Department for Education Higher education policy statement and reform consultation (Augar response)

The Augar review of post-18 education and funding in England was announced by former prime minister Theresa May in February 2018 and published in May 2019. An interim response to the review published by the government in January 2021 announced a “rebalancing of academic and technical education” and a Lifetime Skills Guarantee (see Advance HE governors’ news alert). Today’s long-awaited 77-page policy statement document sets out a series of changes to higher education funding and organisation that will have major implications for both universities and colleges and potential students.

The full document can be found here. 

A DFE press release is here. 

A speech on the proposals from universities minister Michelle Donelan is here.

At-a-glance:

• The tuition fee cap in England will be frozen at £9,250 for a further two years - up to and including 2024/25 (p22)
• The government proposes a student numbers cap to “incentivise high-quality provision and prioritise provision with the best outcomes for students”, and will consult on the form this will take (p34)
• Options for implementing a student numbers cap (SNC) include controlling overall student numbers at sector level, where individual providers are set the total number of students they can recruit, as their share of the aggregate total (p34)
• Under a second option, individual providers could be set the total number of students they can recruit, with provision for certain subjects (to be agreed based on a set of criteria or metrics) allowed to continue to grow (p34)
• Third and fourth alternatives would set the total number of students institutions can recruit for certain subjects, based on an assessment of student/graduate outcomes for each subject, either at a national level (option 3) or at individual provider level (option 4) (p34)
• Judgements on where to apply SNC would be made on the basis of a combination of outcomes with quantifiable and measurable returns for students, taxpayers, and the economy, such as earnings, progression to high skilled graduate employment and/or completion or continuation rates (p35)
• A number of “societal” outcomes could also be taken into account in setting SNC , including contributions to public services (eg teaching, medical and healthcare)
• Strategically important subjects and their contribution to the “greater good of the nation” may also be prioritised (including those contributing to Net Zero and clean growth, digital skills and capabilities, industries with shortages of recruits and areas identified by the Future Skills Unit) (p35)
• The government will consult on minimum eligibility requirements (MER) which propose that young people failing to gain at least grade 4 in GCSE maths and English or at least two E grades at A-level (or equivalent) will not be eligible for student finance  (p40, p41)
• Mature students (age 25 or over), part time students and students with existing level 4 and 5 qualifications would be exempt from MER. Student with at least CCC grades at A-level would be exempt from the GCSE MER (p44)
• The government is also proposing an exemption to MER for students who enter level 6 via an integrated foundation year, or who hold an Access to HE qualification (p45)
• Maximum tuition fees and loans for foundation years and for Access to HE courses should be the same. Foundation year fees will drop, in the first instance, to align with current Access to HE diploma fees of a maximum of £5,197. The proposal “represents a fairer and more affordable deal for students, in particular those from disadvantaged backgrounds” and “address the growing and unsustainable level of subsidy of taxpayer funding” (p49)
• The student loan interest rate will be set at RPI+0% for new borrowers starting courses from 2023/24, meaning that “graduates will no longer repay more than they borrowed in real terms” (p24)
• The repayment threshold for new borrowers starting courses from September 2023 will be set at £25,000 (currently £27,295) until 2026-27 (p24)
• The student loan repayment term will be extended to 40 years for new borrowers from September 2023, to ensure more students repay their loan in full (p25)

Implications for governance:

While the headlines generated by the long-awaited response to Augar invariably concentrate on its impact on potential students, for higher education providers, the contents are no less significant and challenging. Governors alongside senior managers will need to weigh up the various options proposed and how these would impact on their own institutions.

One of the biggest considerations will be the proposal to reintroduce some form of student number cap (SNC), which received just one line in the press release and no mention at all in Michelle Donelan’s speech. While there is no hint in the policy document of what the scale of the number controls will be, this potentially far-reaching policy change is ultimately a U-turn on 2013 decision to abolish student number controls.

The policy document points to an “over-supply” of lower-cost courses and cites a 20 per cent growth in social science courses and 17 per cent increase in business and administration degrees between 2013/14 and 2017/18. Lower-cost is equated with “low quality” and the conclusion is that too many students are being recruited to HE courses which offered them poor outcomes and do not represent value for money to the learner and taxpayer.

The SNC options put forward for consultation include sector level, provider level, subject level or course level controls. The decision about where SNC would be imposed would be made on the basis of factors such as graduate earnings - which the government says would support the fiscal sustainability of the system given its link to student loan repayments – and/or employment outcomes and/or completion and continuation rates. Also taken into account could be whether provision is related to “societal outcomes”, such as public service jobs, strategically important industries or priorities such as Net Zero and clean growth, STEM39 and specific career pipelines from HE to shortage occupations, including in the creative industries.

Any potential restriction on student numbers could present serious financial challenges to many institutions and perhaps raise viability concerns for some provision, as well as having knock-on effects in other areas.

The announcement that tuition fees will be frozen for a further three years – amounting to a five year stand-still in total -- at a time of rising inflation means a further real terms cut in the unit of resource. It presents major problems for university finance and governance, while the lack of a plan beyond 2024/25 will make medium term planning more difficult.

It is clear from the policy document that the government expects universities to make efficiency savings in the face of this financial pressure. It points to evidence in the Augar review of wide variation in spend on similar subjects at apparently similar institutions, with no apparent correlation to outcomes, with the implication that some universities need to cut costs.

A further squeeze on finances at a number of institutions will come from the proposal to harmonise the fees of HE foundation years with that of FE Access to HE qualifications. Universities which charge full tuition fees, or thereabouts, for foundation years would see a drop of fee income of about £4,000 per student. This may well prompt serious governance discussions about the provision of such courses at some universities.

The sector has also voiced serious concerns about the government’s plan to ban students without passes in GCSE maths and English or at least two E grades at A-level from using Student Finance. Governors at higher education institutions that recruit a high number of students from widening participation backgrounds will no doubt share the concerns and wish to consider the implications for their own institution. One question will be to what extend the impact will be softened by proposed exemptions from this policy, including for mature and part time students. With these exemptions, the government estimates that around 4,800 18-24-year-olds currently in HE would be ineligible under the Level 2 Minimum Eligibility Requirements, which equates to 1.4 per cent of all England-domiciled 18-24-year-old first degree entrants. The minimum two E grades at A-level rule would have affected up to 6,200 England-domiciled 18-24-year-olds.¹

On top of these many challenges, changes to student finance, which will see graduates start to pay back their debt sooner and for a period of up to 40 years, could also make higher education seem a less palatable option for young people, particularly those from disadvantaged backgrounds.

Driving more teenagers into technical level 4 and 5 courses as part of the “levelling up agenda”, while at the same time expecting universities to attract more disadvantaged young people, could well have implications for progress towards Access and Participation Plan targets.

¹DFE Higher education policy statement & reform consultation: Equality Analysis