PAC: Higher education market not working in interests of students or taxpayers

REPORT SUMMARY

The Government has recently introduced changes to the regulation of higher education to address concerns that students were not always getting a good service.

The original aim of introducing a market into higher education was that student choice and competition between providers would improve quality and value for money. In reality the planned-for competition did not emerge.

Most students are teenagers when they apply and are too often not getting the right advice and support they need. Decisions made in year 9 can have a serious impact on the choices young people are able to make when applying to universities and yet we were not convinced that the myriad of careers initiatives generated by Government are leading to demonstrably better advice for individual pupils.

Shorter degree courses and part-time courses have also not emerged. A number of Government policies are aimed at widening participation in higher education and this has to be a focus if the Government is serious about delivering its social mobility agenda. Experience shows that it cannot rely on the sector alone to deliver.

We spoke to the Office for Students at its inception and hope that it will set a clear marker that it really is acting in the interests of students from day one. It is still unclear how it will gauge the real concerns of students and ensure that institutions are delivering and sanctioned when they let students down.

It will be important to get right the change in the ease with which students are able to transfer institutions. This will not only be critical to the life chances of tens of thousands of young people but also to creating the foundations for the UK to face the many challenges ahead.

COMMENT FROM PAC CHAIR MEG HILLIER MP

“The choices prospective students make about higher education can be the most critical they have ever faced.

“Their decisions can have a transformative impact on their life prospects and, in turn, lay the foundations for significant benefits to the wider economy.

“It is therefore deeply concerning that the evidence indicates Government’s approach to the higher education sector is letting those same students down.

“The advice available to help students, in the overwhelming majority of cases teenagers, make informed choices is inadequate.

“Should students then be unhappy with the course they choose, they are not sufficiently empowered to switch providers or get their money back.

“At the same time, Government can provide no evidence that competition between institutions will drive up the quality of education they provide.

“These are not indicators of a market working in students’ best interests. Rather, they are the symptoms of failure.

“If Government is to deliver the promised benefits of its reforms then it must be far more rigorous in measuring progress against its objectives and where necessary move swiftly to take remedial action.

“Much rides on the ability of the new Office for Students to function as an effective regulator and as a priority we expect it to set out in detail exactly how it will approach the task of safeguarding students’ interests.”

CONCLUSIONS AND RECOMMENDATIONS

The Department treats the higher education sector as a market, but it is not a market that is working in the interests of students or taxpayers. There is greater competition for students between higher education providers, but no evidence that this will improve the quality of the education they provide. Higher education providers have increased their marketing budgets in order to attract students rather than compete by charging different tuition fees. However, the amount of funding for higher education (primarily via tuition fees) has increased by 50% since 2007/08. It is therefore critical that the higher education market is delivering value for money, both for individual students and the taxpayer. The new sector regulator, the OfS, has a primary objective that students ‘receive value for money’. But neither the OfS nor the Department has articulated well enough what value for money means in higher education, or how they will seek to monitor and improve it. 

Recommendation: The Department should write to the committee by October 2018 to explain what it expects a successful higher education market to look like.

Young people are not being properly supported in making decisions on higher education, due in large part to insufficient and inconsistent careers advice. The substantial financial commitment required and wide variation in outcomes from higher education mean prospective students need high quality advice and support to make decisions that are right for them. The complexity of the market and the volume of information available makes it difficult for prospective students most of whom are teenagers, to assess the quality and suitability of higher education institutions, raising questions over whether student choice alone will drive up the quality of provision. A wide range of other factors influence students’ decisions, such as marketing by higher education providers, the reputation of institutions and their perceived prestige, a student’s family background, as well as the location and costs of travel and accommodation. High quality, impartial careers advice is critically important, but the support available to students in schools is not good enough. The Department acknowledged that it needs to improve the quality of careers advice for young people. It told us that its Careers Strategy, published in December 2017, will have a ‘real impact’ on young people’s lives and help students make choices which best fit their own aptitude, skills and preferences, but it is not clear how or whether the department will ensure high quality careers advice at school level. It is too early to judge its success, but action is needed quickly and the strategy should be robustly evaluated to ensure it is achieving its aims.

Recommendation: The Department should write to the Committee by October 2018 with details of progress it has made with its careers strategy and the impact it is having. It should set up an evaluation framework to enable it to assess progress.

The Department does not have enough of a grip on actions to widen participation in higher education, and is over-reliant on the actions of some universities. The Department’s reforms are designed in part to ensure equal access to higher education, regardless of a student’s background. However, students from disadvantaged backgrounds are still far less likely to enter into higher education than those from more advantaged backgrounds. There have also been substantial drops in part-time and lifelong learning, which are critical to social mobility. The Department told us that it has introduced a Social Mobility Action Plan to address inequalities across the education system, and one of the roles of the OfS will be to ensure best practice in reaching out to students from disadvantaged background is being applied across the higher education sector. However, we are concerned that the incentives in the higher education market do not sufficiently support widening participation. Outreach activities are primarily conducted by universities and while there are areas of good practice, some universities who find it easy to recruit students are not pulling their weight. The OfS told us that each higher education provider will set targets for widening participation and improving outcomes for disadvantaged groups, and it will oversee these Access and Participation Plans, which will be a condition of registration. But it remains to be seen whether the plans to improve performance will have an impact on the life chances for disadvantaged groups.

Recommendation: The Department should provide us with evidence of how it is widening participation and opening higher education to students from disadvantaged backgrounds. The Department should demonstrate how they will maintain pressure on providers to measure success.

Students have limited means of redress if they are unhappy with the quality of their course, even if they drop out. The relationship between students and higher education institutions has changed substantially since tuition fees were introduced, with a much greater emphasis on whether a course or institution offers value for money. An effective market requires empowered consumers who can switch provider if they are dissatisfied, but this is not the case in the higher education market. Across the sector, only 2% of students transfer provider each year, and students are more likely to drop-out altogether if they are dissatisfied with their course rather than switch provider. When students do switch providers or drop-out, they are unlikely to get any of their fees back unless they can demonstrate that they were misled in some way. The OfS will require universities to demonstrate what arrangements they have in place for facilitating transfers, and it will have a responsibility to make sure there is better use of transfers where appropriate. However, given the relative weakness of students as consumers, it is vital that the OfS uses its full powers actively, and works effectively with other regulators (such as the Advertising Standards Authority and the Competition and Markets Authority) to ensure the market functions in the interests of students. 

Recommendation: In developing the new regulatory framework, the Department and OfS must ensure students’ interests are protected. The OfS should include clear guidelines to enable students to shift courses and/or institutions more easily. 

The new Office for Students has not yet articulated how it will support the varied and complex interests of students. It told us that, as the sector regulator, its role is to regulate universities and colleges ‘on behalf of students’. However, it is clear that these interests are varied, complex and often competing. The OfS told us that it has established a student panel, although it has chosen not to work with the NUS, to inform how it makes decisions and to ensure that its definition of the student interest is defined by students themselves. It also told us that it plans to develop a student engagement strategy to clarify what the interests of students are so that it can feed these into its regulatory framework, which would include quality of teaching, feedback and graduate outcomes as key areas of focus. But until the OfS has sufficient clarity over what it is trying to achieve in the interests of students, it will not be able to effectively monitor and evaluate the success of its regulatory approach.

Recommendation: The Office for Students should report back in six months to set out in detail how it will measure and report on its performance in regulating for students, and be clear about what its priorities are in protecting student interests.