Are you able to shed any light on that?

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[Dr Blackman-Woods]

Does the Minister intend to table regulations or guidance that would make obvious the set of circumstances in which HEFCE might arrange for a study into the efficiency of an organisation? This is not a carte blanche power to go in because it decides on a whim to do a study on a particular institution, because there are grounds for concern that would trigger a study being carried out on a particular institution. Alternatively, is his intention that this should be a carte blanche power and that the OFS can decide one day that it is not sure an institution is being as efficient as it could be, so it will commission a study to look into it? Where is the trigger information, so that we can better understand the use of this power?

[Joseph Johnson]

We would not expect to set out the precise circumstances governing the use of this power in the Bill, but they will be subject to guidance from the Department to the office for students in the normal manner in due course.

[Gordon Marsden]

The Minister asks me yet again to trust in the sentiment of what his Department has done, but the answer, I fear, is that there was no specific or distinct assessment of the sort for which I have asked. Nevertheless, I have heard what he has to say. We will see how the transfer operates, and on that basis I am content to leave it at that.

Question put and agreed to.

Clause 62 accordingly ordered to stand part of the Bill.

Clause 63 ordered to stand part of the Bill.

Clause 64

Other fees

[Dr Blackman-Woods]

I beg to move amendment 239, in clause 64, page 38, line 43, at end insert—

“(6) Any fees or costs that arise from the activities of any one institution are only liable to be paid by that institution.”

This amendment will ensure that where a Higher Education Institution incurs fees or costs only that Institution is liable to meet the obligations incurred.

[The Chair]

With this it will be convenient to discuss amendment 240, in clause 66, page 39, line 21, leave out from “OfS” to end of line 22 and insert

“for its set up and running costs.”

This amendment seeks to ensure that students are not meeting the set up costs of the OfS.

[Dr Blackman-Woods]

Amendment 239 would add another subsection to clause 64 to give higher education institutions a guarantee in the Bill that costs would not be applied to them, through the fee regime, that should not be borne by them. For example, if a problem in one institution meant that the OFS had particularly burdensome costs, it could not in some way average those costs out across other institutions—ones that were not “guilty” of whatever the activity was. It is not absolutely clear in clause 64 that higher education institutions would be protected from that sort of practice, and I am not sure that schedule 7 protects them, either, but perhaps the Minister will enlighten me further about that.

The Minister will know that this concern was raised by the University Alliance. In its written evidence to the Committee, it was clear that it thought that it would be very unfair for well managed and high performing HEIs to pick up costs relating to others that might be in breach of a particular provision. With the amendment, we are asking that it be explicit somewhere in the Bill that only fees relating to the activities of that institution can be applied to it.

Amendment 240 would amend the Bill so that the Government, not universities, were responsible for the set-up and running costs of the OFS. The reason for that is primarily that so much of the income that goes into universities now comes from students themselves. Often when Government Members are talking about universities, there seems to be a belief that there is this huge body. I am not saying that public money does not go into universities. Of course, some public money does, but it is now only a fraction of the running costs of universities.

One reason why the Minister has argued for putting up fees is that universities need more income from fees if they are to be able to run properly. Most of their income comes from fees, so if the OFS is funded by universities, actually students are paying for it or a huge part of it—not only for the set-up costs, but the running costs. If students were asked whether they wanted the costs of the whole regulatory regime for universities and everything else that goes with the OFS to be borne by them, or substantially borne by them, they would not be very happy. I hope that the Minister is open to listening to the case for a much fairer system. Students already have a lot of costs.

Interestingly, according to the screen in the room, the Government are asking universities to put a lot of money into setting up and running grammar schools and all sorts of other schools. Who is paying for that activity? It will be borne predominantly by students. I do not mean the running costs of the schools, but the setting-up cost will be borne largely by students because students are largely funding the sector. It seems totally unfair that the Government have come up with this new regime but do not seem happy to put their hand in their own pocket and pay for it. That is not a reasonable course of action.

The Government are not clear in clause 66 or schedule 7 what the Secretary of State will actually be making grants for. I suggest the Minister tells his right hon. Friend that if the Government are serious about making the system work properly and not putting additional costs on students, who are already carrying a very big burden of paying for university, a very good use of money would be ensuring that grants were made available to the OFS on a regular and timely basis to cover running and set-up costs.

[Joseph Johnson]

The OFS has the power to charge other fees beyond the registration fee, in recognition of the fact that it may deliver specific services and one-off processes that would not apply to the majority of providers. That is a fair approach, meaning that providers that require a particular additional service are those that will be charged for it. As an example, the OFS may look to charge for the process of commissioning a registered higher education provider to validate other HE providers’ taught awards and foundation degrees.

Ultimately, the exact detail of what other fees may pay for is to be determined, but we have made clear that fees should be charged only on a cost recovery basis. I would also like to assure Members that any other fees made via the provision would be part of the overall fee regime, on which we will be consulting this autumn. As such, they would require Treasury consent and be included in regulations subject to the negative procedure before they could be brought into force.

On amendment 239, let me start by assuring Members that there is no intention to use the powers under clause 64 to charge other fees for a different service or activity that is not related to the particular service or activity for which the other fee has been charged. However, it is important that we allow the OFS sufficient flexibility in setting charges for each individual additional activity or service that attracts other fees, so that it is either able to set a flat rate where that makes most sense administratively or to vary fees according to the size of a provider, where there are grounds for doing so on the basis of access and affordability.

Subsection (3) enables cross-subsidy between charges relating to the same services or activities. In doing so, it is clear that the clause does not enable cross-subsidy between additional charges for different services or activities. Amendment 239 would prevent the OFS from charging on any basis other than the specific costs incurred by each individual provider and might affect the OFS’s ability to build cover into the fee regime for overhead costs relating to the specific activity being charged for. That clearly works against the rationale for enabling a fair element of cross-subsidy within the main registration fee under clause 63.

On the hon. Lady’s points about set-up and transition costs, I entirely sympathise with the principle that students should not pay for the set-up costs of the OFS. Let me assure the Committee that we will consider areas where Government may provide supplementary funding to the OFS, including to ensure that students do not incur the additional costs associated with transition to the new regulator. That will form part of our upcoming consultation on registration fees.

It is, however, our intention that once the new system is in place, providers will share the running costs of the new regulator with the Government, which will bring the model into line with that of other established regulators that are co-funded through a combination of fees charged on the sectors they regulate and funding from Government. It will also make the funding of HE regulation more sustainable, reducing the reliance on Government grant, and create an incentive for providers to hold the new regulator to account for its efficiency.

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[Joseph Johnson]

Yes, that is exactly right and I have already given some examples of some of the areas in which the Government will want to be making a contribution towards the overall costs of the regulatory framework.

I assure hon. Members that the power under clause 66 is about enabling the Government to express their funding priorities. This recognises that in a world where we set maximum fees, Government need to ensure that they can direct money to some high-cost courses to ensure it remains viable for providers to teach them. Amendment 240 would prevent this. It would also have a further particularly unwelcome, and I am sure unintended, effect in that it would remove the Secretary of State’s ability to make teaching grant to the OFS and replace it with an ability to make grant only for the OFS’s set-up and running costs. That would remove the OFS’s ability to fund activity such as high-cost science, technology, engineering and maths courses or widening participation.

Amendment 240 would undermine the sustainability of our HE funding system, to the detriment of students. Further, we are taking the opportunity in this legislation to refresh the protections for academic freedom so that they are appropriate for today’s circumstances. I ask the hon. Member for City of Durham to withdraw the amendment.

[Dr Blackman-Woods]

If I heard the Minister correctly, he confirmed that I am right to be anxious about what is happening with regard to clause 64. I think he said that there would be overhead charges arising from the activity of all the institutions that would then be borne by each one individually. So there could be additional charges in that overhead fee because it proves extremely difficult to get information from some institutions or the OFS wants to have a lot of specific projects relating to specific institutions. Perhaps that is not what the Minister meant, but it seems that subsection (3) is being used to allow some cross-subsidy—that is the term he used. I am extremely concerned about that, as are a number of institutions.

What is the limit on that cross-subsidy? That is an incredibly unfair and probably, in the long run, unworkable system. I expect that a lot of HEIs will not be happy at all to be charged what they see as a fairly high overhead charge for services or activities that have nothing to do with them as an institution. I am happy for the Minister to correct me, if he wants to.

[Joseph Johnson]

I am happy to try to provide further reassurance on this point, if I did not do so sufficiently the first time round. It is our intention that the registration fee will be fair, proportionate and affordable for providers. With that in mind, we will explore options for Government funding to supplement the fee income that the OFS receives from providers. We have already committed the OFS to fund, for example, the teaching excellence framework.

An element of cross-subsidy can be a sensible means of achieving a balanced approach to cost recovery across the sector and is well established in other charging systems. For example, subscription fees paid to the Quality Assurance Agency for Higher Education currently pay for more than the benefits providers receive and cover other costs, such as running and infrastructure costs and international work conducted by the QAA on behalf of the sector. Having this element of overhead covered by charges is therefore something that the sector is familiar and comfortable with.

[Dr Blackman-Woods]

Yes, but the QAA is about quality assurance; it is not a regulator in that sense. The point I am trying to make with amendment 239 is that institutions need to be protected from bearing costs created by one or a group of other institutions. At this point, the types of activity that will feed into the overhead charge are not clear.

Rather than labour the point, I would like the Minister to take on board these anxieties—which are, after all, not only ours, but have been put in written evidence to the Committee from one of the university mission groups—and see if anything could be added to the Bill or come subsequently in regulations that would give institutions more assurance that they will not have charges levied on them that are created by some other group of institutions or another individual institution. I will beg to ask leave to withdraw amendment 239.

The exact wording of amendment 240 might not be exactly right, but the sentiment behind it is that students should not be paying substantially for the OFS, which is what they will do. The Minister might think it is in students’ interests for them to pay for the OFS, but I do not. It is in students’ interests that the OFS is there and operates effectively and efficiently, but it is quite a big leap to say that they should therefore pay for it. Student loans are already an onerous charge for our students. They often come out of university with debts in excess of £40,000, and simply putting up the fees in order to pay for more and more of the whole sector is not something we should support.

[Gordon Marsden]

My hon. Friend is making a powerful point. The Minister is trying to reassure her by saying it will be all right on the night. The truth is that we are looking at something the Minister wants; he keeps telling us we need it. We are looking at having a very large number of new providers. I make no comment on whether that is good, bad or indifferent. The fact is that we are looking to get a very large number of new providers. Does my hon. Friend not agree that it is probably unreasonable to expect the new providers to bear some of the increased operational costs of the OFS for that? The likelihood is that the amount of operational costs that existing providers will be expected to bear under the process the Minister describes will increase significantly.

[Dr Blackman-Woods]

My hon. Friend makes an excellent point. I want to come back to saying to the Minister that there is acceptance in the sector of the broad direction of activity establishing the OFS. There has been some consultation with them but it is the view of many that, if the Government want to move to this particular regulation and quality assessment and research regime, they must substantially pay for it, and not put the costs on to a group of people who are already having to pay a substantial amount. I accept that it is a loan but they will ultimately have to pay substantially for the whole of the sector, and we have to put a brake on that somewhere. For me, the brake is here. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider Government new clause 2.

[Gordon Marsden]

I was not clear whether the Minister would speak to proposed new clause 2 before we had the clause stand part debate. However, since you have asked me to speak, Sir Edward, I will do so.

It seems to me that the Minister has got himself into a complete tangle over the business of fees. He will remember the Micawber principle that the difference between income and expenditure is the difference between happiness and misery. The Minister seems to be in some misery on this matter at the moment because he is unable to declare what amount the happiness will be.

I want to probe a little further on two or three specific points. The document that supports the case for the creation of the OFS, which is subtitled “a new public body in place of the Higher Education Funding Council for England and the Office for Fair Access”, was published in June 2016. That was before the referendum and all the consequences that flow from it. My question to the Minister is a technical one. Has that document been revised in any shape or form since?

Very little information has been given by the Government today. I accept that these matters cannot go in the Bill, but the paucity of information from the Minister when he says, “This will happen or we will have this, that or the other,” on something as crucial as establishing a new financial institution as well as a new non-departmental body, is pretty poor.

The Minister’s response to the comments of my hon. Friends about cost-sharing were very vague. I know myself from having spent a number of years in the private sector, working with a number of private institutions, how difficult and corrosive the issues of cost-sharing can sometimes be within companies, let alone between organisations. I really do not think that the Minister has given a satisfactory answer in that area.

I refer the Minister to the comment he made earlier: “We are looking at this and we will produce information in due course.” In fact, the Government did produce information in due course. The information is contained in a document I have, and very revealing it is too. On page 22 of the “Case for creation of the Office for Students”, there are two tables. One talks about the operating costs of the OFS over the period 2018 to 2027. I found it very interesting that in 2018-19, the first year of operation, the operating cost will be £30.9 million. In 2019-20, it will be £32.5 million, and it will be £34.1 million in 2020-21. If my maths does not fail me, that is a fairly modest increase between 2018-19, 2019-20 and 2020-21, whereas in my experience of the private sector—I accept that this is not a private sector body, but it is in a situation of quasi operating as a private sector body—operating costs for the first two or three years of an organisation are always substantially higher in years 2 and 3 than they are in the first year. The Minister might want to elaborate on the basis on which those operating costs were dealt with.

However, perhaps more revealing is the stuff referred to in table 2, which gives the estimated split between the costs covered by the sector and those covered by the Government. In 2018-19, we have a figure of £14.9 million for total Government support, as opposed to £16 million for total registration fees. Then there are separate and much smaller figures: £1.9 million for new provider support and £4.8 million for activities with wider economic or societal benefits. There is also transition funding, to which the Minister referred, of £8.2 million. In that context, depending on how we want to do the maths, the balance between Government support and support from the university sector—as my hon. Friend the Member for City of Durham and others have made clear, substantially that means money coming from students —is 50:50.

When we go to the figures for 2019-20 and 2020-21, we are told that Government support will drop from £14.9 million to £8 million and the total registration fees income will be £24.4 million. I have checked, and that balance is retained during the subsequent years of the Department’s forecast. That means that the Government are bearing a load that is 25% of the operating costs of the office for students and the university sector and the students who fund it are being asked to cough up 75%.

If the Minister wants to say that those figures are inaccurate, he may do so, but he might find it rather embarrassing, given that his own Department produced this document in June. Really and truly, I do not think we have had very good or accurate explanations from the Minister today. If he were before the Select Committee, it might have some interesting questions for him.

[Dr Blackman-Woods]

My hon. Friend is making a powerful case. Does he agree that it is hardly co-funding for the student body to be carrying such a weight of the costs of the OFS and the Government so little, and that that is why we are so exercised about this measure—because it is unduly burdensome on students?

[Gordon Marsden]

I thank my hon. Friend for that intervention. I absolutely agree and I will repeat what I said earlier. This is a double-whammy in terms of the costing structure that the Department is suggesting for the university providers, and by implication. This is the reason why I raise Brexit. In an uncertain world, it will pile more problems on them in the first two or three years. It is a whammy on the students. It is also a whammy on the new providers, which will be entrepreneurial in many cases and will not be able to bear more than is suggested in the Bill. If the OFS begins to crumble financially because of the incompetence of the costings produced by the Government, where will that leave the ability of the OFS to supervise and protect new providers? It is a dog’s breakfast, and the Minister has done nothing to unscramble it.

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[Joseph Johnson]

No, I will keep on going. Creating the office for students is about improving the regulatory system and creating a stable, level playing field for providers. The OFS will operate on a sector-funded model, with co-funding from Government, bringing the funding approach in line with that of other regulators. The Bill will enable that, granting the OFS the powers to charge providers registration fees and other fees to cover the costs of its functions.

[Dr Blackman-Woods]

Will the Minister give way?

[Joseph Johnson]

No, I think we have had enough on this, so I am going to carry on. The OFS’s power to charge other fees under clause 64 will allow it to charge for specific services and one-off processes that would not apply to all providers in a registration category.