2Ensuring value for money in the higher education market
On Redress available to students
12.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. Dennis Farington told us that the current higher education market has transformed the relationship between students and universities to one of “business-to-consumer”, and yet students have limited enforceable rights. He described this model as “retrogressive”, and argued that a standard contract should be put in place for students entering university, so that all students are placed on a level playing field and understand their rights.25
13.For a market to operate effectively, it needs empowered consumers who can switch provider if they are dissatisfied, but this is not currently 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.26 We asked the Department and the OfS what they were doing to facilitate switching, and how they plan to address the perverse incentive universities might have to limit student transfers so they do not lose tuition fee income. The OfS accepted that if students have made the wrong decision about their course or institution, then both it and the higher education provider have a responsibility to make it easier for students to transfer. It told us that one of its conditions of registration for higher education providers is to demonstrate what arrangements they have in place to allow students to transfer. As the new regulator, OfS will have a responsibility to make sure there is better use of transfers where appropriate.27
14.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 told us that if students had been misled in some way by their provider, they may be able to reclaim some of their fees, but if they were dissatisfied because they had made a bad choice, then it would be more difficult.28 While some students have to start their higher education again if they move institutions, many can move straight into the second year of their course, but this is not well understood or communicated.29
Value for money
15.Since 2012, the proportion of students who considered their courses value for money has dropped from over 50% to 32% in 2017. The Department’s reforms to the higher education sector, including the increase in tuition fees to £9,000 in 2012 and the lifting of the cap on student numbers from 2015/16, have led to an increase in funding within the sector. The Department provided £9 billion of up-front funding for undergraduate higher education teaching in England in 2015/16 (equivalent to £7,903 per student), up 50% from £6 billion in 2007/8. However, the NAO found that there has been no meaningful price competition in the sector to drive down prices for the benefit of the student and taxpayer. When it introduced £9,000 fees, government expected that price competition would drive fees to an average of £7,500. But in 2016, 87 of the top 90 universities charged the maximum £9,000 fee for all courses.30
16.In light of the lack of price competition and students’ declining perceptions of value for money, we asked both the Department and the OfS how they would ensure value for money in the higher education sector in future, both for students and the taxpayer. The Department told us that at the value of the sector to the taxpayer is based on increased economic productivity. It told us that a 10% increase in the number of students doing degrees leads to an increase in productivity of between 2% and 5%. From the student’s perspective, the value for the higher education sector is based on the fact that graduates on average receive higher wages than non-graduates. It also told us that degrees that may not lead to an economic return in the form of higher future earnings can offer a wide range of social returns and this is another component of value for money. The Department told us that the OfS will have a responsibility to ensure individual institutions are using their resources wisely; the TEF will assess the quality of individual courses; and improvements to the information available to students will enable them to weigh up the economic and social returns to a particular course so they can make an informed choice.31
17.As the new regulator for the higher education market, the OfS’ remit is to support a competitive environment, promote choice, quality and value in the interests of students and the taxpayer. The OfS told us that its role is to regulate the sector “on behalf of students” and in the interests of current and future students. It told us that it has commissioned research from a consortium of student unions to identify how students define “value for money”, to help it fulfil this obligation. It found that there is wide variation in how students think of value for money, and that going forward it would need to be responsive to the range of concerns students have.32 In its written evidence, Universities UK, the representative organisation for the UK’s universities, told us it is right to expect universities to demonstrate value for money in a wide range of contexts: for the taxpayer, students, employers, communities and regions. It also highlighted the complex range of factors that need to be considered in these assessments and told us that universities will need to work with the OfS in defining value for money.33
18.Given the challenge of regulating in the interests of a diverse group, we asked the OfS how it intends to do this. It told us that it has established a student panel to inform its decisions and to ensure that its definition of the student interest is defined by students themselves. It also plans to develop a student engagement strategy to help clarify what the student interest is, and then feed this into how it implements its regulatory framework. It acknowledged that it is a difficult task, but highlighted particular categories of concerns student have in relation to the quality of teaching, feedback and graduate outcomes as key areas of focus.34 It told us it has a range of measures it can take to regulate the sector in the interests of students including enhanced monitoring, fines and in extreme cases de-registering providers.35 The OfS is also not the only regulatory body with oversight of the sector. For example, although it has a role to promote competition, it does not have enforcement powers, which are held by the Competition and Markets Authority.36 There is also the Advertising Standards Agency, which has taken action against universities for misleading advertising.37
25 Qq 5, 18, 21
26 Q 74
27 Qq 75, 113
28 Qq 76
29 Q 77
30 C&AG’s Report, paras 1.2, 3.3–3.5
31 Qq 121–122
32 Qq 128–130
34 Qq 126, 129–131
35 Qq 132–134
36 C&AG’s Report, para 3.13
37 Qq 1–2
Published: 15 June 2018