Higher Education funding: A question of quality?

Reviewing fees and funding

A review of fees and funding has been on the cards since 2018.

It needs to address:

• A vast and growing student loan book
• Significant demographic growth, which in turn demands growth in HE
• Immediate COVID-pressures, including over-recruitment of high-cost funding
• A realisation of the existence of digital poverty, and the fact that some targeted funding may still be needed to make access and participation plans (APP) targets feasible
• Policy drivers from the Government around STEM
• A yet unpublished FE White Paper
• A review on which subject costs can be calculated (TRAC)
• Aligning funding mechanisms developed under the Funding Council to those suitable for a regulator.

In September, the Office for Students (OfS) board considered a paper which set out a timetable for reviews of teaching funding: 2020-21, specialist, high-cost, and student premiums.

First decisions were to be reached by July 2021, followed by technical consultations, and then full implementation would impact on funding for the academic year 2022-23.

A parallel conversation was assumed around fee levels, as part of forthcoming Government response to Augar and Pearce. This was scheduled for November 2020, attached to a three-year CSR (which did not happen).

The follow-up paper was due to be discussed in detail in December.

Yet, what has the OfS prioritised this Autumn?

The Quality and Standards Consultation.

Controlling fees and funding in relation to courses

The Quality and Standards Consultation provides a ready-made set of levers necessary to control funding and subsidised loans.

It also offers new ways of looking at fees and funding, all precipitated (sort of by accident) by the pandemic.

The consultation identifies a nominal 10-20% lowest tier of performance that could be couched in terms of courses, or students on courses… and financials.

The September OfS board paper on Teaching Funding divides teaching funding into three categories:

• Course-based: subject and mode
• Student-based: APP considerations, such as student premiums
• Provider-based: specific provider qualities, such as specialist.

For the first two, references are made to the developing quality regime (which was kept under wraps in the September OfS board paper).

Course-based teaching funding for high-cost subjects seems to be accepted as a necessary funding stream.  It is notable that the Government saw these subject-linked costs as eligible for special uplift due to COVID-linked surprises, having refused other pleas from universities for extra funds.

It is already more or less certain that there will be pro-rata slices of £10m extra teaching funding doled out in February, as well as an additional £10m capital shared round those universities who have applied for it, and are deemed deserving.

The broader OfS teaching funding paper from September explores longer term teaching funding, and posits more targeting of high-cost funding for STEM and health. The latter is to support pre and post-COVID government priorities.

It also recognises other exceptional areas for funding, including the arts and humanities, and flags its intention to support part-time provision as well.

Equally, the method of counting students will be reviewed – this may end the complex non-completion definition – because OfS want to support flexible starts and modular delivery.

However, the concept of a quality bar is clearly stated as linked to funding. This shows the importance of the quality and standards regulatory conditions currently under consultation.

Parts of provision in breach of quality and standards conditions wouldn’t be eligible for student tuition fee loans or OfS funding, until rectified. These “significant financial consequences” to individual providers are noted by OfS in the teaching funding board paper.

This aligns with the Quality and Standards Consultation. This outlines that, in the case of a breach of quality and standards conditions, OfS may seek to “suspend aspects of a provider’s registration, to include suspending access to student support funding, or OfS public grant funding.”

This is also in accordance with powers granted under HERA.

Student-based fees and funding

The position on student-based funding is less clear.

Current student premiums are allocated on the basis of student characteristics, such as tariff point on entry, and POLAR postcode. It is a legacy funding stream from the era of the 50% target where the costs of widening participation in terms of provision of academic and other support was recognised.

However, COVID has given the Government the chance to direct this funding to a range of areas with a preference for direct funding of student needs. This helps the Department of Education (DfE) claim that universities have had access to specific funds to support student hardship driven by COVID.

The pandemic, particularly the issue of digital poverty, has been used to require greater transparency from universities about how these student premium funds are used. This trend for greater accountability already started in the reporting requirements of audited accounts, which have to give information on funds used for access.

A key – and new – message from the Quality and Standards Consultation document is that student outcome data will not be benchmarked, and that universities should avoid “inappropriate recruitment.” As such, it is unlikely that HEIs will continue to receive funding on the basis of lower tariff points on entry.

So, from a wider strategic perspective, the student premium pots were already due to be more targeted to areas where “APP pressure” will not be enough to address issues. A particular example is non-continuation, with proposed funding mechanisms also including flexible, competitive aspects.

However, the specifics of COVID have created even greater drivers for these funds to be used in very specific and targeted ways, namely for direct funding to students to be administered, and reported on, by HEIs.

In terms of specialist providers, the paper suggests that OfS thinks that too many providers may be eligible for specialist funding, and/or that a more regional focus may be necessary.  This may be a difficult conversation given the impact of COVID on many aspects of performing arts/conservatoire training.

As I write this, we await publication of the December OfS board papers which were due to show a detailed discussion on the teaching funding proposals.  Although, now, any message they bring will be eclipsed by the new lockdown, and the resulting financial pressures on the DfE, OfS, and individual providers.

The future of fees

What is likely to happen to full-time undergraduate home fees?

The conversation around pressures for student fee refunds have been interesting. The Government holds to the line that the decision on any refund is at provider level, based on provider performance and processes.

There was also a realisation of the often-greater resources required for provision of online learning by providers. This was admitted by the Minister in her presentation to the Petitions Committee in November.

Meanwhile, Philip Augar himself quietly abandoned his proposal that FT UG Home fees be reduced to £7,500 in his Financial Times article in May 2020.

Enter again the Quality and Standards Consultation.

The consultation introduces the following concepts, which could be drivers for change of overall, or partial, access to fees and funding:

1. The old HESA calculation of likelihood of course completion – currently only used by some league tables – could be linked to a sense of value for money under the Start to Success indicator, with some sub-50% performance levels in certain subjects across the sector.
2. A review of the National Student Survey to make it fit for purpose for regulation, including value for money questions.
3. The idea of measuring outcomes separately for courses with integrated foundation years. This picks up the Augar focus on foundation years as possibly ineligible for HE-type student support (including tuition fee loans). There is also a reference to foundation years in the consultation questions. We are still waiting for the FE White Paper. This may have more to say about Level 3 provision in mainly HE Providers.
4. The idea of quality and standards management being a way of applying financial measures, which could control proliferation of student numbers by focusing on the bottom 10-20% of courses. Is this shorthand for a longer-term aim to cut new student loan liabilities by 20% over time?

And so, we await:

• A consultation on specialist funding
• The FE White Paper
• Two phases of teaching funding consultation
• The Government response to Augar and review of TEF.

However, the most significant development to funding is already underway: the Quality and Standards Consultation which has laid the foundations for the clear link between minimum non-benchmarked quality levels and access to fees and funding – which has the potential to affect a significant amount of current provision.

It creates potential to affect the future shape of fundable English undergraduate provision in higher education in a way which the twin levers “no student number cap” and the TEF failed to do.

Lucy Hodson is the Director of Planning and Intelligence at Birmingham City University.