Background to the report
For a higher education provider to access government funding for research or teaching, or for its students to receive government tuition fee and maintenance loans, it must be registered by the Office for Students (the OfS), the sector regulator. The OfS is sponsored by the Department for Education (the Department). In July 2021, there were 254 higher education providers in England registered with the OfS educating an estimated 2.3 million students (excluding further education and sixth-form colleges). Of these, 1.8 million were from the UK, and 1.6 million were undergraduates. The total income of higher education providers in 2019/20 was £36.1 billion, 36% of which came from public sources.Jump to downloads
The OfS has very broad objectives: to help students access higher education; ensure they have a high-quality experience of higher education; protect their interests while they study; make sure they can progress to employment or further study; and ensure they receive value for money. Should higher education providers become financially unsustainable or unviable, students would be adversely affected in all these areas. Financial pressure could increase the risk of providers failing, closing campuses or courses, reducing the quality of teaching, or limiting access.
Scope of the report
This is the NAO’s first report on the OfS, which began operating in 2018. Having spent its first year registering providers, it became fully operational as a regulator in August 2019. It was therefore still a relatively new body when the COVID-19 pandemic began in early 2020. Risks to the financial sustainability of higher education providers were already increasing, and the pandemic added major disruption and new risks to the sector – and consequent additional challenges to the OfS.
This report focuses on the OfS’s responsibilities to protect students’ interests from the consequences of financial risk in higher education providers. It does not look at the OfS’s other responsibilities for matters such as teaching quality. As the OfS is a young organisation, the NAO reviewed its performance with a view to identifying areas where it should focus as it continues to mature.
The financial sustainability of higher education providers can have a profound impact on the quality and value for money of education for two million students every year. The current regulatory system, with the OfS at its heart, was established to protect the interests of students. So far, the OfS’s regulatory approach has not witnessed any provider failures, but rising numbers of providers in deficit indicate increased financial pressure in the sector. At this early stage in its development as a regulator the OfS has had to adapt to the challenges of the COVID-19 pandemic, during which students’ satisfaction with the value for money of their university education fell sharply. Its heavily data-driven approach to assessing financial risk does not yet have the full confidence of all providers.
To protect students’ and taxpayers’ interests adequately, the Department and the OfS should now reflect on the lessons that can be learned from good-practice principles of effective regulation. Implementing these will strengthen the OfS’s understanding of the risks that pressures on the financial sustainability of providers pose for students. It will also build higher education providers’ confidence in the OfS as a regulator, and better equip it to deal with sustained and increasing risks to providers’ financial sustainability.
“While no higher education providers have failed under the regulation of the Office for Students, the number in deficit has risen significantly. Sector-wide issues that were causing financial stress before the impact of COVID-19 have not gone away and will continue to add pressure.
“The sector’s financial sustainability can have a profound impact on the value for money of education for two million students every year. The Office for Students should improve how it communicates with individual providers to build trust in its approach. As it matures as a regulator, it should also be making better use of its insights to reduce risks that could lead to financial failure.”Gareth Davies, the head of the NAO
- Report - Regulating the financial sustainability of higher education providers in England (.pdf — 504 KB)
- Summary - Regulating the financial sustainability of higher education providers in England (.pdf — 110 KB)
- epub - Regulating the financial sustainability of higher education providers in England (.epub — 1 MB)
- ISBN: 9781786044181 [Buy a hard copy of this report]
- HC: 1141, 2021-22
View press release (9 Mar 2022)