Value for money in higher education Contents

2Value for money for students and the taxpayer

Transparency on tuition fee spending

17.In its written evidence the Department for Education (DfE) stated that under the new OfS registration conditions, providers:

will be required to publish a statement on the steps they have taken to ensure value for money for students and taxpayers which provides transparency about their use of resources and income. Providers should design this statement to allow students to see how their money is spent, following examples from other sectors, such as Local Authorities, publishing breakdowns of how Council Tax is spent.12

18.The Minister confirmed in oral evidence that the statement document is an idea he is “very keen” on and that “students are entitled to know this information”.13 The OfS regulatory framework states that “Section 69 of HERA [Higher Education and Research Act 2017] enables the OfS to conduct efficiency and effectiveness studies in the management or operations of a registered provider. This is designed to allow the OfS to ensure that providers are delivering value for money for students and taxpayers”.14 Sir Michael Barber, Chair of the OfS told us:

Value for money is one of our four priorities as [the] Office for Students and in the regulatory framework we will be asking universities to give evidence of value for money in a whole range of ways. We do, if necessary, have powers to intervene if we think value for money is not being delivered.15

19.Some providers are already publishing information on where fees are spent on their websites. For example, the University of Essex breaks fees down in a pie chart:

Source: University of Essex, ‘How we use your tuition fees’, accessed October 2018

20.Every higher education institution should publish a breakdown of how tuition fees are spent on their websites. This should take place by the end of 2018, and we recommend that the Office for Students intervenes if this deadline is not met.

Senior management pay

21.The issue of pay of senior management in universities was raised throughout our inquiry, echoing much of the attention which the issue received in the mainstream media. The Times Higher Education’s survey of Vice-Chancellors’ pay in 2016–17 showed that Vice-Chancellors were paid an average of £268,103 in salary, bonuses and benefits.16 The £471,000 pay package of the Vice-Chancellor of Bath attracted particular attention and led to the resignation of Dame Glynis Breakwell. Sir Christopher Snowden, Vice-Chancellor of Southampton University, received £352,000 in 10 months in 2015–16 despite the university receiving a bronze in the TEF.

22.In evidence to us five Vice-Chancellors agreed that there was “public concern” over salary levels and that more should be done to improve transparency and openness.17 Dame Janet Beer, Vice-Chancellor of the University of Liverpool and President of Universities UK, and Professor Louise Richardson, Vice-Chancellor of the University of Oxford, discussed salary levels in terms of the “global marketplace” and the international outlook of many of our most prestigious universities.18 Nicola Dandridge, Chief Executive of the OfS, told us:

There is a sense in which some senior salaries have got out of kilter. There is a legitimate public concern about the levels of some of the salaries. [ … ]

Having said all of that, universities are autonomous and we have to respect that. It is critical that they try to sort this out themselves, acknowledging the wider public concern. [ … ]

Yes, we have the powers. Yes, I think there is a problem. Yes, at the OfS we have to be prepared to deal with this and tackle it, but for the time being, we are waiting to see whether the sector can seriously address the issue and the levels of pay and ensure that they are justified. If they are not, the OfS will have to intervene.19

23.Although Nicola Dandridge is right to describe universities as autonomous, it is important to remember that universities are in receipt of both private and public money. The DfE’s written evidence points out that while higher education providers are self-governing institutions with responsibility for setting salaries, the public are “the sector’s most significant single funder” and “there is a legitimate public interest in the efficiency of these providers. This includes senior staff pay”.20

24.A new voluntary Higher Education Senior Staff Remuneration Code was published by the Committee of University Chairs in June.21 The code stipulates that institutions “must publish the multiple of the remuneration of the HoI [Head of the Institution] and the median earnings of the institution’s whole workforce annually”.22 The code also sets out a new ‘apply or explain’ principle.23 Under this principle an institution must publicly provide “meaningful explanations” for non-compliance with the guidance. The code states that the Vice-Chancellor should be not be a member of the remuneration committee. They may attend meetings, but not be present for discussions “affecting him or her”.24

25.The new code has attracted criticism for not going further. In particular the University and College Union (UCU) expressed disappointment that the code does not ban VCs from remuneration committees.25 The new code has also been criticised for “watering down” the section on comparing VCs’ pay to a multiple of median staff pay.26 The original draft code was deemed to be stronger on this point. Nicola Dandridge responded to the code and the role of the OfS:

In recent years there have been a number of cases where the levels of pay for some vice-chancellors, and increases in their pay, are out of kilter with pay levels elsewhere, and that must change. Vice-chancellors, and the governing bodies of universities, now need to show real leadership on this issue. While the code provides useful guidelines, tough questions need to be asked about high pay in the sector.27

26.On 19 June the Office for Students published its account direction on financial statements.28 It states that universities will have to provide the OfS with details of the total remuneration package paid to their Vice-Chancellor, including bonuses and other taxable benefits. “A justification for the total remuneration package for the head of the provider” will also be required.29 The OfS will ask providers to publish their pay ratios.

27.Unjustifiably high pay for senior management in higher education has become the norm rather than the exception and does not represent value for money for students or the taxpayer.

28.The current system of self-regulation for senior management pay is totally unacceptable. We call for the Office for Students to publish strict criteria for universities on acceptable levels of pay that could be linked to average staff pay, performance and other measures that the Office for Students sees fit. The Office for Students should take swift action if this is not the case.

29.Institutions must routinely publish the total remuneration packages of their Vice-Chancellors in a visible place on their website. Vice-Chancellors must never sit on their remuneration boards and this should be enforced by the Office for Students.

12 DfE (VAL 59) para 3.12

16 THE, ‘The Times Higher Education V-C pay survey 2018’, accessed October 2018

20 DfE (VAL 59) para 3.32

21 Committee of University Chairs, The Higher Education Senior Staff Remuneration Code, June 2018

22 Ibid, p 6

23 Ibid, p 2

24 Ibid, p 6

29 Ibid, para 15.c

Published: 5 November 2018