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"The Governor View" – New OfS registration requirement to protect students receives mixed reception from governors

A new requirement of registration introduced by the Office for Students on 1 April that aims to protect students against the impact of “market exit” by their institution has had a mixed reception from governors, with some cautiously welcoming the move but others warning of potential unintended consequences.

The new rule, described as “registration requirement C4”, gives the OfS the power to issue student protection directions if it judges an institution to be “at material risk of market exit”. This can require such an institution to draw up a “market exit plan” setting out what it will do to help students, such as continuing to teach them, helping them transfer to another institution or refunding fees. 

The rule has been imposed despite a majority of respondents to a consultation opposing the change. C4 is designed to bolster the present C3 condition requiring universities, however financially secure, to publish student protection plans outlining what they would do in the event of closure. The OfS says that it had identified a number of common weaknesses with the plans that would reduce their credibility at a time “when a provider is judged to be at a material risk of market exit” and could lead to delay in appropriate action. It wants the power to demand more detailed plans tailored to the circumstances surrounding the institutional failure.

In its final decision report which summarises and responds to the consultation submissions, the OfS says the sector is facing “a range of unprecedented challenges” due to the Covid-19 pandemic that puts them at risk of market exit. It adds that it has also “encountered significant risk of exit in cases unrelated to the pandemic”, although it fails to give details. 

One governor of a large new university described the new rule as “yet more finger-wagging by the OfS”, adding: “They have a style for telling us what to do and it is not a particularly respectful one.”

But some governors acknowledged that action was needed due to the pressures institutions are facing, whether related to the pandemic or not.

The governor of a private university said: “Our student protection plan basically says that we are in a strong financial position so you don’t need to worry. I’m going to suggest we have another look at it because if an institution says this and then does get into difficulty, it would have to change the wording which immediately puts up a red flag.”

Another governor with a long career in higher education commented: “Six months ago I would have said the pandemic has made it more likely universities would exit, but I have been surprised how numbers and income have held up. There is an additional element of risk, of course, and some small private universities were already vulnerable, but I think much more troublesome for public universities is the atomised market environment in which individual universities are encouraged to carry on recruiting while the less popular ones are losing out to them.”

In the consultation, some respondents raised concerns about the impact of the new condition on university autonomy, but the OfS said such worries do not outweigh the need to protect students because C4 would only be applied if a provider was judged to be “at material risk of market exit”. Any intervention would be targeted on measures it considered to be proportionate in the context, it promised.

Governors who spoke to Advance HE largely accepted this but warned the devil would be in the detail of the way the OfS uses the new rule.

The governor of a medium-sized new university said: “It’s right that institutions should carry the burden of their students left in the lurch. My belief is that doing right by the student in these extreme situations trumps any absolute interpretation of institutional autonomy on the part of universities.”

He could, however, understand the fears that the OfS could make too heavy use of the regulation. “These powers need to be deployed with good judgement, quick decision making and effective execution and unfortunately, governments and regulators don’t have a 100 per cent track record on that, so there are many ways it could go pear-shaped.” 

All governors consulted by Advance HE were concerned about the timing of intervention, warning that it must only be applied when closure is inevitable.

“Timing is of the utmost importance because as soon as it becomes known that the OfS has issued a protection order or required the publication of a market exit plan, the institution is bound to fail as students, applicants, staff and suppliers lose confidence in it,” one governor explained.

Though it might seem right in theory to “teach-out” students or refund fees, governors speaking to Advance HE questioned whether an institution with an empty bank balance would be able to afford to do so. And if, as the OfS suggests, the new regulation gives it the power to demand universities make plans to help students while they still have the resources to do so, then news of such a direction could just hasten a closure.

Student representatives, not surprisingly, support the requirement to give them greater support and information, but a student governor of a Russell Group university raised the issue of those unable to transfer, such as commuter students living at home or on courses that don’t exist elsewhere.

“I don’t know what good will come of making universities draw up plans to transfer students to other institutions because I can’t see many of them being willing to take on more when their courses are full,” she said. “I feel like this is claiming to give students power and protection, but all I’m seeing is that it is taking power away from students by treating them like cattle to ship around.”

There needs to be a sector standard for transfers, she added, and the government should put in financial aid for universities in trouble, as it has done for businesses in the pandemic.

A common fund to which all universities contribute, similar to the Abta protection for travellers in the tourism industry, was suggested by a private university governor. However, the governor of a new university agreed with the student governor that the government should provide the funds for a collapsing university to “teach-out” its current students.

“It is in the country’s interests to have a higher education system in which students – home and abroad – can have faith without worrying that it will collapse and leave them with nothing,” he said.

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