An Alternative point of view

The National Audit Office report on Financial support for students at alternative higher education providers has generated a lot of media coverage in the past couple of weeks – both from industry and social media. Here’s links to the Guardian’s coverage; the BBC and the Times Higher; and also a brief piece by Emily Lupton on Wonkhe. The coverage ranges from £5m mis-spending to a whopping £50m potential risk in your super soar-away Guardian. So what’s really going on?

First up, what are alternative providers? An alternative provider is any college which offers higher education, but is not part of the ‘normal’ state-funded, QAA-regulated, HESA-data-submitting established universities. So the term includes established and well-recognised institutions such as the University of Buckingham or BPP University (relatively new name but a long, long heritage) as well as lots of smaller colleges, some of which have sprung up in the last few years. (I should add for clarity that there are no adverse comments about either Buckingham or BPP in the NAO report.) I blogged a while ago about which institutions use UCAS, and a lot of the entrants and exits from that marketplace are alternative providers.

Alternative providers aren’t all for-profit – the term covers colleges run as charitable trusts too. Courses lead to awards made either through powers that they have gained themselves through the recent more open procedures run by BIS; made by national awarding bodies; or lead to awards validated by universities, or franchised from universities.

The story arises from the opening up of access to Student Loans Company (SLC) funding for students at alternative providers – up to £6k fees, and also for living costs. And this is what the NAO was investigating.

There were four main findings:

“EU students at some alternative providers have claimed or attempted to claim student support they were not entitled to” – this is the £5.4 million mis-spending reported by the media. And 83% of the wrongful claims came from student at just 16 alternative providers.

“Dropout rates at 9 alternative providers were higher than 20% in 2012/13” and “20% of Higher National students recruited by alternative providers and claiming student support may not have been registered with the qualification awarding body in 2012/13”. The NAO takes this as evidence that some students aren’t really motivated to learn – that is, they may be registering as students only to access loans.

“Between 2012 and 2014, BIS suspended payments to 7 providers and their students owing to concerns that providers had enrolled students onto unapproved courses” and “a lack of clarity has existed within BIS and its partner organisations about which courses were approved for student support.” This points to procedures designed (or at least operated) by BIS and the SLC which didn’t check eligibility before lending money.

“In 3 cases, BIS suspended payments to providers or their students where it had concerns that the providers had supplied incorrect information about student attendance.” The point being that it was the SLC making payments, but without the powers necessary to assure itself of the correctness of the payments.

Does this mean that alternative providers are a Bad Thing? That was certainly the unspoken view behind a lot of the Twittersphere commentary. I don’t think that it does.

It does mean that some of the providers audited almost certainly are doing bad things, and it almost certainly means that some of the people who signed up for courses at some alternative providers were doing it for the wrong reason. But a very few students also enrol at ‘normal’ providers for the wrong reason. And they’re often caught, like these ones, and dealt with. (A quick note about the 83% at 16 providers which the NAO cited: the alternative providers market is very skewed, with a few very large providers and many very small indeed. 83% of students at alternative providers, selected on any basis at all, are mathematically almost certain to come from a small number of providers. Just saying.)

But I do think that there is a problem here, and it’s the failure of regulation which this represents. There wasn’t until September 2014 a single comprehensive list of courses at alternative providers which were approved for access to SLC funds - this makes checking very difficult. There weren’t systems which shared information at the right time between bodies to make it possible to spot and stop problems. There wasn’t the right authority to oversee new providers in a timely fashion. These are all foreseeable problems, the sort of problems which universities have been dealing with for years and which sector groups – Universities UK, the Association of Heads of University Administration (AHUA), the Academic Registrars’ Council (ARC) – are well placed to advise upon.

The reasons for this?  Too little time spent on thinking things through; a government in a hurry; a coalition government, meaning that plans had to be compromised; and a civil service which was distracted by pressure to find savings. And underlying this the great truth that higher education is a long-term process, with outcomes only known sometime after the event. The same is true for higher education policy – act in haste, repent at leisure.

Who Pays?

Q: What’s green, five inches long, and takes an hour to drink?
A: A grant cheque!

I was reminded of this student joke from the 1980’s by Universities UK’s establishment, announced today, of a Student Funding Panel “to consider the design of the current student fees and loans system in England, and to make recommendations on its future development.” The underlying story: universities know that the current system is unsustainable, certainly politically and possibly economically, and want to play a part in fixing the problem.

And it’s obviously a big problem. Before the 2010 election universities also had concerns about finances, but it was individual mission groups that did the lobbying, not the sector as a whole. Perhaps that is one lesson from 2010, Browne and where we ended up with the fees system. Long-term matters are too important to be left to the randomness of coalition negotiations, and universities speaking with one voice have a greater chance of being heard.

A lot was made on the Today programme this morning about the problem of cost to the public purse, so I thought I’d take a look at what the issues are. It isn’t as simple as finding the cheapest option.

There’s a long history to this question. Go back to the 1970’s and there were no undergraduate tuition fees. And local authorities provided grants to students at universities to cover living costs. By the mid 1980’s the effect of cuts in local government funding meant that student grants were worth less and less (hence the joke I opened with), and as a student you faced three options: rely on your parents or family for funding; get a job; or go into debt. Or all three, as I managed to do.

The introduction of student loans in the early 1990’s provided an alternative to relying on funding from families, which will have helped some people, but another problem was brewing. The UK Government was pursuing a policy of expanding higher education, but on the cheap, meaning that for some universities – and especially for the new universities – the amount of funding they had per student (the unit of resource) was declining.

To address this, tuition fees for home undergraduate students were introduced in 1998, at £1,200 per year. This means that state funding via the national higher education funding councils was supplemented by money from students themselves. (A cautionary note about devolution: different arrangements apply in some respects to the devolved administrations. Another post, another day, I’ll look at this in detail. But the underlying issue – how much do good universities need to operate, and who pays? – affects all parts of the UK.)

And a few years later it was clear that this hadn’t solved the problem. Students were still in debt and finding jobs whilst studying; universities’ finances were in a bad state. In 2004 the government again passed legislation, amidst much controversy, to grow the student contribution, to £3,000 per year. This took effect from 2006.

And then guess what? A few years later universities were saying that the problem still wasn’t solved. And they were right. Further student expansion had again eroded the unit of resource; and universities needed investment in their buildings and other infrastructure to keep standards high. Following much lobbying Lord Browne was asked to chair a group to think about it, make recommendations, and report after the 2010 election. Thus, supposedly, removing student fees and university funding as an electoral issue. Nick Clegg can tell you how well that turned out.

So what was the 2010 settlement? Dramatic reductions in direct state funding to universities, coupled with increased access to loans for living costs, and much higher maximum tuition fees. And, significantly, an accounting trick which took state-backed student borrowing out of the government’s current spending. This is what the current hoo-ha about default rates is about: estimates of non-repayment by graduates are higher now than they were when the system was introduced, meaning that it costs Future Us more than Past Us thought that it would. But this depends on forecasts based on current levels of graduate employment and salary, which are subject to change. Present Us doesn’t really know how much Future Us will pay. And some Present Us-es would like other Present Us-es to be the Future Us-es that pay more. While other Present Us-es think that Future Us shouldn’t bear the cost, but that Present Us should. And a lot of those Present Us-es are the Future Us-es that the other Present Us-es think should bear more of the cost. Clear now?

And now let me bring in an expert view. I was fortunate to attend, a couple of weeks ago, a debate organised by the Institute of Welsh Affairs. You can see the debate again here. The panel included Professor Nick Barr of the LSE, who knows more about the topic of student fees and loans than anyone else in the world. Probably. And he was very erudite on the topic. (In a nutshell: the 2004 system was well designed, the 2010 system cannot be described using words which are fit to write in this blog a least.) But what I thought was interesting was that he went beyond the economic into a political judgement: the reason universities need to be able to charge fees is that they can’t rely on governments to fund them properly. And looking at the history, you can see his point: four attempts to reform student and university finance, and none of them lasted for more than a few years. About the life of a parliament. Short-term solutions don’t work very well for long-term issues.

The hope is clearly to have a grown-up conversation about how to fund universities. The UUK panel has VC’s from old and new universities, and is inviting contributions from any interested parties. It is only focused on England, but will have an effect on Wales and Scotland. The Institute of Fiscal Studies, whose research underpins the launch, is on board. These are good signs.

But my prediction is for another fudge: a solution which works for a few years and then leaves a mess for the next parliament to deal with. Why am I so cynical? You can’t get consensus without all political parties coming on board. There’s an election coming, there’s the unpredictable factors of UKIP and the fall out for the LibDems following their tuition fee promise in 2010. Who’d believe a politician now about student funding? David Blunkett, as Education Secretary in 1997, cherry-picked from Lord Dearing's recommendations, which were presented as a coherent package. The current coalition cherry-picked from Lord Browne's recommendations, which were presented as a coherent package. Do we really think that third time round government wouldn't do just the same?

And the sad thing is that this really matters. To lots of individual students. To the quality and sustainability of lots of UK universities. To the prosperity of the whole country. I’ve no solution in this blog post. Perhaps another day.