Office for Students sets out approach to financial penalties

The higher education regulator in England has encountered opposition from some in the sector who think the plans allow the OfS too much discretion to impose fines

The Office for Students has published details of how it will levy “proportionate and targeted” fines against higher education providers in England that breach its rules – but an accompanying report shows the scale of concern raised by institutions nervous of the regulator’s approach.

The publication outlines a five-step process to determine the size of fines – although the OfS does state it will take “a more holistic approach” to appropriate penalties “proportionate in all the circumstances of the case”.

The HE regulator in England has powers – given to it by the Higher Education (Monetary Penalties and Refusal to Renew an Access and Participation Plan) 2019 legislation – to punish the 387 institutions it regulates.

A consultation with universities – suspended by the Covid pandemic – found considerable unease within the sector about the OfS plan to calculate the size of fines.

The OfS explains it will “consider the nature, seriousness and impact of the breach” to “determine the ‘baseline’ penalty” for the transgression, which can be up to £500,000. It will use a university’s “qualifying income”, judged using the cumulative value of tuition fee revenues and OfS grants, to assess the baseline.

The following four caveats allow the OfS to discount the headline amount: “mitigating…[or] aggravating circumstances”, “the provider’s track record”, the chance it could happen again and any other “relevant factors”.

The use of qualifying income – meaning the size of penalties will be somewhat in proportion to the overall operating revenue for that financial year – drew concern from those universities that responded to the consultation.

Some felt the approach would penalise “large providers, or those with ‘strong finances’”, which could result “in unjustified reputational damage because of public perceptions that a high monetary penalty reflects a very serious breach”. Another felt the assessment of a provider’s ability to pay was “too narrow”. Concerns were raised that the approach did not fully assess the assets of a provider: some, like specialist arts providers, have small reserves, while others, like Oxbridge, have disproportionately large savings compared to annual revenues. One respondent felt the regulator’s approach did not fully consider what financial penalties might mean for students.

Some in the sector feel the rules allow for “too much subjective decision-making by the OfS”, which will lack transparency when enacted. There are also concerns that some providers may game the system, risking fines knowing they will not fully offset any potential gains from breaking the rules.

Some respondents suggested that fines were inappropriate in financial sustainability and quality and standards breaches because the penalty might hinder the university further, limiting its potential to remedy the situation. The OfS says its “principles-based approach” would better allow it to tailor its strategy to the specifics of the case and institution, taking into account the likelihood of the penalty to exacerbate the problem further, for example.

Read more: DfE and Ofqual launch consultation on qualifications

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