Higher Education (Monetary Penalties and Refusal to Renew an Access and Participation Plan) (England) Regulations 2019

Viscount Younger of Leckie Excerpts

Monday 20th May 2019 Lords Chamber

Moved by

[Viscount Younger of Leckie]

That the draft Regulations laid before the House on 1 April be approved.

Relevant document: 25th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

[Viscount Younger of Leckie (Con)]

My Lords, we have come a long way since the passage of the Higher Education and Research Act 2017 and I thank noble Lords for the scrutiny they provided, both to HERA itself and to the HERA regulations laid before this House since HERA gained Royal Assent in April 2017.

Let us step back and take a look at the progress of the Office for Students. Since its formation, the OfS has registered over 350 higher education providers, while ensuring that academic freedom and autonomy are core principles of the governance of all registered providers. In registering these providers, the OfS has satisfied itself that each provider has met a range of registration conditions including, but not limited to, quality and standards, access and participation, management and governance, financial sustainability and student protection. It has also helped to introduce the Teaching Excellence and Student Outcomes Framework, to highlight where to find high-quality teaching and the best graduate outcomes, as well as providing an incentive to improve standards. We know that the TEF has encouraged providers to focus more attention on their teaching and learning strategies. Dame Shirley Pearce is conducting an independent review of how the TEF currently operates and we expect her to submit her report in the summer. The OfS has also ensured that all registered providers with fee caps at the higher level have comprehensive access and participation plans to improve access and support for students from disadvantaged backgrounds and underrepresented groups.

Widening access and participation in higher education is a priority for this Government. This means that everyone with the capability to succeed in higher education should have the opportunity, regardless of their background or where they grew up, and we are making progress. In 2018, 18 year-olds from disadvantaged backgrounds were proportionally 52% more likely to enter full-time higher education than in 2009. But we know that there is more to be done. Through the Government’s guidance to the Office for Students we have asked for greater and faster progress on access and participation. On the provision of information to students, the OfS is working in partnership with the Department for Education on the best way to enhance and improve the information given to students on the quality and standard of teaching that they can justifiably expect. I am sure your Lordships will agree that this is a considerable achievement, on which the OfS should be congratulated. 

I now turn to the regulations and first to Section 15 of HERA, which gives the OfS the power to impose monetary penalties on providers that fail to comply with their ongoing conditions of registration. The OfS register is the route for providers to charge fees that attract student loans, become eligible for grant funding, offer degrees or call themselves a university. In return for these considerable benefits, providers have to comply with registration conditions relating to, for example, their financial sustainability, quality of provision and student protection. The register—noble Lords may know this, but I wish to go over the details again—is divided into two categories: “approved” and “approved fee cap”. A provider’s registration category determines its exact benefits and obligations. Providers on the register with an agreed access and participation plan are in the approved fee cap part of the OfS register.

HERA also gives the OfS the power to apply specific conditions on a particular provider if there is cause for regulatory concern. These are not specified in the Act but, by way of example, the OfS has placed specific ongoing conditions of registration in relation to their access and participation plans on certain universities. They have been required to report on their evaluation of financial support made available to students.

Adherence to the registration conditions is a vital component of our reforms to the regulatory landscape. It is critical to safeguarding the interests of students and the quality and reputation of our higher education sector. The power to impose a monetary penalty on providers is a crucial tool for the OfS to have at its disposal to enforce registration conditions and to encourage compliance. Regulations are required to make provision for the amount of the penalty that can be imposed and may set out the matters to which the OfS must, or must not, have regard when exercising the power to impose a monetary penalty. Failure to put these regulations in place will mean that the OfS will not have this essential regulatory tool at its disposal at the very point at which it most needs it.

I move on to the consultation on monetary penalties. Monetary penalties provide an effective incentive to comply with regulation and an enforcement tool, but they must also be proportionate and fair. There was no statutory obligation to consult on these regulations. However, a commitment was made during the passage of HERA through this House to consult on the matters that the OfS must have regard to when imposing a monetary penalty. As a result, the department conducted its consultation between December 2017 and March 2018. To reassure your Lordships, as these are new regulatory powers, we also took the opportunity to seek views on the maximum monetary penalty amount. It is through this extensive consultation that we have established the fair and balanced approach set out in these regulations.

The consultation process identified some concerns that monetary penalties could take away provider income that might otherwise be used for the benefit of students. The majority of respondents did not support the department’s proposals for the maximum penalty, but respondents were broadly supportive of the proposed factors, especially that relating to impact on students. The Government have listened. In response, the Government adopted the lower of their options for a maximum penalty amount—2%, rather than 5%, of qualifying income—but remain of the view that monetary penalties need to be set at a level that ensures there are visible and meaningful consequences, without being unduly punitive. By this I mean that the penalties should have the potential to be of sufficient magnitude to have a real impact on providers, which will encourage them to comply with their registration conditions. However, the legal restraints these regulations place on the OfS, including the mandatory factors to which it must have regard when setting a penalty, are designed to ensure that the OfS is required to take appropriate, reasonable and proportionate action. In doing that, the regulations ensure that the interests of students—both at the provider in question and those of students more generally—are taken into account. Your Lordships will be reassured to know that the regulatory framework published by the OfS last year sets out its approach to imposing sanctions, including monetary penalties. In addition, the OfS will produce more detailed guidance on how it will take decisions to impose monetary penalties and on the amount of penalty to be imposed.

I now turn to the second part of the regulations. These allow the Office for Students to refuse to renew a provider’s access and participation plan. Given the importance of access and participation, we have asked the Office for Students to secure greater and faster progress in this very important area.

--- Later in debate ---

[Lord Storey (LD)]

My Lords, we obviously welcome this statutory instrument. I have three very brief questions. First, we have of course talked about disadvantaged and underrepresented groups, but what about dis- advantaged schools? How do we ensure that we break the cycle of the top independent schools sending far more pupils to some of our top universities than your average maintained school? Are we ensuring that the gap between independent schools, maintained schools and academies is included?

Secondly, do the access and participation plans include numerical targets for each university? Thirdly, I am quite taken with my noble friend Lady Garden’s point about the fines not going into some black hole in the Treasury. You could do quite a lot in disadvantaged areas with schools doing outreach work to encourage young people to go to university. If there was money available, it would be a much easier proposal to operate.

[Viscount Younger of Leckie]

I thank all noble Lords for their participation in this fairly short but interesting debate. I will do my best to answer in short order the questions that were raised on these Higher Education (Monetary Penalties and Refusal to Renew an Access and Participation Plan) Regulations.

I thank the noble Lord, Lord Bassam, and all other noble Lords for being broadly supportive of these regulations. I welcome the remarks that the noble Lord made towards the end of his speech, saying that it is welcome that more efforts are being made towards access and participation to ensure that more disadvantaged pupils go to university. He is right that there is more to do; I think I said that in my speech.

The noble Lord, Lord Bassam, and the noble Baroness, Lady Garden, raised a point about impact assessments on the fees and penalties. I will spend a little time on that. There was a full consultation on the penalties. The maximum level of penalty is set at 2% of the income that the provider receives through grant funding from the OfS and from tuition fees in a 12-month period, or £500,000. To clarify, by this I mean that the maximum level of penalty is 2% of income, unless that calculation produces a figure that is less than £500,000. If that is the case, the maximum is £500,000. The maximum penalty is set at a level to allow the OfS to ensure that there are visible and meaningful consequences for a provider that is in breach of an ongoing registration condition, without being unduly punitive. The OfS has discretion as to whether to impose a monetary penalty and to set the level of that penalty up to the maximum mentioned.

It is envisaged that the OfS would impose the maximum level of penalty only in the most exceptional circumstances. These regulations set out the factors that the OfS must consider. These factors are intended to help ensure that the imposition of a monetary penalty and the amount of any penalty is appropriate, reasonable and proportionate, given the circumstance of a particular breach of a registration condition. There was broad agreement on these factors in the consultation response. On the question of whether a higher maximum was suggested in the consultation, I can say that no provider suggested a higher maximum penalty in the consultation.

The noble Lord, Lord Bassam, asked about the appointment of a statutory reviewer. I can reassure him that a statutory reviewer has already been appointed to focus particularly on access and participation. This appointment is in line with the principles of public appointments and will be under review. She is getting up and running; we will see what other resources she might need—at the moment, we are perfectly happy that she has a role, but of course it will depend slightly on what the demands of her role are. I hope that is understood.

The noble Baroness, Lady Garden, asked where the money from the penalties will go. Money from monetary and financial penalties, as well as income derived from interest, is required under the Act—under HERA—to go to HM Treasury’s Consolidated Fund, from which government expenditure is funded. This prevents the OfS from imposing penalties or charging interest to raise income. That is a long-winded way of saying that the money goes to the Treasury, which I suspect is an answer that she—

[Baroness Garden of Frognal]

My Lords, is there any way that could be addressed? Surely it would be to the immense benefit of universities if any fine imposed went into a fund to help the very things for which it was imposed—that is, to increase the participation.

[Viscount Younger of Leckie]

I understand exactly the point that the noble Baroness is making. I can certainly take that back to the department, and possibly to the Treasury, but I am pretty sure it is a matter which is tied down; as I have made clear, it is tied down in legislation, and was set out in the Higher Education and Research Act. However, the point is well made.

The noble Lord, Lord Bassam, asked about an impact assessment. No impact assessment was prepared for this instrument because these regulations do not introduce further burdens that would have an impact on businesses, charities or voluntary bodies. A provider’s compliance with its registration conditions—and so avoiding OfS sanction—is within the provider’s own control.

It is worth noting that the mandatory factors in Regulation 4 require that the OfS must have regard to the impact of imposing a penalty on higher education students at the provider in question and on higher education students more generally. The OfS will also take into account other matters that it considers to be relevant, including financial stability. However, with the greater emphasis that the OfS has given the regulator in terms of looking at the providers and their progress or otherwise, there is a process which the noble Lord will be aware of, to the extent that the financial sustainability of the providers is monitored very closely indeed. If there is any hint of difficulties, much closer monitoring will take place. I hope that is helpful.

The noble Lord, Lord Storey, asked about disadvantaged schools and the targets. The OfS is encouraging all the providers to work with schools through outreach access and participation plans, which should include targets set by providers and agreed by the OfS.

In terms of the help that independent schools can give to maintained and secondary schools, the noble Lord will be aware that—I am pleased to say—much work is going on between and by independent schools to ensure that resources, including teaching resources, are given where appropriate to secondary or maintained schools in a particular area. That is deliberately to help to raise standards within the community and give those who are less advantaged a greater chance to go on to either vocational training or a university.

[Lord Storey]

Are those numerical targets?

[Viscount Younger of Leckie]

Yes, they are numerical. I will certainly write to the noble Lord with more information about the targets that we have in mind.

I believe I have covered all the questions that were raised—

[Lord Bassam of Brighton]

I do not believe the Minister has covered my point about the Augar review and when it will be reported, and the relationship between these two things.

[Viscount Younger of Leckie]

The noble Lord is right. He is as sharp as anything; in fact, I wrote that very question down. I reassure him that the Augar review is going to be published shortly—very soon. I have said that for a while, but I promise that it is due out shortly. I am afraid that I am not in a position to say anything further about the timing of the Augar review.

[Baroness Warwick of Undercliffe]

Will the Minister respond to the point about the burden on institutions and the additional clarity, which I know there is some anxiety about?

[Viscount Younger of Leckie]

Yes, indeed. I do not have an answer to that question, but let me write to the noble Baroness about that in the same letter that I will be writing to the noble Lord, Lord Storey.

Motion agreed.