Can OfS really be transformed from sector’s scourge to saviour?

For most of its existence, England’s Office for Students (OfS) has occupied the unenviable position of simultaneously being blamed for much that is seen as wrong with higher education, and tasked with fixing it.

Since launching the OfS in 2018, the former Conservative government loaded its fledgling regulator with an ever-lengthening list of priorities from tackling antisemitism and sexual misconduct on campuses to poor spelling and grammar and grade inflation.

Investigations were begun and never ended, consultation responses disappeared into the ether and yet new lines of work kept appearing.

Relief must have been palpable in the organisation’s Bristol headquarters last month when education secretary Bridget Phillipson signed up the new Labour government to supporting the core analysis of Sir David Behan’s independent review of the regulator – that it be stripped back to focus on “key priorities”.

One of these, however, could prove more onerous than anything the OfS has been tasked with to date: taking a leading role in ensuring the financial viability of the sector.

In her early interventions on the funding crisis, Ms Phillipson has put great stock in the need for stronger regulation as a way of ensuring financial sustainability, while talking down the chances of providing more funding or raising tuition fees.

But how much can an already overburdened regulator really do for universities facing frozen fees, falling recruitment and rising costs?

The OfS needs more powers or more resources “otherwise there is a real limit to what it can do” for financial sustainability, said Jonathan Simons, head of the education practice at the consultancy Public First.

“It is already creaking at the seams and doesn’t have the people. It has to be bulked up to take this stuff seriously.”

Mr Simons’ recent report with colleague Jess Lister argues that the regulator needs to be “rebalanced” so that instead of focusing on competition it prioritises “collaboration and continuation of provision of the sector”, and seeks “to more actively address the risks that extend beyond students and individual institutions”.

“The first thing they need to do is to further develop their intelligence-gathering systems,” said John Rushforth, executive secretary of the Committee of University Chairs.

“The key thing for the sustainability of the sector is preventing people from getting into trouble rather than dealing with it when they are in trouble, and they need the mechanisms in place to understand exactly what is happening.”

While this will probably include asking for more regular financial information from providers than just annual returns and forecasts – especially from those that are teetering – the OfS has to be alive to the other big criticism of the organisation, that it is overly onerous in the information it asks for.

“It is always a matter of judgement about when you ask for that data,” said Mr Rushforth, formerly chief auditor of the Higher Education Funding Council (Hefce), a predecessor of the regulator. “Do you ask for it before clearing when student numbers are unknown, or after? Or both? But then people would find that a pain.”

He said that it was crucial to foster a better relationship between the sector and its regulator to ensure that universities would feel able to give sufficient warning and seek help when it appeared things were going wrong, adding that this had already happened in the case of one institution.

Bob Rabone, a former chair of the British Universities Finance Directors Group and now a consulting fellow at higher education consultancy Halpin, said the regulator could also ask for more data from institutions, such as details of their banking covenants.

More scenario planning based on a range of different assumptions around student numbers and funding would also provide a richer picture, Mr Rabone said, and could be possible alongside data that has already been collected – but this would require more specialist capacity.

“My interpretation is that this is an area that has been increasingly automated and risk-based,” he said. “There are less people doing it in the OfS now than there were in Hefce.”

Attracting specialist staff will be a challenge for the regulator, not just because of budget constraints but because of the number of other options open to those with expertise in restructuring, according to Mr Simons.

An alternative, he said, was to subcontract to auditing firms that have existing capabilities, but this would contradict a commitment across government, led by chancellor Rachel Reeves, to cut back on consultancy spend.

Last month the OfS quietly released a tender to “procure capacity to undertake financial risk and transformation planning assessments of HE providers”. The contract, worth up to £4 million over four years, would allow auditors to work with up to 10 institutions in trouble and give them extra support to restructure.

While the OfS may struggle to develop the capability to take on more of a role in understanding the level of financial risk in the sector and developing early warning systems – two key recommendations of the Behan review – it could soon face a far greater pull on its resources in the shape of dealing with a university collapse.

Mr Rabone said his view was that the OfS already has the power to intervene in such circumstances under its general duty to protect students and could justify providing funding to an institution to rescue another, but much would depend on whether it had political backing, and so it might be better if the regulator were handed explicit powers in this space.

The Public First report recommends the creation of a “special administration regime” – as exists in further education and other critical public sectors – which could allow for more intervention on behalf of students and other interested parties than would usually be the case.

“There certainly needs to be some form of legislative intervention to create a framework whereby, in the event of a bankruptcy, the interests of students are protected in some way,” said Mr Rushforth.

“At the moment all resources would have to be allocated to the creditors. Any notion of protecting funds to guarantee accommodation or teach out or anything like that goes by the board.

“There are no guarantees because the primary pull on resources is the people the institution owes money to.”

Whether this should be the remit of the OfS was another question, said Mr Rushforth.

“It could be quite a big task and the OfS would still have to regulate the rest of the sector. I think there’s an argument for saying that in the event this sort of thing happened you might be better with a special unit in DfE that can call on contingency funding from government and other resources as well, and leave OfS to do its core function.”

tom.williams@timeshighereducation.com