The House of Commons Public Accounts Committee (PAC) has concluded higher education in England faces a looming financial crisis and plummeting student satisfaction and questioned whether ministers and the regulator are in control of the situation.
The committee of MPs who scrutinise public spending said changes are needed to solve the problems that English universities face. In a report released on 15 June, it opined that the Department for Education (DfE) is “not effectively holding the Office for Students (OfS) to account” and queried whether appropriate mitigations are in place.
It has commanded the OfS to write to MPs, “setting out the actions it will take” to address student satisfaction, financial pressures and HE performance. More than a third of HE income comes from public sources.
MPs set out the scale of the problem
Of particular concern, said the PAC, is the growing number of providers posting in-year deficits, rising from 5% in 2015/16 to 32% in 2019/20.
Though the sector’s financial health has rallied since the pandemic, there remain “systemic, long-term pressures on providers’ finances”. Continuing and emerging financial challenges, including inflation, only threaten the situation further, say MPs.
Universities face pension fund deficits, inflation and a long-held freeze in tuition fee income. MPs say that changes to loan repayments and minimum entry requirements could alter the numbers of future students. The report’s fears for university finances are exacerbated by what MPs see as an unsustainable dependence on international student recruitment to balance budgets.
The committee also concluded that too many students think HE is not value for money. A recent survey of 10,000 full-time undergraduates, published after much of the PAC investigation, shows these statistics have improved in the last year but remain below pre-2020 levels.
MPs set out recommendations for the OfS and DfE
In making recommendations to the OfS, MPs say, the regulator should explain how it intends to improve its knowledge and monitoring of the sector’s financial resilience.
The report questioned how alert the OfS was to the diverse array of financial challenges – and how they may interact over time – and the danger it may put students and education.
The OfS should, MPs say, explain how it intends to improve its understanding of the sector’s financial health.
As it undertakes this rethink, MPs urged the regulator to ensure student protection plans “are fit for purpose and sufficiently clear” as they warned its interventions to safeguard students have hitherto seemed “reactive”.
MPs also recommend the OfS should investigate the short and long-term causes of low student satisfaction in value for money. The National Student Survey (NSS), for example, polls only final-year students – and perhaps would merit the inclusion of students in earlier stages.
There are recommendations, too, for the DfE. MPs say ministers should “establish a complete set of robust, published performance measures and targets, including structured feedback from providers, and use these to hold the OfS to account for its effectiveness.” It says of OfS performance that, currently: “Of the 26 performance indicators… eight are still in development or have incomplete performance information and a further 11 indicators do not yet have associated targets. Complete information is available for just seven indicators, giving an inadequate picture of performance.”
The government should also demonstrate it has considered “the risks to achieving the continued forecast growth in overseas student numbers” and explain “how it is mitigating those risks”.
Some universities are experiencing financial pressure from the impact of grade inflation during the pandemic – which led to some providers becoming undersubscribed as students sought out providers with higher entry requirements. MPs say ministers and the OfS should “model and review” this phenomenon, especially given the dangerous intersection of other ongoing financial pressures.
There will, of course, be variation in financial performance between individual universities, and it is important to remember that each institution is responsible for its own sustainability
– Susan Lapworth, OfS
Dame Meg Hillier, chair of the PAC, said: “The A level fiasco of 2020 and grade inflation have a long-term impact on higher education, adding to deep systemic problems in the financial sustainability of higher education. The number of providers in deficit rose dramatically in the four years up to the onset of the pandemic.
“Too many providers are too heavily dependent on overseas student fees to maintain their finances, research base and provision – that is not a satisfactory situation in a sector that government is leaning on to boost the nation’s notoriously, persistently low productivity.”
A spokesperson for the DfE acknowledged the sector faced challenges but said recent reports from the National Audit Office and the OfS “make clear that overall, the sector remains financially resilient”.
The spokesperson continued: “Higher education is a key part of our skills revolution, which is why we have set out reforms to boost the sustainability of our world-class higher education system, including ensuring the student loan system is fairer for both students and taxpayers.”
The spokesperson further argued that a recently announced investigation into eight HE courses demonstrates the OfS’s commitment to “ensuring students receive sufficient face-to-face contact hours and are on high-quality stretching courses that are assessed rigorously and fairly.”
Susan Lapworth, interim chief executive of the OfS, said the regulator would “carefully consider [the report’s] recommendations”. She argued her organisation was already closely monitoring the situation and its decisions were “underpinned by our expert understanding of the wider financial and policy context in which universities operate”.
“The sector, in aggregate, is well placed to recover from the challenges of the last two years,” contested Lapworth, conceding: “There will, of course, be variation in financial performance between individual universities, and it is important to remember that each institution is responsible for its own sustainability.”
Lapworth said the OfS would “take steps to protect students” if a provider was forced to close its doors, adding that the regulator is engaging “with a small number of providers where the information we hold suggests concerns about their financial position”.