Financial support for students at alternative higher education providers - Public Accounts Contents

1  Oversight of the alternative provider sector

1. On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business, Innovation & Skills (the Department), the Student Loans Company, the Higher Education Funding Council in England (HEFCE) and the awarding body for Higher National qualifications, Edexcel, about financial support for students at alternative higher education providers.[1] Approximately 140 institutions offering higher education are termed 'alternative providers'. They include a diverse range of organisations from private companies to charitable institutions. Alternative providers benefit from the public funding provided to students via tuition fee loans.[2]

2. In June 2011, the government published a white paper that introduced measures designed to encourage diversity and competition in the higher education sector. In particular, the government increased the maximum tuition fee loan available to students studying at alternative providers, from £3,375 to £6,000 a year.[3]

3. Evidence submitted to us, including from whistleblowers, highlighted a number of issues relating to the implementation of these changes:[4]

·  The number of non-UK EU students at alternative providers claiming student support is now around 40% of the total publicly funded student cohort attending private colleges;

·  £3.84m of student support paid to EU students who were not eligible for it;

·  Dropout rates higher than 20% at some alternative providers;

·  Evidence of inappropriate recruitment practices with colleges recruiting on the streets;

·  Indications that students are not being registered for their qualifications; and

·  Indications that some students were accepted onto courses without adequate English language skills.

4. Following announcement of the higher education reforms, various bodies and stakeholders had warned the Department about the consequences of expanding the alternative provider sector without a robust regulatory framework to protect public money. In particular, this Committee recommended that the change in higher education funding arrangements would require a new system of regulation and accountability. We recommended that new powers would be required to regulate institutions that receive little or no direct public funding but whose students have access to publicly-provided loans which are used to pay the institutions' fees.[5] HEFCE and the University and College Union also raised concerns about the risks and the need for new regulatory powers.[6]

5. The Department initially planned to bring forward legislation to establish a new regulatory role for HEFCE from the 2013/14 academic year.[7] However, when, in 2012, it became clear to the Department that there would be no new legislation within this Parliament, the Accounting Officer did not seek a Ministerial Direction to proceed with implementation of the policy in the absence of legislation. The Accounting Officer told us that it would be very helpful to have legislation as early as possible following formation of a new Parliament in 2015.[8]

6. The Department could not demonstrate that it had drawn on previous government experience before proceeding with expansion of the alternative provider sector. In 2003, our predecessor Committee reported on the implementation of Individual Learning Accounts by the former Department for Education & Skills. Under the scheme, which was intended to widen participation in learning and reduce financial barriers faced by learners, particularly amongst those who lacked skills and qualifications, private providers received public funding for running training courses. However, our predecessors concluded that the scheme had been poorly thought-through, had been put in place too quickly, and lacked adequate risk assessment and risk management.[9] Although many of the issues were similar when the Department implemented the 2011 higher education reforms, the Department does not appear to have taken lessons from Individual Learning Accounts into account when considering how it would oversee the expansion of provision by alternative providers.[10]

7. The Department was then slow to identify and respond to warning signs that the alternative provider sector was not developing in the way originally anticipated. Between 2010/11 and 2013/14 the numbers of students attending alternative providers grew from 7,000 to 53,000. Half of the total growth is accounted for by just five providers.[11] These providers are also amongst those with higher numbers of ineligible student loan applicants or high dropout rates. The Department acknowledged that the growth of the sector was much greater than expected and that, although in 2013 and 2014 it took action to limit further growth, it was a fair challenge that it should have responded earlier.[12]

8. Another signal that the expansion of the alternative provider sector was leading to unintended consequences was large numbers of applications for student loans from ineligible EU students. The Student Loans Company told us that, at the time of the hearing, £3.84m had been paid out in student support to 832 EU students who had either chosen not to or had been unable to prove that they met eligibility criteria on residency.[13] Payments were made to ineligible students because the Student Loans Company did not routinely require supporting evidence to confirm applicants met residency criteria. The Student Loans Company told us that the process has now been tightened.[14]

9. We asked the Department what it had done to investigate evidence in the NAO report of inappropriate recruitment by some alternative providers, such as advertising higher education courses as if they were English language training or paid employment.[15] We highlighted further cases where we have been told that some providers were recruiting by approaching prospective students on the streets.[16] Although the Department asks alternative providers whether they are using recruitment agents, it told us that it has not conducted a specific investigation into the activities of recruitment agents because this is outside of the scope of its statutory remit.[17]

10. There have been a number of cases where the Department has investigated individual providers about specific issues, such as student attendance rates, and the Department told us that it has responded to concerns about the sector by increasing the Student Loans Company's budget for tackling fraud. However, the Department told us that while it can look into allegations, it has to follow legal processes and cannot proceed without sufficient evidence.[18] The Department has no rights of access to alternative providers and this affects the extent to which it can investigate when concerns are raised.[19] Nevertheless, the Department has not taken practical steps to establish whether, for example, providers are recruiting prospective students from the streets.[20] Nor has it carried out broader investigations into the issues identified by the NAO, such as data suggesting that 20% more students are claiming student loans than have been registered with the qualification awarding body. Unless students are registered, they will not be able to attain the qualification they have enrolled for.[21]

11. The Department's oversight arrangements are failing to protect the interests of legitimate students and the reputation of those providers who may be performing well. Higher education institutions that receive funding from HEFCE are required to provide performance data to the Higher Education Statistics Agency (HESA). HEFCE uses this data to produce benchmarks, identify which institutions need more attention, and which institutions merit a lighter touch. Although for the 2014/15 academic year onwards, alternative providers are also required to provide this data to HESA, comparable data on alternative providers is not yet available.[22] Therefore, it is difficult for prospective students to assess the relative performance of alternative providers, and the Department is also unable to identify which providers are doing well and which may require more intense scrutiny.[23]

12. Qualification awarding bodies, rather than the Department, set minimum entry requirements for higher education qualifications. In the case of Higher National qualifications, Edexcel does not specify entry requirements but, regarding English language, recommends that all students should be at least between level 4 and level 5 in the International English Language Testing System (IELTS).[24] We asked Edexcel whether it thought that this was a reasonable level of English to be taking a Higher National qualification. Edexcel told us that it has decided to introduce an entry requirement for English language and will be consulting on the appropriate level, which could be IELTS level 5.5 or above.[25] In the meantime, low entry requirements may have led to students without the required ability being accepted onto courses, struggling with language and consequently dropping out, contributing to the high dropout rates at alternative providers reported by the NAO.[26]

1   C&AG's Report, Investigation into financial support for students at alternative higher education providers, Session 2014-15, HC 861, 2 December 2014 Back

2   C&AG's Report paras 1.1, 1.8 Back

3   Department for Business, Innovation & Skills, Higher Education: Students at the Heart of the System, white paper, Cm 8122, June 2011; C&AG's Report para 1.4 Back

4   Qq 20, 72, 80, 86-87, 226; C&AG's Report paras 7-8, 2.2, 2.11-2.12 Back

5   HC Committee of Public Accounts, Regulating financial sustainability in higher education, Thirty-sixth report of Session 2010-12, HC 914, June 2011 Back

6   Qq 10-11, 62, 108 Back

7   C&AG's Report para 1.14 Back

8   Qq 100, 108, 242 Back

9   Committee of Public Accounts, Individual Learning Accounts, tenth report of Session 2002-03, HC 544, April 2003 Back

10   Qq 6, 63, 110-122 Back

11   C&AG's Report para 1.6, Figure 2; Qq 62, 65 Back

12   Qq 63-65; C&AG's report paras 1.9-1.10 Back

13   Qq 86-98 Back

14   Qq 104, 125 Back

15   Qq 81, 188-194; C&AG's report paras 2.11-2.12, Appendix Five Back

16   Qq 204-206; 222-224 Back

17   Qq 190-197 Back

18   Qq 203-212, 218-225 Back

19   C&AG's report para 1.15 Back

20   Qq 226-231 Back

21   Qq 50-61 Back

22   Qq 22, 100, 108, 239 Back

23   Qq 174, 239 Back

24   C&AG's report paras 3.16-3.17; Q 156 Back

25   Qq 156-165 Back

26   Q 186 Back

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Prepared 24 February 2015