Finances, Universities

Bums on Seats: Regulating the UK Higher Education Sector

Gold Leaf carries out a great deal of research in and around universities, both in the UK and in many other places in the world.  An issue that several of its recent research projects has highlighted is the heightened competition to which the HE sector is now being subjected globally.  In the UK, this was largely caused by the decision taken by recent governments – of both main political persuasions –  to create a ‘market’ within the HE sector; unfortunately, in the minds of students and their parents, it has also become linked with the rapid hike in fees that took place at around the same time.  This has had the unforeseen (and presumably unwanted by the government) effect of causing some students to believe that they are ‘paying for’ their degrees – i.e., paying for the actual grades they are awarded, not just the tuition fees.

It is perhaps unfortunate that during the same period the activities of HEFCE [Higher Education Funding Council for England] were wound down, as HEFCE was replaced by the OfS [Office for Students].  A certain hiatus resulted, as the OfS seemed to be relatively slow in getting into gear and for a while little regulatory work seemed to be being carried out in the sector.

This has now changed.  The OfS has flexed its muscles by publishing a series of important reports and directives, one of the most recent of which is entitled Financial Sustainability of Higher Education Providers in England.   The report states that, as part of the registration and ongoing monitoring process, all higher education providers are now required to demonstrate to the OfS that they are financially viable and sustainable. 

Some Vice-Chancellors of even well-known and very well-established universities may have quailed at learning this, as their seeming failure to be able to balance the books has frequently been dissected by the Press over the last two or three years.  The OfS doesn’t explain its methods, however – there are many kinds of capital, for example, not all of them tangible, and it doesn’t say which kinds are acceptable in boosting universities’ perceived solvency – but it does say “our analysis suggests that the sector overall is currently in reasonable financial health”.   Better news than might have been thought, then. But, sounding a greater note of caution immediately afterwards, the OfS adds that “the general picture masks considerable variations in financial performance between individual providers”.  Not really a surprise, but perhaps some Vice-Chancellors should start quaking, after all.

Although some providers are predicted to do less well next year than initially expected, the OfS says that this is mainly because the forecast growth in student numbers has been over-optimistic in the short term; but apparently universities’ student recruitment ambitions now stand a greater chance of being realised.  Of the 183 registered UK HE providers, 122 are assuming growth in student numbers of more than 5% – the students are expected to come from the “UK, EU and overseas” – in the next four years.   The OfS notes that most of these providers are not reliant on this projected growth to reduce their projected costs (i.e., their calculations are not based on what economists call ‘margin’) if their student recruitment ambitions are not met, so the OfS will continue to monitor them closely for financial stability.  Good news for students and their parents, then.  Vice-Chancellors still under pressure!

However: “Collectively, providers forecast the number of overseas students to increase by approximately 56,000 full-time equivalent (FTE)(20.7 per cent). Fee income from overseas students is projected to rise by £1.7 billion (37.9 per cent), suggesting an anticipated increase in the average fee charged to overseas students. The government’s recently announced international education strategy aims to support the sector to increase the number of overseas students.”  Is this a cunning element of the government’s Brexit plans?

Almost as an afterthought, the report acknowledges that the higher education sector continues to face uncertainties, “including the UK’s future relationship with the EU; potential changes in government policy following the review of post-18 education funding; and as a consequence of student choice following a continuing decline in the 18-year-old UK population to 2020.” 

Aside from the fact that the last statement appears to blame the decline in 18-year olds by 2020 on “student choice” (were the first-borns so obnoxious that they deterred their parents from providing siblings?), the report fails to inspire confidence.  The cautious optimism it demonstrates in the face of almost certain adversity seems almost reckless.        

Nevertheless, it is an interesting document: it produces some useful financial detail about where the university sector in the UK is heading, and as it is only 23 pages long, offers both information and entertainment (infotainment?) at the expense of not too great an outlay in time. 

The report may be found at https://www.officeforstudents.org.uk/media/cf54b6ee-714e-45c3-ade9-56bc685b861d/report-on-financial-sustainability-of-higher-education-providers-in-england.pdf

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