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Must do better: the Office for Students and the looming crisis facing higher education Contents

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Chapter 3: Financial sustainability

56.Under HERA, the OfS “must monitor the financial sustainability” of most registered higher education providers. The OfS must also annually report on financial sustainability.75

57.In its written submission, the OfS explained that its work on financial sustainability includes monitoring individual providers, gathering intelligence, and taking regulatory action “where providers fall into significant difficulty”. The OfS set out that “to register and stay registered with the OfS, each provider must show that it is financially viable and sustainable”.76

58.The Government also plays a critical role in the financial sustainability of the sector. As noted by the OfS, “Ministers decide on any changes to the system of fees and funding … and other relevant policy matters such as the rules for visas for international students”.77

The financial situation of the sector and the risks it faces

59.In March 2022, the National Audit Office (NAO) published a report on Regulating the financial sustainability of higher education providers in England, finding that the number of providers facing short-term risks to their financial sustainability is “small but not insignificant”. The NAO found that the medium and long-term risks facing the sector are systemic and exist across the sector.78

60.In June 2022, the Public Accounts Committee published a report on the Financial sustainability of the higher education sector in England, following on from the NAO’s report. The Committee said that it was “not convinced that the OfS has made sufficient progress in getting a grip on the long-term systemic challenges facing the sector and individual providers”.79

61.The OfS published its annual report on financial sustainability on 18 May 2023. The report found that the aggregate financial position of providers registered with it “remains sound, although there is significant variation”.80 The OfS was “not currently concerned about the short-term viability of most providers” but noted “an increasing financial sustainability risk for some providers in the longer-term”.81

62.In its written evidence to the Committee, the OfS set out a number of “continuing and emerging systemic risks facing the sector”, including:

• rising costs, including in relation to pay, pension costs, energy bills and inflation;
• the real-terms decline in the value of undergraduate fees for UK students, which have not risen with inflation;
• a reliance on income from overseas students to fund other activities, such as research;
• the ability of the sector to access affordable borrowing;
• capital expenditure and maintenance of higher education estates,
• competitive pressures between providers.82

63.Universities UK’s Vivienne Stern said that the financial difficulties of some universities “will restrict their ability to invest in facilities”.83 OfS Chair
Lord Wharton of Yarm said that the maintenance and improvement of facilities and buildings is “an ongoing challenge”.84

Tuition fees and inflation

64.There are two main elements of public spending on higher education: direct funding for teaching and research, and student loans. The Minister explained that, in total, higher education providers receive approximately £40 billion in public funding.85 Following student finance reforms in 2012 that increased the level of UK undergraduate tuition fees from £3,000 per year to £9,000 per year, student loans rather than direct spending represent a large majority of this figure. In 2017, the tuition fee cap was raised to £9,250 and was intended to rise in line with inflation thereafter. However, in 2018 fees were frozen at £9,250 and have remained there since.86

65.The DfE’s written submission stated that “this government is clear that financial sustainability of the higher education sector is essential to the future success of our economy and society”. The DfE noted that “Government funding policy and the OfS’ regulatory approach are clearly important factors” in financial sustainability.87

66.In 2018, the Government launched the independent Review of Post-18 Education and Funding. An independent panel chaired by Sir Philip Augar reported to the review and made a number of recommendations for reform in May 2019, including reducing the tuition fee cap to £7,500 per year, with the lost fee income replaced by increasing teaching grants. The review also suggested that the fee cap should be frozen until 2022/23, then increased in line with inflation from 2023/24.88

67.In February 2022, the DfE ran its higher education policy statement and reform consultation. This set out its response to the independent panel’s recommendations in relation to higher education and proposed a number of reforms, including in relation to student number controls, minimum eligibility requirements, and tackling “the rising cost of the system to taxpayers, while reducing debt levels for students and graduates”. The response disagreed with the proposal to reduce the home undergraduate tuition fee cap to £7,500 per year, instead announcing the cap would be frozen at £9,250 until 2025.89

68.Since this publication, the Government has changed how student loans are repaid, reducing the interest rate paid but extending the repayment term for students entering their courses in the 2023/24 academic year onwards.90 The Government’s response to the higher education policy statement and reform consultation in July 2023 announced that it would lower the fee cap for classroom-based foundation years provision to £5,760. However, it did not set out a substantial change to the funding model for providers more broadly.91

69.The University of Huddersfield noted that policy change “has been slow to be enacted”, creating “a vacuum”.92 Universities UK said that “a lack of clarity on long-term policy direction … makes it challenging for institutions to plan for their financial future”.93

70.In its 2023 report on financial sustainability, the OfS said that “the real-term value of the fixed fee level for UK undergraduate students has decreased”, while the costs of staff, maintenance, goods and services have increased. The OfS noted that if this continues over a longer-term period, “it will continue to put pressure on the financial performance of providers”, potentially threatening their sustainability.94

71.Universities UK, a body representing 140 universities across the UK, argued that the £9,250 annual tuition fee for UK undergraduate students “is now only worth around £6,600” in real terms “and will erode further” due to record levels of inflation.95 University Alliance, a body representing 16 professional and technical universities, argued that the “main systemic risk” for the sector is that its primary source of income “is capped by government and hasn’t increased since 2017”.96

72.The Russell Group, representing 24 research universities in the UK, estimated that universities are now subsidising the teaching of domestic students by £1,750 per student per year as tuition fees no longer cover the costs of teaching. This is projected to increase to £4,000 by 2024–25, “equivalent to 43% of the current standard tuition fee”. The Group estimated that by 2024–25, per student funding will be lower than in 2011–12, before higher fees were introduced, representing less than £3,375 per annum in real terms.97

73.The Russell Group argued that universities have made efficiencies, including centralising decision-making and services, automating processes and sharing campuses, residences and equipment. However, it emphasised that it was not possible to make these efficiencies at scale over time “without negatively impacting teaching, research and the student experience”.98

74.Professor Neal Juster, Vice-Chancellor of the University of Lincoln, argued that the freeze in tuition fees has “put huge pressure on the system”. He noted that “there is a lot of cross-funding from other activities to try to ensure that the quality in the classroom stays the same” but emphasised that it is “a difficult job”.99

75.Vivienne Stern of Universities UK argued that the current freeze on domestic teaching funding is “unsustainable” and that the consequences of this are “staff-to-student ratios going up and universities posting deficits”. She added that “you can probably get away with it for a few years because the university sector is pretty resilient” but that if the situation continues, universities will be in “real trouble”.100

76.The University of Kent argued that the funding squeeze “means that universities are having to cut back on courses that they offer, potentially leading to ‘subject deserts’ in some parts of the country”.101 The University of Huddersfield agreed, and also expressed concern that escalating costs, without any growth in funding, drive “an efficiency agenda with potential detriment for high-cost subjects”, such as in STEM.102

77.Erica Conway, Chief Financial Officer at the University of Birmingham and Chair of the British Universities Finance Directors Group, said that for small and specialist institutions, the response to these pressures is “about significant cost control and probably a reduction in the offer”. For larger institutions, it is about “diversification of income”.103

78.Erica Conway added that although reserves and cash holdings “look large in many institutions”, they represent “relatively small amounts of expenditure … between three and four months’ worth of cash”. She warned that there were “probably 10 or 15 institutions across the sector” that would be on banks’ “watchlists”.104

79.A large number of submissions from higher education providers indicated the need, in the words of the University of Sunderland, for “policy change and further clarity to ensure the financial sustainability of the higher education sector”.105 University Alliance argued that “the higher education funding system should be reviewed”.106 The Russell Group argued that the sector and government should “come together and look at a new funding formula”.107

80.GuildHE argued that “the key clarity” that would support financial sustainability would be for “major changes to government policy and funding to be set and agreed on a multi-year cycle so that institutions are able to better plan over a longer period rather than needing to react all the time”.108

81.Universities UK explained that while “the financial sustainability of providers is primarily determined by the institutions themselves”, their reliance on capped tuition fees and public funding for research means that “government policy has a significant impact on their ability to balance the books”.109 This sentiment was reflected by a number of other submissions, including from GuildHE, noting that “government policy and funding remains the key uncertainty as it can change rapidly”.110

82.Lord Wharton, Chair of the OfS, argued that “overall, the sector’s finances are in good shape”, while noting “significant variation with some individual providers in less robust shape than others”. He also said that “financial performance is forecast by most providers to reduce significantly in the short term as cost pressures mount”.111

83.Lord Wharton said that the Government controls “significant parts of the funding environment for the sector directly or indirectly”, including deciding “the shape of the undergraduate funding system and the balance between student and taxpayer contributions”. He emphasised that “they are matters for the Government, not the OfS”.112

84.The Minister recognised that there are financial challenges for universities but emphasised that the nearly £40 billion in annual public funding that the sector receives is “not a small sum of money” in the current context. He also argued that during a cost-of-living crisis, “the last thing I can do is go and tell students that we are going to raise their tuition fees”. He suggested that financial issues in some institutions “may be down to the management and leadership of that particular university rather than the funding system”.113

85.The Minister said that it “may be right” that the funding of universities and their business model “should be done differently”. However, he did “not think that the model is wrong” and said that “given everything else that is going on in the economy and the public sector, HE is in a fairly strong position”.114

86.The Minister told the Committee that 72% of universities are in “good financial health”.115 He stressed the difficult situation facing the wider economy and the public finances and argued that higher education “is not doing too badly financially”.116

87.The Government’s intention is that from 2025, the current systems for student finance will be replaced by the Lifelong Loan Entitlement (LLE). We discuss this further in paras 258–264.

International students

88.In its 2023 report on financial sustainability, the OfS recognised “the significant role” that fees from international students, which unlike domestic tuition fees are not capped, have in the financial model of many providers. The OfS argued that overreliance on overseas fees “remains a vulnerability for some providers” and that the sector “continues to rely on recruitment of students from China”, meaning that any geopolitical or other event that reduces the flow of these students “could have a significant impact”.117 OfS statistics show that in 2021–22, China was the leading source country for overseas students, making up 22.3% of total overseas students.118

89.The report also found that “a number of providers are forecasting significant growth in overseas student numbers”, outlining the regulator’s expectation that providers relying on overseas students will “have contingency plans” if the flow of such students is interrupted.119 The OfS has written to 23 providers with high levels of recruitment of students from China to ensure they have contingency plans in place.120

90.On 17 August 2023, the University and Colleges Admissions Service (UCAS) published statistics showing that 51,210 international students had been accepted by UK universities and colleges for the 2023–24 academic year, a 2.3% reduction on the previous year. China was the country with the largest number of placed applicants, with 11,630 acceptances. However, this was a reduction from the 13,180 students from China accepted in 2022.121

91.Professor Susan Lea, former Vice-Chancellor of the University of Hull, explained that providers were using the international market to replace the shortfall in funding for domestic students, as a way of managing their finances.122 Vivienne Stern suggested that this is “a vulnerable income stream”.123 Charles Clarke, the former Secretary of State for Education, also raised concerns that relying on cross-subsidy from international students was “not sustainable” as “countries around the world are building strong, world-class universities themselves”.124 According to a global league table published by the Centre for World University Rankings (CWUR), nearly 60% of top UK universities fell down the CWUR’s rankings in 2022–2023. The CWUR attributed this to “intensified global competition from well-funded institutions, particularly from China”.125

92.Dame Nicola Dandridge, a former Chief Executive of the OfS, suggested that the imbalance in fees between domestic and international students “undoubtedly builds an incentive” in terms of allocating places to students.126

93.The former Minister for Universities Lord Johnson, on the other hand, argued that it is “a great benefit” to be able to attract international students, who generate “£25 billion of annual exports”. He said that “the idea that we want fewer international students mystifies me”.127 Vivienne Stern said that the UK is “unbelievably fortunate to be the kind of place where people want to spend their formative years”, adding that universities and students “benefit enormously” from international students.128 Sir Michael Barber, the former Chair of the OfS, said that high numbers of international students do not concern him “as long as the student experience is strong and the overseas students are not pushing out domestic students”.129

94.The Minister also emphasised that “76% of students are not international students” and that he is “actually very supportive of international students”. He said that “they help with the finances” and “are examples of soft power”, stressing that he does “not see having too many international students as a risk”. He did not think there was “dependency” on international students.130

95.On 23 May 2023, the Government announced proposals to restrict the ability of international students to bring family members on “all but post-graduate research routes” and to ban people from using a student visa “as a backdoor route to work in the UK”.131 However, the Government “reaffirmed its commitment” to the International Education Strategy, which includes ambitions to attract 600,000 international students per year to study in the UK and to increase education exports to £35 billion per year by 2030. The UK has met the Strategy’s ambition on international students in the last two years, attracting 679,970 international students in 2021/22.132

96.The higher education sector faces several financial risks. These risks are exacerbated by the freezing of tuition fees for home undergraduate students, the sector’s main source of income, especially at a time of high inflation. Higher education institutions now make a loss when teaching domestic students and conducting research. These shortfalls have led institutions to become increasingly reliant on cross-subsidy from international and postgraduate students, whose fees are not capped.

97.The contribution of international students to higher education is valuable and welcome but the sector’s dependency on their fees comes with risks.

98.There is a worrying complacency in some quarters that the premium from overseas students could be banked for the long term. But this takes no account of a) the significant imbalance in where overseas students are coming from, particularly China, which concentrates the risks of geopolitical shifts; and b) an increasingly competitive international environment. It is therefore unclear why a student would pay a substantial premium to study in the UK, whilst in other countries, which may include their own, the quality of the offer is improving.

99.The current system of higher education funding is not sustainable and will lead to growing issues in the coming years. The decline in the real-terms value of tuition fees has led institutions to make substantial efficiencies already, and the extent to which further efficiencies are possible is unclear. Further funding shortfalls will lead to risks for the breadth and quality of higher education provision.

100.Given the scale of these challenges, we were surprised by the OfS Chair’s assertion that the sector’s finances are “in good shape”. This is not an assessment that we or most of our witnesses share. In our view, this remark is indicative of the insufficient attention the OfS has paid to the financial risks facing the sector.

101.While individual institutions are responsible for managing their own finances, the Government controls their main sources of income through the cap on tuition fees for domestic undergraduates, and through research funding, including via its approach to the UK’s association with Horizon Europe. It also has an influence over the level of international student recruitment, a key part of providers’ business models, through its immigration policy.

102.It is therefore the responsibility of the Government to put in place a stable funding model for higher education that enables institutions to plan for the long-term sustainability of the sector. It has yet to do this.

103.The Government should review how higher education is funded. In doing so, it must provide sufficient clarity for institutions to plan for the long-term and set sustainable funding and delivery models for the higher education sector. This review should take into account the planned changes to the student finance model under the Lifelong Learning Entitlement.

How the OfS oversees financial sustainability

Monitoring and assessing risks

104.In its written submission, the OfS explained that its approach to monitoring financial sustainability is “risk-based and data-driven”, enabling the regulator to “identify providers that could be at risk of unplanned market exit and to intervene as appropriate to protect students”.133

105.The OfS outlined that “registered providers are required to submit structured information about their financial performance and strength at least once a year, covering the most recent audited year and forecasting ahead for the following five-year period”. Providers also provide the OfS with “qualitative information”, such as a written commentary and reports from external auditors.134

106.This information is used, alongside the OfS’ understanding of sector trends and risks, to assess the financial viability and sustainability of each provider. The OfS argued that it takes “a risk-based approach, focusing attention on those providers that present most risk”. Providers are also required to report certain matters that may indicate financial risk.135

107.In April 2023, the OfS published a summary of its approach to monitoring the financial sustainability of individual universities and colleges. The OfS set out that 250 higher education providers were required to complete its annual financial return for the 2020/2021 financial year. Of these, 117 were subject to further assessment, there was informal monitoring of 51 providers, of which 31 were subject to additional formal monitoring. Three providers were subject to Student Protection Directions, which enable the OfS to intervene “quickly and in a targeted way” where there is a material risk of market exit. One provider exited the market.136

108.Dame Nicola Dandridge said that during her time at the OfS, “there was a lot of engagement and assessment” of which providers were at risk and that the OfS “would try to get involved at an early stage”. She argued that the OfS was also focused on the broader systemic risks in the sector, examining “broader trends” to anticipate when institutions might get into difficulties.137

109.Sir Michael Barber said that at one point, OfS analysis of provider forecasts found that they “were projecting more students in the future than existed in the country”, which was “impossible”. He explained that the OfS would “feed that back into the system, just to give a reality check”.138

110.Lord Johnson said that in this area, the quality of the OfS’ work was largely “very good”. He suggested that the only area where the OfS has been “a bit slow” is in relation to “overdependence on international students from a couple of countries”. He argued that the OfS had identified the problem but been slow to act: “making institutions put in place an action plan to diversify their sources of international income is what we need, not just to observe that it is a risk”.139

111.Professor Dame Nancy Rothwell, of the University of Manchester, said that the OfS looks at financial accounts “in some detail”. However, she argued that it would glean better insights by speaking to providers directly.140

112.Erica Conway said that, while all “good” institutions conduct forward planning, “the level of detail that is required” by the OfS is significant. She called for clarity on how the OfS’ approach is working, “what that means to us individually as institutions and what we have to do in response to that”.141

113.Nicola Owen, Chief Executive (Operations) at Lancaster University and Chair of the Association of Heads of University Administration (AHUA), suggested that “silence is effectively the only clue that you are not a high-risk institution”, but acknowledged that “the case studies that have been published are quite helpful in that regard”.142

114.For the OfS, Susan Lapworth said that “it is for individual institutions to run their finances effectively. That is not our job”. She contrasted this with HEFCE, which “was much more interventionist”. Lord Wharton said that the OfS’ role is “to intervene where we appropriately can to assist institutions that are struggling, but it is not our role to fix their problems”.143

115.Susan Lapworth expressed confidence that the OfS “can spot risks early”, while noting that “this is a deliberately risk-based system and we do not look in detail at every provider every year”.144

116.In its financial sustainability report for 2023, the OfS explained that this year, it introduced “direct engagement with finance directors from a wide cross-section of providers through a series of roundtable meetings”, which allowed it to “hear first-hand the financial risks that face different parts of the higher education sector and the mitigations available”.145

117.The OfS’ targeted approach can mean it communicates little with institutions whose financial data appears healthy. This limits the regulator’s knowledge of providers that are not in financial difficulties, makes it harder to identify risks that are not evident in financial data and means that relationships may have to be built from scratch if difficulties occur. It is welcome that the OfS has recognised this and introduced greater direct engagement with providers this year.

118.The OfS should prioritise holding discussions with providers more regularly about their financial situation, in particular those that are not considered high-risk.

Provider failure and market exit

119.HERA requires that the OfS monitors and reports on financial sustainability in the sector, but the OfS does not have a responsibility to ensure financial sustainability or prevent the failure of higher education institutions.146 As the University of Bolton noted, “the OfS is not a funding body in the same way” as its predecessor, HEFCE.147 HEFCE aimed to “encourage and support the positive contribution that higher education makes”, including through funding teaching and working in partnership to lever investment into English higher education.148

120.The OfS explained in its written evidence that “it is not [the] OfS’ role to prevent financial failure in the sector” and emphasised that “some providers will leave the system because of unresolvable financial difficulties”. The OfS set out that its role “is to minimise the likelihood of an unmanaged and disorderly exit, because this is how we minimise the impact of any provider closure on the interests of students”.149

121.All providers registered with the OfS must have a student protection plan in place which must be approved by the regulator. The plan must address specific risks to the continuation of study for the provider’s students in the event that the provider enters financial difficulties, including ensuring that existing students can complete their course and continue to access student finance, or transfer to other providers.150

122.In 2021, the OfS amended its regulatory framework to introduce a new condition of registration that enables it to impose “legally-binding student protection directions” on a provider where it considers there “to be a material risk of market exit”. The OfS considers imposing student protection directions where providers are unable to demonstrate that they are likely to have access to sufficient funds to meet day-to-day costs and any other liabilities due within the next 12 months.151

123.In 2021, the Academy of Live and Recorded Arts (ALRA), a registered provider, closed due to financial difficulty. The OfS said that it was “able to ensure that all students were offered a suitable alternative place” at another institution and “received credit for their studies to date”. The OfS emphasised that it also acts in such situations “less visibly” and has imposed formal student protection directions or otherwise required exit planning six times since it began operating in 2018.152

124.In April 2023, the OfS published case studies outlining the action it had taken in three cases where providers were at risk of market exit, including the case of ALRA, which did exit the market. In the case of ALRA, the OfS introduced requirements to protect the interests of students, established a multi-agency taskforce to coordinate planning for ALRA’s market exit and identified options for ALRA’s students to continue their studies at another provider. When ALRA closed, over 90% of its 248 students chose to move to Rose Bruford College of Theatre and Performance.153

125.Sir Michael Barber said that “it was assumed in the HEFCE era that, if a university got into financial trouble, it would get bailed out”. He said he had made a speech early on during his time as Chair of the OfS in which he said “we would not bail out universities that got into financial trouble, because you have to get to a situation where they take responsibility for their own finances”. He suggested that “the politics” of any exit would be “difficult”, noting that in the case of one institution that got into financial difficulty, “we sorted it out behind the scenes” but did not bail it out.154

126.Dame Nicola Dandridge said that when ALRA went out of business, “the OfS was very aware of that situation and intervened”, stressing that “our priority was the students”, who were offered a place in good-quality alternative providers. She stressed that “that is how the system should work, and it worked”.155

127.However, Dame Nicola did note that the OfS is “very conscious that institutional failure could be immensely damaging for the sector as a whole”, including by affecting “the confidence that banks had to lend”, potentially leading to a knock-on effect for other institutions.156

128.Lord Johnson argued that the OfS “is not set up to be an entity that can bail out failing institutions” and does not have “pots of money” that it can draw on for that purpose. He suggested that if Ministers were to decide that they “wanted to save an institution”, it would be a matter for the DfE and the Treasury.157

129.Sir David Eastwood, the former Chief Executive of HEFCE, thought there would be “some consolidation” in the sector in the coming years, but argued it was “unlikely” that institutions will fail as “the political imperatives are against” this. He explained that the OfS “does not have the resource that HEFCE, for example, would have had to help to facilitate and broker those mergers”, suggesting that the OfS and the DfE needed to think about this.158

130.Prof Juster said that “it will be a political decision as to what happens if a university was to fail”. He noted the requirement for providers to have student protection plans but explained that he is “not sure how the sector would cope if a large university with 40,000 students could not teach the next day”.159

131.Vanessa Wilson of University Alliance questioned “how willing universities are to go to the OfS”, as “they would fear that the OfS might come in with some sort of punitive response”. She emphasised that there have been occasions where the OfS was “very supportive to institutions” but argued that a “lack of trust probably inhibits the frank exchange of information”.160 Prof Juster said that he personally would “think very hard before I went to the OfS”, while Prof Rothwell said that she “probably would go to the OfS” in such a scenario, but “probably not in the same way that we would have done with HEFCE”.161

132.Lord Wharton said that he would “certainly hope” that a vice-chancellor would not feel reluctant to engage with the OfS on their institutions’ financial difficulties, as in the past the OfS has been able “to assist with finding solutions”. He emphasised that while the OfS “will have to protect students … we will also help institutions where we can and offer guidance, support and some of the experience we have had in dealing with other institutions”.162

133.Lord Wharton argued that the OfS has “been able to make a tangible difference” by “ensuring that students were not simply cast out with nowhere to go” in the event of failures. However, he acknowledged that if larger numbers of institutions are “struggling to the point of potential failure, it becomes more difficult”.163

134.For the Government, Anne Spinali said that the DfE “will have constant dialogue with the OfS on institutions at risk and actively discuss what plans the institution is putting in place”. She acknowledged the “concern that some institutions have about approaching the OfS directly”, explaining that some providers have approached the Government first. However, she emphasised that the Department’s “first reaction” would be to direct providers to the OfS.164

135.Anne Spinali also argued that “what will probably happen … is the consolidation of institutions and evolution of business models”, rather than provider failure. The Minister emphasised that if “a university was going under, I would regard it as my duty to work sure the students had another provider to go to”, by working “very closely” with the OfS.165

136.It is worrying that some institutions would be unwilling to engage with the OfS in the early stages of falling into financial difficulty for fear of a punitive regulatory response, especially given the OfS’ risk-based approach to engagement. This hampers the ability of institutions and the regulator to plan together and take early action against emerging financial risks. Trust would be improved by greater mutual engagement between providers and the regulator, which could help improve the willingness of providers to discuss emerging problems. The OfS’ publication of case studies, providing more clarity for providers on its approach, is welcome.

137.The OfS has indicated that its role is not to bail out failing providers but to support their students to continue their studies in other institutions. While this was successful in the case of a recent market exit by a small provider, there are questions as to the practicality of this approach in the event of the failure of large institutions or of large numbers of institutions. In these instances, it would be difficult to ensure alternative places for large numbers of students.

138.HEFCE, the OfS’ predecessor, had the ability to facilitate and broker mergers and consolidations of providers where there were difficulties, facilitating planned solutions rather than disorderly exits. It is not clear whether either the OfS or the Government has taken on any strategic oversight of the sector in this vein, despite an apparent expectation of greater consolidation of providers through mergers.

139.The Government and the OfS should clarify whether there is any strategic oversight of the higher education sector’s long-term financial stability, including whether to encourage mergers and consolidation. If no such function exists, they should consider whether it is necessary and which body should take this responsibility.

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