Office for Students: Lords Industry and Regulators Committee report

On 21 May 2024, the House of Lords is due to debate the report from the House of Lords Industry and Regulators Committee entitled, ‘Must do better: The Office for Students and the looming crisis facing higher education’. The report was published on 13 September 2023. The Office for Students (OfS) and the government responded in November 2023.^[1]

1. Role of the Office for Students

The OfS is the independent regulator of higher education (HE) in England and a non-departmental body of the Department for Education (DfE). The OfS’ stated mission is to:

[…] ensure that every student, whatever their background, has a fulfilling experience of higher education that enriches their lives and careers.^[2]

The OfS was established under the Higher Education and Research Act 2017 (HERA), which sets out its statutory duties. The OfS began operating in April 2018 and took on its key regulatory powers in August 2019. It regulates a total of 425 universities, colleges and other higher education providers in England.^[3]

Under the 2017 act, the OfS is required to have regard to institutional autonomy; quality and choice; competition; value for money; equality of opportunity; efficient use of its own resources; and best regulatory practice.^[4] The OfS must also publish its regulatory framework. It is required to consult bodies that represent HE providers and students when preparing the framework.

The DfE’s ‘Office for Students framework document’ sets out the governance and accountability framework that applies between the DfE and the OfS. The document provides details on the OfS’ core responsibilities, and on how the relationship between the OfS and DfE works in practice, including in relation to financial matters. The DfE also issues to the OfS an annual guidance letter which sets out the priorities for the coming year and tells the regulator how much funding to distribute to HE providers.^[5]

2. Committee findings and recommendations

The House of Lords Industry and Regulators Committee launched its inquiry into the work of the OfS on 3 March 2023. It published its report ‘Must do better: The Office for Students and the looming crisis facing higher education’ on 13 September 2023.

The committee stated its inquiry had taken place during a time when the HE sector was facing “a series of challenges”, in particular:

[…] the impact of the COVID-19 pandemic, inflation and the cost-of-living crisis, the loss of EU research funding and ongoing industrial action.^[6]

The committee argued that “against the backdrop” of these challenges, the HE sector was facing a “looming crisis”.^[7] It stated that given these issues, it was “vital” that the sector’s regulator was “fit for purpose”.^[8]

However, the committee found that despite its “laudable aim” to support the interests of students rather than those of HE providers, the OfS had found itself in the “worst of both worlds”.^[9] The committee said this was a “direct consequence” of its own approach and government pressure. It argued the OfS was not trusted by many of the providers and had “arguably not acted in the real interests of students either”.

The committee report made a series of conclusions and recommendations on “seven key issues”:

• OfS duties and decision-making: The committee said that despite the claim that HERA sets out clearly the OfS’ statutory duties, they had been applied “inconsistently and unequally”. It said this had created “uncertainty” over the regulator’s objectives.^[10] The committee argued that the requirement for the OfS to have “regard” to its duties made it difficult for the OfS to be held accountable. It suggested the government consider whether the OfS should be required to demonstrate that it had taken account of particular objectives, rather than just having regard to them. The committee said when making changes to the regulatory framework, the OfS should set out how it had taken its statutory duties into account. The committee had concerns about the “proliferation” of regulators in the HE sector. It welcomed the government’s plans to address the issue. However, it called for the government to set out steps and a timetable to streamline regulation within the sector.
• Financial sustainability: The committee said the HE sector faced several financial risks which had been exacerbated by the freezing of tuition fees for UK undergraduate students and high inflation.^[11] It argued this had led institutions to become increasingly reliant on international and postgraduate students. The committee warned against complacency that the premium from overseas students could be “banked for the long term”, given the risks of geopolitical shifts and an increasingly competitive international market. The committee concluded the current funding model was not sustainable. It said the government should undertake a review of how HE was funded.
• Value for money: The committee stated the OfS’ approach to measuring student outcomes was “simplistic and narrow”.^[12] It criticised the focus on employment outcomes. It said this approach had the “potential” both to “penalise providers” that took on students from disadvantaged backgrounds and to “underplay” the “broad value” of the higher educational experience. It recommended the OfS undertake and publish a review on this area.^[13] It also called on the OfS to require HE providers give prospective students “clear digestible information” on matters such as contact time; the balance between online and in-person learning; and the likely cost of living.^[14] The committee said the OfS should consider “tougher regulatory consequences” for those who did not provide this information. It said the OfS should ensure its approach aligns with the Competition and Markets Authority’s consumer protection guidance.
• Quality, standards, competition and choice: In 2023, the Quality Assurance Agency for Higher Education (QAA) was de-designated as the quality and standards oversight body of the HE sector in England. The committee expressed concern about the circumstances surrounding the QAA’s de-designation, which had followed a series of events that included the QAA’s temporary suspension from the relevant European quality body. The QAA told the committee it “blamed” this suspension on the “OfS’ regulatory approach”.^[15] The committee said it was “concerning” that England’s regulatory framework had “shifted away from European standards” because it had the potential to damage the international reputation of England’s HE sector.^[16] The committee said it was unclear if the OfS had the capability to take on the role previously carried out by the QAA. It called on the regulator to align its framework with international standards and to appoint the QAA or another arms-length body to perform the quality assurance role.
• Student interest and engagement: The committee heard evidence that the sector was not clear how the OfS defined “student interest”. It said there was a “suspicion” the OfS used the term as a “smokescreen for the political priorities of ministers”.^[17] The committee called on the OfS to conduct “detailed scoping work” on how it defined “student interest” and how that informed its work.^[18] It said the review should include engagement with students, and that the results should be published. The committee also recommended the OfS “refresh its approach to student engagement” by “opening up its work to co-creation with students”. The committee recommended there be at least two student representatives on the OfS board.^[19] At present, the board has one.
• Regulatory framework and sector relations: The committee heard evidence from providers that the OfS’ regulatory framework was “overly prescriptive”.^[20] The committee said it was “clear that the poor relationship” between providers and the regulator was partly because the “OfS’ approach had been overly distant and combative”. It called on the OfS to be more transparent about its approach. It recommended the regulator publish its approach to investigations; publish case studies on different areas of its regulation; and when requesting data from providers, it should clearly state for what it is intended.^[21] The committee suggested the OfS establish an annual meeting with providers. The committee also questioned the increase in OfS’s registration fees of up to 12%. The committee found this increase was “driven in part by the expected increase in the regulator’s responsibilities”, including taking over the role previously carried out by the QAA. The committee called on the government to examine how the OfS targets and uses its resources and how it is held to account.
• Political independence and the role of government: The committee concluded that the regulator lacked “both real and perceived independence”.^[22] It said both the OfS and the government bore some responsibility for this: the OfS’ actions “often appear driven by political priorities”, and there is a “perception” the government’s guidance letters are “prescriptive and unusually frequent”. It called on the government and the OfS to set out in their response to the report, steps they intended to take to support the OfS’ ability to operate independently.^[23]

3. Regulator and government response to the committee report

3.1 OfS response to the report

The OfS published its response to the committee report on 27 November 2023.^[24] The regulator’s response to each of the recommendations can be found in the document.

The OfS said the report gave the regulator the “opportunity to reflect and to change” areas of its work where it was “clear” they needed to do things differently.^[25] The areas of work the OfS said it would focus on as a result of the committee’s recommendations included:

• Engagement with students: the OfS said it would expand its existing plans for a review of its approach to student engagement.^[26] The regulator agreed that a “fuller articulation of how we define and deploy” the concept of the ‘student interest’ would help students and the sector understand the work of the OfS.^[27] It said it would engage with stakeholders to inform its engagement work, and as a first step, it would publish a plan for developing this work. The OfS also said it planned to reframe the student panel and that it would take up the committee’s recommendation to report annually on its student engagement.
• Relationship with the HE sector: the OfS recognised that two-way dialogue was the “key to regulation that works effectively in the interests of students”.^[28] It said engagement with the sector was an “ongoing priority”. The OfS acknowledged that it needed to be transparent about the reasons for its data collections. It said it had commissioned an independent review of the financial data it collected. The OfS said it would consider the recommendation for an annual meeting with providers.
• Financial sustainability: the OfS agreed the sector was facing growing risks, and explained that it engaged with providers privately about how risks should be mitigated.^[29] It said its regulatory tools were limited, especially when compared with those of sectors such as finance and utilities. It highlighted there was no special administration for higher education. It stated that it was discussing these issues with the government.

The OfS stated it was “committed” to the changes set out in its response.^[30] It said it would continue to work with the stakeholders who engaged in the committee inquiry, and with the committee itself, to “progress [its] work in response to the committee’s recommendations”.

3.2 Government response to the report

The government published its response to the committee report in November 2023.^[31] The document provides a response to each of the committee’s conclusions and recommendations.

The government said the OfS had played an important part in delivering the government’s priorities in HE. It expressed its “strong support” for the regulator.^[32] It explained that alongside the committee inquiry, the government had been preparing for its scheduled public bodies review of the OfS. The government said the focus of the review would be on the OfS’ effectiveness in performing its regulatory functions and protecting the interests of students.^[33] In December 2023, Sir David Behan was appointed to lead the review.^[34] It is expected to conclude in early summer 2024. Sir David is a former chair of the board of Health Education England, and a former chief executive officer of the Care Quality Commission.

The government stated that it believed HERA set out the statutory duties of the OfS clearly. It argued that it was the “right policy position” not to set out in legislation the OfS’ primary objectives.^[35] The government also said it did not agree that it was “impractical” for the OfS to take on the assurance role previously carried out by the QAA.^[36] However, the government did agree there may be benefits in “exploring how alignment of the implementation of the OfS approach” and European standards could be “reinforced”.^[37]

On the issue of political independence and the role of government, the government acknowledged there may be a perception that its guidance was “overly prescriptive”.^[38] However, it disagreed that the number of ministerial letters had been too frequent. The government argued:

The OfS is also completely clear that it has procedural protections in place to ensure that it remains independent in all of its regulatory decisions. In light of this, the government is of the view that there are already established and sufficient protections to ensure that the OfS operates independently of government.^[39]

4. Read more

• Department for Education, ‘Independent review of the Office for Students: Review process’, 14 December 2023
• Office for Students, ‘English higher education 2023: The Office for Students annual review’, 5 December 2023
• House of Commons Library, ‘Office for Students’, 20 April 2023
• House of Commons Library, ‘Higher education in the UK: Systems, policy approaches, and challenges’, 18 April 2023
• House of Commons Library, ‘Impact of increases in the cost of living on further and higher education students’, 15 September 2023

Cover image by Brett Jordan on Unsplash