1 Oversight of the alternative provider
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
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
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. Evidence submitted to us, including from whistleblowers,
highlighted a number of issues relating to the implementation
of these changes:
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;
of student support paid to EU students who were not eligible for
rates higher than 20% at some alternative providers;
of inappropriate recruitment practices with colleges recruiting
on the streets;
that students are not being registered for their qualifications;
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.
HEFCE and the University and College Union also raised concerns
about the risks and the need for new regulatory powers.
5. The Department initially planned to bring forward
legislation to establish a new regulatory role for HEFCE from
the 2013/14 academic year.
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.
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.
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.
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.
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.
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.
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.
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.
We highlighted further cases where we have been told that some
providers were recruiting by approaching prospective students
on the streets. 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.
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.
The Department has no rights of access to alternative providers
and this affects the extent to which it can investigate when concerns
are raised. Nevertheless,
the Department has not taken practical steps to establish whether,
for example, providers are recruiting prospective students from
the streets. 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.
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.
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.
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).
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.
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.
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
C&AG's Report paras 1.1, 1.8 Back
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
Qq 20, 72, 80, 86-87, 226; C&AG's Report paras 7-8, 2.2, 2.11-2.12 Back
HC Committee of Public Accounts, Regulating financial sustainability in higher education, Thirty-sixth report of Session 2010-12, HC 914, June 2011 Back
Qq 10-11, 62, 108 Back
C&AG's Report para 1.14 Back
Qq 100, 108, 242 Back
Committee of Public Accounts, Individual Learning Accounts, tenth report of Session 2002-03, HC 544, April 2003 Back
Qq 6, 63, 110-122 Back
C&AG's Report para 1.6, Figure 2; Qq 62, 65 Back
Qq 63-65; C&AG's report paras 1.9-1.10 Back
Qq 86-98 Back
Qq 104, 125 Back
Qq 81, 188-194; C&AG's report paras 2.11-2.12, Appendix Five Back
Qq 204-206; 222-224 Back
Qq 190-197 Back
Qq 203-212, 218-225 Back
C&AG's report para 1.15 Back
Qq 226-231 Back
Qq 50-61 Back
Qq 22, 100, 108, 239 Back
Qq 174, 239 Back
C&AG's report paras 3.16-3.17; Q 156 Back
Qq 156-165 Back
Q 186 Back