Universities must do better

The National Audit Office’s sole purpose is to scrutinise public spending for Parliament. With the Department for Education’s up-front public funding for higher education students in England at now over £9billion a year (up from £6billion in 2007/8), it’s no surprise The NAO will want to keep a close eye on how it’s performing.

In short, the report highlights that the Department needs a more comprehensive approach to the oversight of the higher education market and must use regulatory reforms to help address the concerns flagged. The main reason for this is to secure value for money for students and the taxpayer. But, with only 32% of undergraduates from England considering that their course provides value for money, clearly something’s not right.

85% of the up-front funding follows students directly, in the form of tuition fee loans, and that’s up 23% over since 2007/8. The Department has already begun consulting on a new regulatory framework which focuses on improving student choice and outcomes, as well as to address market weaknesses.

Good. The average student debt, for a three-year course, on graduation is £50,000. They deserve value for money. That’s not to say they shouldn’t pay, they should. However they should feel satisfied with the service they’re paying for. And whilst on average graduates earn 42% more than non-graduates, for those who don’t – due to the provider and subject they’ve taken – more information needs to be readily available so that they make informed choices (the Department has improved information available to help prospective students choose their course and provider, but only one in five use it and there’s not always adequate additional support for those that need it the most).

It was also noted that there is no real price competition in the sector. 87 of the top 90 universities charge the maximum fee of £9,000 a year for all courses. The relationship between course quality and providers’ fee income is also weak. The NAO found that, on average, a move of five places in a league table gained them just 0.25% of additional fee income.

What’s more, students can do little to influence quality once on a course. The sector ombudsman did show that providers have improved their handling of complaints and feedback, with a 25% drop in student complaints since 2014. That said, students are unable to drive quality through switching providers. There is also no evidence to support that more providers entering and exiting the market will improve quality in the sector, and protections for students are untested.

And whilst the Department provides grant funding for high-cost courses that it considers strategically-important, costs vary from £7,000 for some subjects to £20,000 for others. The NAO finds that the cheaper a course is to run, the more likely a provider is to maintain offers in the face of declining applications or expand student numbers in response to more applications.

The report also showed that the proportion of young people from disadvantaged backgrounds entering higher education has increased, but it’s still lower than for those from more advantaged backgrounds. The number of 18- and 19-year-olds attending higher education from the lowest participation areas of the country (linked closely to lower socio-economic status) increased from 21% to 26% between 2011 and 2016. However, 59% attend from the highest participation areas, a difference that is mostly explained by educational achievement at school.

Obviously, there are definite areas for improvement and a general feeling from students that their education is not providing them with value for money. Yet, with no incentive to drive quality from the providers (due to the maximum permissible tuition fees), it feels that the issues highlighted are here until some radical steps are taken.

Amyas Morse, head of the National Audit Office said, “We are deliberately thinking of higher education as a market, and as a market, it has a number of points of failure. Young people are taking out substantial loans to pay for courses without much effective help and advice, and the institutions concerned are under very little competitive pressure to provide best value. If this was a regulated financial market we would be raising the question of mis-selling. The Department is taking action to address some of these issues, but there is a lot that remains to be done.”  

Wednesday, 13 December 2017

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Dan Beynon Date: Dec 15, 2017

There are a number of incorrect and perhaps lazy statements in both the NAO report and this article. In particular the premise that students are not provided with information prior to choosing their institution and course. This is simply not true. The popularity of (and attendance numbers at) Open Days and the huge number of prospective students who spend time researching courses (not necessarily using the departmental sources referred to) are testament to that. The point on price competition is also interesting. Universities are now funded by tuition fees but when the article talks about competition is the suggestion that students would be better off if Universities were free to charge more? Charging less would mean institutions were underfunded and some would close even quicker than they may do under the current regulations. Universities and consumers pay great attention to the National Student Survey and rankings when making decisions. The points around quality and competition are questionable. And is your view that institutions should cap the number of students that can take up places on popular courses simply because they are economically viable? The increase in the number of students from disadvantaged backgrounds is referenced in the article but is linked to an implied negative statement about the number of people attending University from other backgrounds? Why make that point when there is huge progress being made around social mobility and widening participation? The final statement regarding lack of advice and competition from the NAO representative “Young people are taking out substantial loans to pay for courses without much effective help and advice, and the institutions concerned are under very little competitive pressure to provide best value” is simply not true on both points.

Ri5 Editor Date: Dec 18, 2017

Thanks for your comment Dan. Reports, such as the one published by the NAO, absolutely should spark debate. They’re designed to do so. The NAO’s stance is that they’ve reviewed the Higher Education sector as a market. As such, they believe it should respond – as all markets should – to meet the needs of the market. It asks demanding questions of the sector, as it reveals shortcomings as to its performance (in their opinion). To that extent, we can see what they’re trying to achieve. Their very purpose is to ensure that that public spending is getting value for money. And, in their opinion, they’re not convinced it does in all areas. In response, you raise some genuinely thought-provoking counter arguments. If you’re willing, we’d love to hear more detail on these as it will no doubt give our readers a greater understanding of the bigger picture. We look forward to picking this up with you in the New Year and wish you a Merry Christmas.

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Universities must do better