The Regulation Revolution: Some initial thoughts on the Green Paper

Wow. There is an awful lot going on on the regulatory front in BIS’s Fulfilling our Potential: Teaching Excellence, Social Mobility and Student Choice.  The measures proposed include a number which are designed to address two problematic features of the current regulatory landscape, namely the much vaunted  leveling of the playing field for alternative providers and the updating of what the paper describes as the “architecture” of HE in terms of the roles and powers of the various sector agencies.

On the level playing field, the paper is full of proposals to increase the ease with which new providers should be able to enter the market. It’s easy to forget that it is less than a year since the last Minister was forced to tighten up regulation of alternative providers, and less than a year since the Public Accounts Committee savaged the system for funding alternative providers as an abuse of public money. The paper seems to advocate the taking of more such risks, on the basis that new powers will make it easier to take action if things go wrong. So, for example, the process for securing DAPs and university title will be speeded up (things such as demonstrating a track record of delivery being dismissed as just another unnecessarily high barrier to entry) but it will be easier to remove them if a provider goes off the rails.

Two immediate observations flow from this. First, we are likely to see a far more fluid and less stable HE sector in the future, which may (possibly) be good for student choice but which also, no matter how carefully designed the system might be, carries an increased risk of damage to the reputation of UKHE. The second is that for the playing field to be truly level, all providers need to be at risk losing their DAPs and UT where circumstances require and the paper does refer to these provisions extending to incumbent providers. This would clearly be a major new risk area for traditional institutions and their governing bodies to worry about.

The Green Paper highlights the inequality built into the current system by the need for new providers to have their provision validated by their competitors, previously colourfully explained by the Minister as the “Byron Burger/Mcdonalds” problem.  The solutions proposed include giving the new proposed super-regulator validation rights, giving DAPs to non-teaching bodies, or centrally licensing certain existing providers to validate new entrants with an express remit to increase competition. These are all viable solutions, but overlook the fact that validation can be a risky practice in terms of quality assurance, especially where the validating body lacks the necessary expertise to judge the quality of the provision on offer and especially where there is a financial imperative to validate as much as possible. This risk must surely be greater where the provision in question is untested and novel.

Provider exit is recognized as being more likely and indeed something to be encouraged and as a consequence, providers are expected to offer “student protection” to deal with this eventuality. The protection would involve arrangements for alternative provision for students in the event of provider failure or financial recompense (the proposal is for a fee rebate for any unused pre=paid tuition fees). Interestingly, neither of these would necessarily be regarded as sufficient redress for the purposes of consumer protection law, and it remains to be seen whether, for example,  a student two years and a term into a degree would regard a refund of the two outstanding terms fees as adequate redress if the provider closed down for some reason.

In terms of the regulatory architecture, as widely predicted the Green Paper recommends the abolition of HEFCE and OFFA and the transfer of any relevant functions to a new Office for Students. Whether QAA, HEA and HESA should remain independent forms part of the consultation and there is a recognition that there are specific considerations, for example where these bodies play a UK wide role, that militates against transferring their functions to the new OfS.  The new OfS would have various statutory duties to safeguard the student interest and to safeguard public funds,

Although presented as a “light-touch” regulator it is clear that the new body will have teeth. The paper refers to the power to give directions, levy fines, or to de-designate. Separately, there is a proposed power for the Secretary of State to have a power to enter and inspect specified providers if there has been a suspected breach of conditions relating to funding.

The paper contains some interesting proposals about deregulation for HECs including the power to dissolve themselves, as was given to FE colleges a few years ago, as well as more freedom to amend their governing documents in areas where there is no significant public interest. We can expect an update to the 2006 Rammell letter and it will be interesting to see what new or different areas are considered to lack sufficient public interest and thus be ripe for deregulation.

There are also some very interesting if brief points about public body requirements,  based on the Government’s oft repeated view that tuition fees are not public funds and therefore do not warrant their recipients being treated as public bodies.  Sadly this is not a view shared by many of the procurement lawyers I have spoken to. Nevertheless, in the spirit of leveling playing fields, the paper dangles the carrot of removing some of the obligations placed on traditional HE providers, including  the obligation to comply with the Freedom of Information Act.

Smita Jamdar 
Partner and Head of Education
T: 0121 214 0332
E: smita.jamdar@shma.co.uk
W: www.shma.co.uk

From → General Interest

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